The Duke of Edinburgh is quoted in the papers today by someone he spoke to at a reception as follows:
‘He said they were absolutely useless, completely reliant on subsidies and an absolute disgrace.’
To which of the following was the beloved husband of the Queen — and in his youth Prince of Greece — referring?
a) the royal family
b) Greeks
c) wind turbines
d) all of the above
The latest from the investigation into the death of Mark Duggan, whose death sparked the UK riots this summer, is worth taking on board.
Recall that when police shot him dead, Duggan was initially said to have fired on police. And a shot Duggan supposedly fired almost killed a policeman, except it lodged in his radio.
The point we are at now is that a) Duggan did not fire a shot b) Duggan did not have a weapon in his hands.
Instead there was a weapon inside a sock inside a box in the back of his car that police had information he had acquired.
It is not quite as bad as shooting an unarmed electrician in the head multiple times at point blank range. But the Duggan killing points to a London police force parts of which have lost touch with what policing means as a profession.
Meanwhile:
Two of three members of a community liaison group set up to create trust in the official investigation into Duggan’s death have resigned. And the Met is running to the Press Complaints Commission with what looks like a very lame complaint against The Guardian‘s reporting (same link); it isn’t quite Giuliano Mignini firing off allegations of criminal libel against any journalist who gainsays him, but it is a little chip hewn from the same moral block.
It isn’t easy to see amid all the goings on, but there is a fork in the economic road. A third week of improving jobless claims in the US signals the very slow recovery of the world’s biggest economy. Meanwhile the spreading of the stress in European debt markets signals that the worst in that region is yet to come.
The world is suffering two different macro crises. A private debt disaster hit countries running the Anglo-Saxon model. As Hyman Minsky would have expected, the US is beginning to escape from this because its government carried sufficiently low debt that it could step in and bail the problem out with monstrous sums of public money. The US is also assisted by having a diversified economy that contains the planet’s best manufacturing firms in addition to its biggest banks (something not considered in Minsky’s ‘financial instability hypothesis’, but then he never claimed it was a complete theory). The UK, and Ireland, and Spain, are more one-dimensional and hence more stuffed. As this article makes clear in Britain’s case.
The second macro crisis is the public debt one of the Eurozone. Here the state cannot step in because its debts are the problem. Instead the state has to negotiate its way out. Which involves politics. Which is why the problem is more intractable than the private debt disaster where the solution is automatic (deleveraging, falling asset prices, misery for anyone who failed to ‘play the market’).
The major ‘negotiation’ of the public debt crisis in Europe is Italy’s, which is now in its ‘Chin Up, Let’s All Stand Together Phase’, under Mr Monti. The press today is being terribly positive. But I cannot see where a good outcome could come from. Italians are all in favour of Mr Monti because he has not yet set out clear policies. Once he does, the political parties will attack him, and allege that dark, conspiratorial forces are behind him. Without a clear roster of policies that have to be approved by a referendum, there is no practicable way forward. And no party is urging a referendum because it would involve making policy choices clear. The parties were not even willing to offer up ministers for the government. The preference is to let the ‘technocrat’ dig his own grave.
Krugman highlighted a great site on his blog this week. And it is a great site, so here’s the link if you haven’t seen it.
The World Top Incomes Database has income distribution data for 22 countries, with more being added, over long periods of time. Go to the graphics page and you can call up series for different shares of the population for your favourite countries.
I went for the top 5 percent of tax payers in the UK, US and Denmark since 1900. The top 5 percent of earners in the US and UK have gobbled 25-30 percent of national personal incomes in recent years. In Denmark — the country which consistently tops out the rankings in European ‘happiness’ surveys — the percentage is consistently under 15 percent. (UK and US shares were of course lower until the well-known inflection point in the 1970s).
Unfortunately I can’t reproduce the graph here. But you can make your own.
Should have posted this rather nice graphic from the NYT a few days ago, showing debt relationships in Europe.
It reminds us, as Mario Monti goes to work, that the Italian debt buck stops in France.
For it is the French banking system that has a net exposure to Italy of something over US$350 billion.
When the history of recent world banking is written, US and British bankers will take the prize for unadulterated, venal greed and selfishness.
But French bankers must surely lift the trophy in the combined greed-with-stupidity category.
The French liability in Italy is about 15 percent of French GDP. Which particular risk model were the French banks running when they decided that was a good idea?
The Economist has published its sixth, and presumably final, cover story on Silvio Berlusconi. The headline – ‘That’s all folks’ – is supposed to evoke the cartoon quality of his premiership. But coupled with a backdrop of Sil set in a painting of end-of-Empire Roman lassitude, it is too busy. Far more visually effective was the June 2011 cover with a simple photo of Sil and the line ‘The man who screwed an entire country’.
I haven’t been the biggest fan of The Economist’s coverage of Italy because it has focused so overwhelmingly on Sil — rather than on a the malaise of an entire professional class which he symbolises. What sets Italy apart is that, relative to its level of economic development, it has the most backward, self-serving professional class and professional institutions of any state in the world. This includes, but is far from limited to, its political and legal and fiscal institutions.
There is also a very English undercurrent of hypocrisy in the manner in which the British elite discusses the Italian crisis with a told-you-so attitude. The Economist is particularly guilty of this, putting the boot in to the German response to the crisis on a weekly basis.
What is forgotten is how the Germans are left to do the political heavy lifting in Europe almost single-handedly. They have a French ‘assistant’, but he is barely worthy of the name.
If Britain had joined the Euro, things would have been different. There would be two big political grown-ups in the Euro-zone instead of one, and that would have made the job of dealing with Italy so much easier.
You cannot argue with Britain’s decision to stay out of the Euro from a selfish, pragmatic perspective, but anyone who supported that decision should limit themselves when yelling from the sidelines about what to do now. How would you like to be Merkel, put in a team with Sarko, and expected to sort out Greece and Italy?
If Britons are honest, they must concede that post-war Germany has done the bulk of the work in creating a stable, prosperous and progressive Europe while the British — famed as people of action — stood around bitching. And when Britain realised it desperately needed to be inside the Common Market in the early 1970s, it needed German support — against French opposition — to get in.
Germany, not Britain, is the moral leader of Europe in the past half century.
Nouriel Roubini, who lived for 20 years in Italy, has the day’s best post on the evolving Italian crisis. The concluding paragraph is a reasonable summary of what is required by Italy’s Euro partners to keep it in the currency bloc at this point:
‘Only if the ECB became an unlimited lender of last resort and cut policy rates to zero, combined with a fall in the value of the euro to parity with the dollar, plus a fiscal stimulus in Germany and the eurozone core while the periphery implements austerity, could we perhaps stop the upcoming disaster.’
What Roubini does not spell out is why this is unlikely to happen. When all the talking is done, it is a simple matter of trust.
Northern Europe does not trust Italy to push through the reforms that would make the effort and expense worthwhile.
The Matilda problem that I highlighted back in August is coming home to roost.
My own thought for the day is Article 54 of the Italian Constitution:
Those citizens to whom public functions are entrusted have the duty to fulfil such functions with discipline and honour.
It seems the last Euro-era chance to interpret that line in a more mundane and literal fashion may fall to Mario Monti.
They say you can learn from the classics. So here are my bullet points on the heroic struggles of Europe’s ancients.
How Greece did it:
1. Get money from EU in return for reforms.
2. Tell EU/IMF you need to hold referendum in order to get population on board.
3. Abandon referendum when rest of Europe says this is devious and should have been discussed up front.
4. Bicker and look ridiculous.
5. Leave Euro and return to Third World.
(6. Feel really bad when Turkey joins EU and takes commitments seriously.)
How Italy could do better.
1. Tell EU you need to hold referendum in order to get population on board.
2. Form government of national unity. Agree comprehensive package of labour market, justice system and fiscal reforms with EU/IMF to be overseen by IMF.
3. Don’t bicker. Hold referendum in January.
4. Implement reforms under IMF oversight.
5. Remain in Euro and begin to be respected member of First World instead of being resident joke member.
(6. Not have to feel bad when Turkey joins EU and takes commitments seriously.)
But which option to go for?
Rodin's epic representation of the Italian politician
Here’s a new song to sing to keep up spirits as we wait for Italy to fall into the abyss:
IMF, IMF, IMF
IMF, IMF, IM-E-EFF
IMF, IMF, IMF
AYE EMM FFFF
Because even though the country is among the richest in the world, it can’t look after itself.
And take a look at the bio of David Lipton, who the IMF had already scheduled to go to Rome next week (before Italian bond yields hit 7.5% this evening). This guy appears to have the cv from hell. He worked at disaster bank Citi in the run-up to the global financial crisis. He (presumably) filled his boots at hedge fund Moore prior to that. He was part of the Clinton financial deregulation road to hell team in the 90s. Which came just after he had worked with Jeff ‘did I say that?’ Sachs to provide restructuring ‘advice’ to developmental superstate Russia in the 1989-1991 period. Maybe there really is a God. And he really has lost patience with Italy.
Time for Giuliano Mignini to investigate. The yield on Italian debt has hit seven percent. Which is the same as the number of deadly sins committed by the Italian prime minister. Every week, which in turn has seven days. And today is only just more than seven days after Halloween, the diabolical festival when Raffaele Sollecito and Amanda Knox, give or take a day, hatched their Satanic ritual murder plot. In Perugia. Whose name has seven letters.
It is soooooooo obvious that everything in the whole world is a conspiracy. How can anyone be expected to take action when confronted by forces beyond our control?
Frankly, they can’t. Which is why Italy’s professional class is doing nothing as the country goes down the tubes.
Let Rome burn!
The images will at least form a good backdrop for a Dolce and Gabbana advertising campaign. Sicilian peasant chic — combining glamour, stoicism and passion — is surely the perfect day-wear for the modern cataclysmic financial crisis. Not to mention a great metaphor for a society living on bullshit.
Prime Minister Nero putting in a bunga-bunga order last night.
Worth a read:
Nouriel Roubini reposts what he said about Italy at Davos in 2006. Roubini’s analysis led to a bizarre racial outburst from finance minister Giulio Tremonti, the former professor of ethics who was recently busted renting a Rome apartment for cash.