Home > Uncategorized > Links. Debt. And shrimps. And Mario Draghi.

Links. Debt. And shrimps. And Mario Draghi.

1) Carmen Reinhart and Christoph Trebesch argue that, looking at the record (which they established), redeeming government debt overhangs generally (no: often) increases prosperity.  Learn their Box 1 by heart! It’s another addition to our rapidly increasing knowledge about the history of ‘really existing capitalism’ (for the young ones: the phrase ‘really existing socialism‘ was used to describe communist systems and served to drive down the difference between rosy communist ideals and the often bland and harsh reality – the rosy ideal in this case being ‘general equilibrium’).

2) On Voxeu, S. M. Ali Abbas, Laura Blattner, Mark De Broeck, Asmaa El-Ganainy andMalin Hu show a decomposition of 100 years of government debt in 13 advanced economies. Who owned the debt, what kinds of debts were issued? Less and less of the debt is held by commercial banks and more and more by institutional investors (pension funds and the like) which leads to internationalization of the debt (though governments owe less debt denominated in foreign currencies – which in the Eurozone however does not matter as the Euro can, in a sense, be considered to be a foreign currency). The amount of debt on the balance sheets of central banks is nowaday way lower (as a % of total debt) than in the 1950-1980 period. Part of these debts were (and are) currency, the authors do not show the amount of this kind of ‘debt’. 

3) Frances Coppola tells us that reality is already worse than the worst case scenario of the ECB stress test

4) Frances Coppola tells you all about regulatory arbitrage and why it mattered while at the same time explaining how QE-policies in a sense were a follow-up to the credit booms of the 190-2006 period.

5) One of the activities most difficult to mechanize is shrimp peeling, but thanks to a 78-year-old shrimp trader and after thirty years of tinkering (in 1984 at home peeling of shrimps was forbidden in the Netherlands),  it is finally possible. Dutch shrimps are at the moment peeled in Morocco (no joke) and the machines will lead to a few hundred Moroccan jobs being lost. At the other side – last year I co-tutored two students groups who had to design a shrimp-shell factory producing shrimp shell bouillon. The magic: they are dissolved with NaOH – a very nasty substance – but after adding HCl (nastier) you end up with delicious salted (NaCL) shrimp bouillon.

6) Mario Draghi on how to end the crisis. No talk of debt redemption. And, to my taste, he places too much confidence in confidence boosting ‘structural reforms’ (whatever these are). But we have definitely left the Greenspan/Trichet world where everything is supposed to be fine as long as central banks hold inflation low and stable, end of story. Unemployment is mentioned as a problem, just like a low rate of wage increases. Draghi argues for a coherent strategy of fiscal, monetary, financial (banks) and structural policies. Which seems a no-brainer. But in Europe, it isn’t.

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