Quis custodiet ipsos custodes?

A US colleague of mine thoughtfully sent through a memo on the Greek crisis and European economic outlook from a chap at Oaktree Capital. It was the usual pillory of the Greeks for being lazy tax-dodgers and praise for the fiscally prudent Germans. It prompted the following response.

"The Euro was basically a political compromise: West Germany was allowed to reunify with East Germany (the French hated this because it made Germany without doubt the premiere power in Europe) if the French were allowed to have the Deutsche Mark (i.e. a lower cost of borrowing). It was explicitly framed in these terms by Mitterand and Kohl. From the same source of French insecurity comes the decision to allow the fiscally weak countries such as Belgium, Italy and Greece to join despite the fact that they did not, and were not likely to, meet the Maastricht Convergence Criteria. The idea was to create a voting block of nations that France could commander as a counter-veiling force to Germany on the ECB and the Council of Economic Ministers.

"I also get a bit cheesed off when commentators describe the current crisis as being caused by the profligate South in the teeth of opposition from the fiscally prudent North. The South is profligate – not to mention inefficient, unproductive and crippled by an unjustified sense of entitlement (if Portugal didn’t exist, would you invent it (unless you were a golf-fanatic)?). But the North – while possessing a decent manufacturing export sector – is also crippled with over-generous and inefficient social security programmes. The key fact is that Germany – the apparent paragon of fiscal virtue – broke the Maastricht Stability and Growth Pact rules on budget deficits in 2002, 2003, 2004 and 2005. Not to mention to 2009 and 2010(f). By contrast, Spain passed the test with flying colours – posting SURPLUSES in 2004, 2005 and 2006. So, enough of the anti-South propaganda. Germany, France, Belgium etc all over-spent and that’s why they didn’t come down hard on Greece – because they would’ve had to come down on themselves too.

"The amazing thing is not that bond market vigilantes have finally caught onto this – but that between 2000 and 2008 they gave the Eurozone the benefit of the doubt. We are now in a situation where bond markets and rating agencies are enforcing the fiscal discipline that Eurozone politicians should’ve enforced themselves. All of which goes to show that there is nothing new in European politics. Juvenal had it exact in 180 AD – you can’t trust the people who are subject to the law to enforce it.

Information from the North Concerning Ice

Each seal uses many blowholes, and every blowhole is used by many seals.

"JakeN" commenting on The Economist's analysis of Goldman versus the SEC

In summary,

a) Goldman escaped having to admit wrongdoing.

b) Goldman fined a fraction of the amount in the original complaint.

c) Goldman ordered not to break the law.

d) Goldman staff ordered to find out what the law is.

(a) and (b) are par for the course in terms of financial regulation. But (c) and (d) sound like an extract from the satirical script of “Jon Stewart’s Daily Show”.

From The Economist

"The barrier to (EU structural) reform has always been political, not economic. Jean-Claude Juncker, prime minister of Luxembourg, put it best in 2007: “We all know what to do, but we don’t know how to get re-elected once we have done it.”"

It's the little things

From the Letters page of the Trinity Issue of Oxford Today:

"In your interview with Monty Python actor Terry Jones ("A Python's Progress", OT, 22.2), you referred repeatedly to his involvement with the "Oxford Review". When I was at Oxford, my involvement was with the Oxford Revue. Call me picky, but I think that I was involved with the one better spelt.

Rowan Atkinson.
Queen's 1975.

Thoughts on listening to the Today programme

An Education minister says our curricula used to be "designed upwards" to suit the universities and that now they should be "designed downwards" to suit the needs of, you know, actual students. An unfortunate turn of phrase but it does hint, subconsciously, at the troglodytically poor standards of inner city secondary education.

Ten minutes later the Afghan ambassador to the Court of St James is talking about "time", "having enough time", and "this being the time to take time, not having enough time notwithstanding". He sounds like Culture Club.

Overall I'm, like, totally, like disturbed about the declining standards of public discourse on Radio 4, innit.

Maybe I have over-sensitized to the corruption of public discourse by last night's experience, on a "hot date" watching "Get Him to the Greek". I've always complained about having to choose between a career as an economist and as a film programmer. It seemed to me that these worlds were very different and rightly so. And now I find Nobel Prize winning economist Paul Krugman in a cameo in a Judd Apatow comedy. It's like seeing your dad crop up as a background singer in a Miley Cyrus video.

When I first started reading Krugman it was 1998 and he was but a humble trade economist with a lo-rent website out of MIT upon which he opined about the Liquidity Trap. (That was back in the day when the only liquidity trap was Japan, as opposed to now, when you could be referring to anywhere in the developed world.) Reading Krugman was a niche interest for Econ students at Oxford. It was the geek equivalent of being into Vampire Weekend before they put out "I Stand Corrected" as Free Song of the Week on iTunes. And then Krugman went to Princeton. I guess we should've seen it coming. From the third best University in Jersey, but the only one with a Gucci store, it was just a mere hop, skip and jump to the NY Times Op Ed page. Ever since then, Krugman's university page has been abandoned, and while he won the Nobel for his trade work, he hasn't written anything of substance since. Rather, he seems to have become enmeshed in political spats and ad hominem attacks. It's a crying shame. Krugman, in his old guise, could've been instrumental in actually rolling up his sleeves and sorting out the mess we're in - at the Fed, Treasury, IMF, whatever. Now, he's reduced to just another Huffpost contributor - and to being a cameo in a Judd Apatow movie.

I genuinely wonder how Krugman views this latest venture. Does he see it as part of his apparent mission to popularise economics? Is it just a vanity project? Or is he just a little bit embarrassed? He looked bewildered in the movie. But maybe that was just his "character". All I know is that he has probably ruled himself out of being Fed Chief. Or maybe not. In a world where Arnold Schwarzenegger can be elected Governor of California, anything is possible, maybe even the first Bank of England MPC member who simultaneously reviews flicks in The Grauniad?