Coppola Comment

The atmosphere in the Greek standoff is turning ugly. On Tuesday , after new Greek finance minister Euclid Tsakalotos turned up to Eurogroup talks with nothing but hastily-drafted notes written on hotel paper, Eurozone leaders told the Greek government in no uncertain terms that if it did not produce credible proposals by Sunday 12th July Greece would be thrown out of the Eurozone. "We have a Grexit scenario prepared in detail", said European Commission president Jean-Claude Juncker. The President of the European Council, Donald Tusk - one of the very few consistently sane and reasonable voices in this drama - said that inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system. And he warned that there would be serious - possibly irreparable - geopolitical repercussions for the European Union. "If someone has any illusion that it will not be so," he said, "they are naive". Others have also warned abo...

Guest post by Tom Streithorst Vladimir Illych Lenin may well be the most destructive political theorist of the 20 th century.  His glorification of a conspiratorial party as agent of a glorious future legitimised mass murder from Bolshevik Russia to Nazi Germany to Cambodia's Khmer Rouge .  Nonetheless, he did invent an analytical tool political scientists and economists should use more often: “Kto Kovo”, or “who beats whom”.  In examining any policy, Lenin suggests the first question to ask is who gains and who suffers. Neoclassical economics pretends that we search for an optimum solution that serves the economy as a whole. In truth, all change creates winners and losers.  The most obvious example is currency appreciation.  If the dollar is strong and its value rises against the euro, then American tourists enjoy nicer vacations, able to eat and drink more luxuriously for less money, but American exporters pay the price.  The cost of their...

It appears that the Greeks have given a bloody nose to the EU, turning in a resounding NO vote in Sunday's referendum. Though exactly what they have rejected is unclear. The ballot paper is, to say the least, complicated. The UK's Telegraph published this translation from Greek Analyst: The ballot paper of the #greferendum question upon which the Greek people are called to vote on. (Translated) pic.twitter.com/hPGJcp49Gs — The Greek Analyst (@GreekAnalyst) June 29, 2015 And the paper asked, "Does this make sense to you?" No, frankly, it doesn't. Neither of the documents referred to are current. The EU negotiators withdrew the June 25th offer as soon as the referendum was announced, replacing it with a subtly altered version from the "institutions" and dangling the carrot of debt restructuring if Greeks vote to accept the terms. No doubt they thought that this would force the Greek government to cancel the referendum. They were wrong. But th...

While all eyes are focused on Greece, there is a potentially far more important crash going on. Via Sober Look comes this pair of charts: China's stock market is crashing. It's very evidently a bubble bursting. The question is, what will be the knock-on effect to the Chinese economy, and indeed to the whole of South East Asia, Brutal sell-offs of this kind are rarely without economic cost, especially when the bubble is debt financed (as this one is). I can't see this ending well. Related reading: China stocks are battered anew - WSJ

I know I keep saying that economics is not a morality play. But when it comes to Greece, I can find no other satisfactory explanation for what is going on.  The harsh treatment meted out to Greece over the last five years makes no economic sense whatsover. It has driven Greece into a deep depression that not only makes its government budget unsustainable but renders its debt unpayable: it has not only caused poverty and distress among Greece's population, but it has driven businesses into bankruptcy and done serious damage to the supply side of Greece's economy. And yet creditors want more . I might agree that reforms to pensions are a good idea. I might also agree with widening the tax base. But not, emphatically not, in an economy as depressed as this. What is needed is debt relief, FIRST. Then real reforms, and help to restore the wanton destruction caused to the economy through ill-considered and frankly vindictive austerity measures. But debt relief is not on the ag...

In a reply to a comment on my recent post about Target2 and ELA, I said this: There are no "Greek euros" or "German euros". There are only European euros. So the ECB is not exchanging Greek and German euros at par. Both countries are using the same currency, which is produced by the Eurosystem. The NCBs are not autonomous entities, they are part of the Eurosystem. They do not create their own currencies : collectively, they create the single currency. This is how a single currency works. If there are multiple "central banks" within a single currency area - as there are in the United States, for example - they do not produce their own currencies. St. Louis Federal Reserve does not produce St. Louis Dollars. It produces United States dollars. As does the Minneapolis Fed, and the New York Fed, and the Atlanta Fed, and so on. The twelve Federal Reserve banks collectively produce one currency, the US dollar. So the person who argued that Greek and Ge...

The UK is forcing universal banks like HSBC to ring-fence their retail operations from their global and investment banking businesses – a sort of watered-down Glass-Steagall arrangement. The ring-fence will come into force in 2019, and banks are currently working out how to implement it. HSBC is creating a completely separate UK retail entity with its own capital, management and head office. As part of this process, it conducted a review  of possible locations for the unit's new head office, and concluded that London was not ideal. In March, it announced that the new UK retail bank head office would be in Birmingham, to the delight of local politicians and media. The announcement sparked approving remarks about the UK retail bank going “back to its roots”: HSBC’s UK retail arm was formerly Midland Bank. Prior to its acquisition by HSBC, Midland Bank had a long and at times colourful history . It was founded in 1836 as the “Midland & Birmingham Bank”, and originall...