Coppola Comment

Scott Sumner has been reading Piketty . And in the first of (apparently) several posts he picks Piketty apart, starting with this passage: "In my view, there is absolutely no doubt that the increase of inequality in United States contributed to the nation’s financial instability. The reason is simple: one consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the United States, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous banks and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms." "Where does one begin?" cries Sumner. And he then proceeds to give five reasons why this particular passage is wrong: "1.  In my view there is plenty of doubt as to whether inequality contributed to the crisis...

London's buses have gone cashless. From July 6, you can't use coins or banknotes on buses – you can only use the capital's “ Oyster” prepaid smartcards, its short-term general travel tickets known as “Travelcards”, or contactless bank cards. You can still buy Travelcards and top-up Oyster cards with cash, of course. But paying the driver of the bus with the last of your small change is now a thing of the past..... Find out about the implications for the future of cash here  (Forbes).

Yes, I know you are all bored with BNP Paribas. Now the penalty has been issued, let's move on. Other scandals are beckoning..... But bear with me for a little longer. I have something to say about BNP Paribas's penalty. It's not enough. The US regulators let them off far too lightly considering the scale and duration of their crimes. To find out why I say this, click here .

At the  HACT House Party  last week, I ran a workshop in which we examined the UK housing market in the context of a game of  Monopoly . The famous board game Monopoly is a land and property speculation game, in which the object eventually is to own all property and bankrupt all competitors. It is simple, and old-fashioned – prices by modern standards are simply unbelievable. But it conveys some important messages regarding our attitude to property. In this picture, the Monopoly board is set up in rather an odd way.  To find out why, read on here .....

At Forbes: Things move quickly in Bulgaria. Less than a month ago,  the IMF gave  Bulgaria's banking system a clean bill of health, saying it was "stable and liquid, with banks' non-performing loans buffered by provisions and significant capital, as well as a positive net foreign asset position".   But yesterday, the President of Bulgaria was forced to  issue a statement  reassuring people that their money was safe after a week of bank runs. And the EU has now granted Bulgaria an  emergency line of credit  to support its banking system. So what on earth went wrong? Find out here .

(I was tempted to call this post "Sumner's Here" but thought that might be a bit too FT Alphaville.) Recently, the American economist Scott Sumner visited the UK, among other things giving a presentation at the Adam Smith Institute and interviews on the BBC's Today programme and Newsnight. Sadly I missed these events, but fortunately he has written about  what he saw. He notes that all the talk in the UK is about raising interest rates. Indeed it is, and I am one of a rapidly diminishing number of voices who urge caution: premature interest rate rises in a fragile economy with high levels of household indebtedness could kill off the nascent recovery. The UK economy needs to be strong enough to support reduction in the fiscal deficit before interest rates start to rise. On this, Sumner and I seem to be in agreement: Since 2008, the UK has run extremely large budget deficits, bigger than the US as a share of GDP. Everyone agrees these are too large, and need to be...

  There’s a nice little storm brewing in the Eurozone core.  Reuters reports   that the German province of Bavaria is considering legal action against Austria. And it is seeking support for its action not only from the German federal government, but also from the EU. The background to this is the failure and nationalization of the Austrian bank   Hypo Alpe Adria   (HAA) in December 2009. HAA was bought by the Austrian state from the Bavaria-based Landesbank BayernLB for a nominal 1 euro. But it seems that BayernLB left behind about 2.3bn euros in subordinated debt. And the Austrian government wants to bail this in as part of the winding-up procedure for HAA..... Read on here . UPDATE: Klaus Kastner, who knows much more about this than I do, has posted a really illuminating comment on the Forbes post about the background to HAA and BayernLB's relationship. And David Keohane has reminded me about this FT Alphaville post on the subject from December 2013. ...