The Great Debate UK
Wherever you look – radio and TV, novels, internet – history is all the rage these days. Perhaps a large part of the appeal is the nice warm feeling it gives us of being able to look down on the sheer madness and heartless cruelty of our own ancestors. What did they think they were doing back in the 16th century burning witches? Or 300 years later, locking up poor young girls for getting pregnant? Or sending men to jail simply for being homosexuals, as we did until the 1950s ?
History may seem to be nothing but a catalogue of human folly, but have you ever asked yourself what features of contemporary life will have our own descendants scratching their heads and asking themselves: how could they – meaning us, today – be so crazy?
My guess is that the feature of modern life that future generations will find hardest to understand will be our attitude to narcotics. The War on Drugs will look to them as mad as the Salem witch trials do to us today.
Of course, narcotics are mostly bad for you – in some cases, very bad indeed (though the authorities have been rather keen to exaggerate the risks, in some cases quite grotesquely). But then cigarettes are also very bad news, as we all know, and alcohol abuse does a lot of damage (more through its effect on people’s behaviour than anything it does to their internal organs), and under the kitchen sink there are bottles of stuff which could give you a serious high and an even more serious health problem. Yet cigarettes, alcohol, cleaning fluids and glue are not classed as illegal substances. Why does sanity prevail in these cases, but not for narcotics? After all, common sense tells us that we can’t ban something simply on the grounds that it is bad for our health – that is why we haven’t yet made deep-fried Mars bars or turkey twizzlers illegal – but what we call “drugs” are, for some reason, treated differently.
The UK, USA, the PIIGS (Ireland and Italy are together in the same stye), France is in poor fiscal shape – OK, Germany is ostensibly living within its means, but it looks a lot less solvent when you remember that it has underwritten the rest of the euro zone (in large part, to protect its own irresponsible banks). In any case, as I have argued in previous blogs, this or a future German Government is likely to cave in to the pressure from its own electorate and from inflationist economists at home and abroad to join the party and spend, spend, spend. Only Australia and Canada, riding high on the commodities price boom, and a handful of small countries, look stable.
Where will it all end?
With inflation, almost certainly, but beyond that, it is hard to say. However, there is one prediction I would offer for the medium to long term outcome, and it applies not only to the euro zone, but to Britain and America too – in fact to the whole of the comfortable, complacent industrialised world – and it is this.
There are traditional relationships that the financial markets respect. For example, when the markets are tanking the world wants to own safe havens like the yen, the Swiss franc, U.S. debt and gold. If volatility spikes investors go into auto-mode and are almost pre-programmed to purchase these asset classes.
But just how safe are the safe havens? Both the Japanese and Swiss authorities intervened to limit the appreciation of their currencies in recent days. The Swiss National Bank (SNB) did so first by slashing interest rates and announcing a new QE program to flood the economy with money to try and put downward pressure on the franc. The Bank of Japan (BOJ) embarked on something similar, but they directly intervened and sold yen in the markets.
By Laurence Copeland. The opinions expressed are his own.
As I write this blog, it looks as though the U.S. Congress is going to pass a bill raising the debt ceiling and making modest cuts in Federal Government spending over the coming years. Although it is, quite rightly, being presented as a somewhat hollow victory for the forces of reason, there is one extremely puzzling aspect of the crisis.
It is being reported on all sides that the credit rating agencies may well downgrade U.S. sovereign debt in spite of this “happy ending” – indeed, Egan-Jones, one of the smaller agencies, cut its rating of U.S. debt some weeks ago, and there is much talk of Moody’s and S&P following suit in the very near future.
Markets thrive on certainty. Anything that smacks of uncertainty, fence-sitting or indecision will lead to market turbulence, as investors punish those who don’t tell them how it is.
This is exactly what we are seeing in Europe right now. The markets are losing patience with the EU’s inability to come up with a credible plan to fight the sovereign debt crisis and that is why it is escalating at an alarming rate.
By Kathleen Brooks. The opinions expressed are her own.
Back in early 2009 I was sitting in the library trying to find a new spin on the U.S. financial crisis for a college paper. I trawled through book after book and they all said the same thing. But finally, late into the night, I stumbled upon something fresh in the latest unemployment report.
Jobs had been slashed in the U.S. and unemployment was rising, but interestingly, women were faring better than men. So there was my story. After June’s jobs report I decided to review this phenomenon and find out whether this was really just a male crisis.
By Kathleen Brooks. The opinions expressed are her own.
The markets always suffer from a chronic case of short-termism, but once a sovereign debt crisis takes hold it is very difficult to reverse. Investors may be concentrating on Greek, Irish and Portuguese funding needs for the next 24- 36 months now, but it won’t be long before investors start to scrutinise longer-term liabilities that are currently being clocked up for the next 10,20 even 30 years.
Another week another round of EU officials proposing solutions to the Greek insolvency problem.
First there was the President of the European Council Jean Claude Juncker who suggested that bond holders could be tempted into rolling over their maturing debt and buying more Greek bonds as long as a few sweeteners like higher coupon or interest rates were thrown in.
from Pakistan: Now or Never?:
I have never read "Three Cups of Tea", Greg Mortenson's book about building schools in Afghanistan and Pakistan. I tried to read the sequel, "Stones into Schools" and gave up not too long after the point where he said that, "the solution to every problem ... begins with drinking tea." Having drunk tea in many parts of South Asia - sweet tea, salt tea, butter tea, tea that comes with the impossible-to-remove-with-dignity thick skin of milk tea - I can confidently say that statement does not reflect reality.
So I have always been a bit puzzled that the Americans took Mortenson's books so much to heart. Yes, I knew he boasted that his books had become required reading for American officers posted to Afghanistan; and yes, there is the glowing praise from Admiral Mike Mullen on the cover of "Stones into Schools", where he wrote that "he's shaping the very future of a region". But I had always believed, or wanted to believe, that at the back of everyone's minds they realised that saccharine sentimentality was no substitute for serious analysis. Just as hope is not a strategy, drinking tea is not a policy. (To be fair to the Americans, I have also overheard a British officer extolling the virtues of drinking tea in Afghanistan.)
By Kathleen Brooks
The U.S. has practically zero chance of solving its debt problem in the foreseeable future while politicians line up to contest the 2012 Presidential elections.
We have already heard President Obama lay out his partisan cards. He called for Congress to come up with a plan to trim $4 trillion from the U.S. deficit in the next 12 years. His favoured way to do this: end tax cuts for the rich – a well versed refrain from Democrats throughout the ages.