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Sunday, 13 April 2014

The Economist: Essay - The Financial Crises

Hi my friends! I apologise. It has been a busy month, and I had not had the opportunity to write another post...

Today's post, it's about a very interesting essay published in The Economist (the original one, not me haha). "The Financial Crises" is intended to illustrate a comprehensive explanation of the Financial crises in History, and the analysis of banking crises since 1792 shows a conclusion: all banking and financial crises are resolved with a systematic increase in public debt and a bailout of private entities. In the current case of Spain, the public debt will reach 100% of GDP this year. The pattern since the eighteenth century is the same: the Bank never loses.

Read the essay here. Enjoy it!


Thursday, 20 March 2014

EU Banking Union Completed! Q&A from FT

Hi my friends! Sorry for the delay! I think that I should work less hours... Right! Today's post is about great news from Brussels! After long hours negotiating, the terms on the Unified System for handling crises were finally settled.

This agreement is important enough to analyse the different aspects of this much-desired banking union.
If you are a FT subscriber, read this article, Q&A: How the banking union plan will work. If not, I am going to try to summarise it. FT, do not be offended, it's free advertising!

Is banking union now complete? According FT, "Eurozone governments will no longer be the sole masters of their big domestic banks; they will be policed centrally and if they are failing they can be shut down against the home state’s wishes, using funds from a common €55bn pot.". Well, I would like to add that only biggest banks will be supervised by EU, not the smallest.

How does this relate to the eurozone debt crisis? "The teeth of the European Central Bank, the new central supervisor, are already being felt in its health check of big eurozone banks. [...] The banking union will bolster confidence but it is principally aimed at coping with the next financial crisis, not solving this one.". True. The current crisis is past. So wherever the next crisis occurs, EU will be united (in banking issues, at least).

Surely they will be discussing reforms to the reforms soon enough? "Probably. Once big concessions are made in Brussels, the path to more centralisation is smoother.". But EU  is very heterogeneous, and don't forget that Germany still governs Europe...



Thursday, 6 March 2014

EU removes Spain from list of countries with excessive imbalances

Hi again my friends! New post! This post is about the good news from Brussels. The European Comission, the executive agency of the European Union, removed Spain from its list of countries with excessive macroeconomic imbalances, saying the Iberian nation had made significant progress in addressing its economic challenges.

According to the EC, "Spain is experiencing macroeconomic imbalances which require specific monitoring and decisive policy action. In several dimensions, the adjustment of the imbalances identified last year as excessive has clearly advanced and the return to positive growth has reduced risks".

Good news! But, at what price?

As I wrote in previous posts (here, and here), the spanish way to emerge from crisis, you know, is reducing wages to boost competitiveness (...all this without forgetting the cuts in our welfare system, and the unbearable tax burden).

Right, we can accept salary cuts for the common good. We can even accept higher taxes. But not forever.

A new way: Ok, do not reduce wages, reduce labour costs for enterprises. But seriously, please. We don't need patches*. Fortunately, many experts think as I do.


*Patch: Employers will have to pay only a flat fee of €100 a month for each permanent hire in the first two years. That would replace the current system, in which employers make contributions that vary with workers’ earnings.

Monday, 24 February 2014

The economic factors of the Ukrainian Revolution

Hello my friends! After several weeks of extreme violence in Ukraine and more than hundred people dead, ukrainian protesters can celebrate, as the FT says "the collapse of Viktor Yanukovich's kleptocracy". I do not wish to comment on Politics, I shall leave that to other publications. I merely want to add that the Ukrainian people must choose their own path, peacefully and democratically. Extremes are dangerous. Both extremes. That's all. Now, I will write about the economic implications.

It must not be forgotten that Ukraine not only represents a market of almost 45 million consumers. According Wikipedia, "Ukraine has long been a global breadbasket due to its fertile conditions. As of 2011, it was the world's third-largest grain exporter with that year's harvest being much larger than average.". But there are two main factors in this story: ENERGY and its CONTROL.

The country imports most energy supplies, especially oil and natural gas and to a large extent depends on Russia as its energy supplier. While 25% of the natural gas in Ukraine comes from internal sources, about 35% comes from Russia and the remaining 40% from Central Asia through transit routes that Russia controls. At the same time, and probably, most important, 85% of the Russian gas is delivered to Western Europe through Ukraine. A few years ago, in 2006 and 2009, disputes with Russia over debts for natural gas briefly stopped all gas supplies to Ukraine, leading to gas shortages in several other European countries.

Russia controlled the Ukrainian politics and therefore the pipeline network. Now, the EU, with the support of the United States, have this control at hand. It still remains to be seen whether Russia will permit that. There are exciting times ahead. I trust that there will reign the good sense...


Monday, 10 February 2014

"Let weak banks die" : the European Regulator says... Better late than never

Hello dear bloggers! It has been a long time since I have written the last post! Parental and family duties, you know! And obviously, labor duties, that keep me busy twelve hours a day... Despite everything, it is time to satisfy the needs of my readers!

Today, ladies and gentlemen, we will discuss about the shameful situation in which many european authorities have permited zombie banks to survive. This disgrace is absolutely scandalous in Spain, where many failed banks were rescued by public financing. The best way to say thank you has been to execute massive evictions, steal the savings of pensioners and a considerable rise in the financial services fees.

A few weeks ago, in one of my very first posts, I wrote about the tax burden in Spain. As I told in the post, "we must pay debt interests, because the Spanish Government bailed out the Financial sector, and we must balance the accounts. You know, pay more taxes, cut public benefits and rescue failing banks: transfer the financial crisis to citizens.".

Now, a few years after the total transfer of the crisis to citizens, after many tens of thousands of new unemployed, after the most important cutbacks in our welfare system in the History, after all, the new european super-regulator says "let weak banks die"...

Better late than never. But a very important part of the crisis, and probably, the most painful part, could have been avoided if these zombie banks had been liquidated in 2010-2011...do you agree with me?


Thursday, 30 January 2014

U.S. GDP Advances 3.2% in 4Q 2013

Hi my friends! Let's have a discussion about the magnificient growth of US GDP in 2014 Q4, and the reasons of this very optimistic figure and why this growth cannot be extrapolated to Spanish economy.

The good news are been valuated quite differently on both sides of the pond. The american The Wall Street Journal indicates that "the U.S. economy closed out 2013 with one of its best half-year stretches of growth in a decade as consumers spent readily, businesses boosted investment and exports surged.". However, in the UK, the FT tries to break the report down into components in a less optimistic point of view, describing the report itself as "a rather bizarre report". In my opinion, Americans did things well, using less austere policies, but we must not forget that the monetary, fiscal, political and economic union are the essential tools to rebuild a shattered economy.

The European Union has continued to rely on austerity measures and yes, we will emerge from crisis, but in a slower and more painful way than the United States. We are still awaiting the fiscal union...

Obviously, these figures in Spain are unthinkable. The engine of an economy is the consumption, and spanish consumers need to budget every day to make sure they can make ends meet for the rest of the month. More taxes, non-existent bank financing, and more job insecurity don't encourage us to purchase and consume goods.

So, yes, we will emerge from crisis, but, once again, God bless America...