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Ambrose Covers the Debt Crisis

On December 12, 2011, in Debt, Europe, by Tim

Ambrose Evans-Pritchard of the Telegraph has been writing some of the most colorful, alarming, and (as far as I can tell) prescient commentary on the latest developments in the two-year old, credit market saga better known as the European sovereign debt crisis.

Last week’s Better a horrible end for Euroland, or endless horror? offered the imagery shown to the right when it appeared at his blog where, presumably, there are less strict rules on decorum than in the newspaper.

That’s Ambrose on the left.

Friday’s blog entry Europe’s blithering idiots and their flim-flam treaty attracted nearly 2,000 comments, so, clearly, as far as generating discussion, he’s doing a very good job and an opening line such as “What remarkable petulance and stupidity” does little to make readers think that they’ll be disappointed upon reading further.

Three entries yesterday for the print edition of the paper are more reserved, but not much:

Links to all his work appears at this page at the Telegraph and it provides a good diversion from the coverage provided by the mainstream media that rarely includes any pictures from Lord of the Rings, though I’m guessing that Balrog (as Germany) would be a better metaphor for what’s been going in Europe lately.

[BTW - if the image above is not from Lord of the Rings (which I wasn't able to verify), try not to let that distract from the significance (and light humor) of the Balrog comment.]

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Ron Paul’s Greatest Hits from Saturday Night

On December 12, 2011, in Debt, Economy, by Tim

Not having seen any of the GOP Presidential debate on Saturday night and failing to spot any coverage of Rep. Ron Paul’s comments on a brief sampling of Sunday morning talk shows yesterday, it was nice to see this compilation of his comments beginning with a discussion of why the economy is in the condition it’s in.

Of course, the idea that the excessive credit and debt that led to the recent malinvestment (a.k.a. the housing bubble) have to be liquidated before economic growth can resume continues to fall on deaf ears, as does the notion that we could save trillions of dollars in short order by relinquishing our role as the world’s policeman.

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Unusual Developments in Consumer Credit

On December 9, 2011, in Debt, Our Culture, by Tim

From this item at Jake’s EconomPicData blog the other day comes the graphic below depicting dramatic changes in consumer credit trends over the years. Racking up revolving credit (e.g., credit cards) is not nearly as popular as it was for decades, what I’ve long called “the real Reagan Revolution” as individuals dramatically increased their use of credit cards to fuel consumption (i.e., buying things you don’t need with money you don’t have).

Taking up the slack for falling credit card balances are higher student loan balances that, already, are further separating the nation into have and have-nots (a.k.a. debt serfs) while making the whole idea of higher education less appealing when this is one the the things the country needs most to remain competitive with emerging economies in Asia.

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A Dangerous Kick of the Can in Europe?

On December 9, 2011, in Debt, Europe, by Tim

Anyone reading the details of the agreement forged this morning at the European Union summit shouldn’t be surprised that financial markets are offering only a lukewarm response.

In addition to a “fracture” in the union as the U.K. refused to be bound by possible financial industry regulations (e.g., a transaction tax that could hurt profits at its big banks), the agreement does nothing to shore up credit markets over the near term, most analysts now pointing to the European Central Bank to fill that role despite the clear message yesterday by ECB President Mario Draghi that it had no intention of doing so.

It’s clear that the time bombs below (from this item last week) have not been defused.

The hope exists that new involvement by the International Monetary Fund might result in providing more support to wobbly credit markets where Italian and Spanish bonds continue to be  under pressure, but, Asia is still reluctant to partner with anyone in an effort to save the euro and, at this juncture, who could argue with them?

The latest headline at the Wall Street Journal reads EU Fiscal Pact Leaves ECB in Focus($) and it seems clear that markets now expect the ECB to take bolder action, despite what Draghi said yesterday. Absent that bolder action, this deal appears to be a dangerous kick of the can down the road in Europe.

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Are We There Yet?

On December 9, 2011, in Debt, Economy, Europe, by Tim

Once again, the morning news is chock full of developments in the European sovereign debt crisis that requires a little catching up on my part. So far, it looks like the French and Germans have succeeded in accomplishing a tighter fiscal union that leaves the British on the outside looking in and this interactive graphic at the BBC shows the many different paths that these latest steps might lead to.

At the BBC, you can click on the various buttons along with that question mark in the middle for details. My early take on this is that eurozone members think they’re headed to the upper right of the chart while the British may have other ideas.

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Krugman vs. Reinhart

On December 8, 2011, in Debt, Economy, by Tim

I’ve only watched about the first half hour of this panel discussion featuring Carmen Reinhart (of This Time is Different fame) and New York Times columnist Paul Krugman, but it’s a pretty interesting debate about the mess that we’re currently in.

Watch live streaming video from nytimesopinion at livestream.com


Here’s Reinhart’s characterization of our current woes (beginning at about 6 minutes):

A key common factor in the decade following severe financial crises is a slow and painful deleveraging … I think the expectations that we built, from the mid-1990s to the outbreak of the crisis in 2007, I think that debt-fueled surge in housing and consumption and just the sense of well being in economic activity – I don’t think we’re going to see that, on a sustained basis, for a while.

Naturally, Krugman disagreed with this outlook, calling it “fatalist” here.

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