Coppola Comment

Yesterday, my friend Tim Coldwell sent me a copy of the Harvard economist Martin Feldstein's article at Project Syndicate, " Is Inflation Returning "? Feldstein argues that the Fed's QE program will inevitably lead to inflationary pressures in the future, because when the new money finds its way into the real economy it will lead to a spending splurge. Frankly, at the moment a spending splurge would be a very good thing. The economic trend throughout the world is deflationary, everyone is cutting back spending, banks aren't lending and the velocity of money is dropping like a stone. The Bank of England (which Feldstein doesn't mention), which has done far more QE in relation to the size of the UK economy than the Fed in relation to the US, says that the primary purpose of QE is to maintain inflation near its 2% target and counteract DEFLATIONARY pressures. Many might dispute this, since the UK's CPI has been and remains well above target, but the BoE...

A couple of days ago, the Republican Senate hopeful Todd Akin claimed that women who suffer what he called "legitimate rape" would not become pregnant because their bodies would "shut down", and therefore argued that abortion after rape should not receive Federal funding. Not surprisingly, there was a worldwide storm of outrage: there were calls for him to withdraw from the Senate election race and calls for him to be sacked from the Republican committee on Science, Space and Technology. The Republican Presidential candidacy duo, Romney and Ryan, distanced themselves from Akin's claims and insisted that they supported abortion after rape. Romney has indeed in the past been a supporter of the Roe v Wade legislation that legalised abortion in the US, although in recent years his position has hardened and like most right-wingers he now argues that abortion should only be available to victims of rape or incest and where the mother's life is in danger. Paul R...

A few days ago the German newspaper Der Spiegel broke a story that the ECB was contemplating capping yields on Eurozone sovereign debt by effectively promising to buy the debt of distressed nations in sufficient quantity to keep yields at sustainable levels. There has understandably been considerable comment on this story, both from those who think this is a good idea because it will provide a lifeline for struggling Eurozone sovereigns (especially Spain), and those who think this is a terrible idea because it will let profligate Eurozone sovereigns (especially Spain) off the hook. But they have all misunderstood. This action - as with everything else proposed and done so far by the ECB - has nothing whatsoever to do with bailing out Eurozone sovereigns, although that may be an incidental effect. It's all about the Euro. Here is the final paragraph (my emphasis) of Asmussen's commentary on Draghi's suggestion that yields may be capped (h/t FT Alphaville , German transla...

So yet another UK bank is at the centre of a storm of corruption allegations. First Barclays , then HSBC ....this time it's the "whiter-than-white" Standard Chartered Bank that is alleged to have soiled its trousers. The New York State Department of Financial Services  claims that Standard Chartered has laundered $161bn of Iranian money to avoid US sanctions against Iran: the regulator describes it as a "rogue institution" and is calling for it to be stripped of its US banking licence and its authority to trade in dollars. The release of these allegations caused Standard Chartered's share price to drop by 18% and created a storm of glee in US media and anger in the UK press. Standard Chartered Bank is an interesting institution . Although it is headquartered in the UK, it has no domestic business. Its main business is in Asian and African emerging markets, where it is a major provider of trade finance, much of it in dollars. So losing its US licence and b...

One of the most interesting issues to arise in the course of the "comment-athon" on my post "The Golden Calf" was the suggestion that the link between money and work is broken, and indeed that there is no longer a reliable link between "earning" and working. This is a logical consequence of two things: firstly, increased automation of production means the number of people needed to produce enough goods to meet people's basic needs is declining; secondly, an increasing number of people do considerable amounts of pro bono " work that is directly beneficial to society. The converse to this latter point is that there also seems to be a broken link between remuneration for work and the benefit of that work to society as a whole: there are people who are rewarded very handsomely for work that benefits few people (mostly people like themselves), and there are  other people who are paid very little or even nothing at all for work that benefits far more p...