Edward Hugh Jul 18, 2008
Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past, the ocean is flat againJohn Maynard Keynes
'As far as I am concerned, this is ... the most complex crisis we've ever seen due to the number of factors in play'Spanish Economy Minister Pedro Solbes speaking this week to Spanish radio station Punto Radio
Jose Luis Borges tells a story about two rascally villains, eternal rivals, who - under sentence of death - are offered one last bet: rather than accepting a conventional execution they can agree to have their throats slit simultaneously, just to see who is a able to run the farthest. Immortality, rather than fame, in an instant. Now I mention this since tale I can readily anticipate the immediate feelings many will have on reading what follows (I am at the end of the day going to argue that it is necessary to inject money - and I do mean rather a lot of money - into a banking and construction system which many will want to argue is largely responsible for Spain's present distress, and indeed, that having made a good deal of money out of the operation, these are the very people who should now be forced to don that sackcloth and ashes costume which so behoves them (actually the way things stand they are much more likely to find themselves reduced to a sporting a loincloth, but still). I understand why many ordinary Spanish people may have such feeling, but I do think this is a time for cool heads, and that what is most needed here is an extreme dose of pragmatism coupled with a lot of emotional intelligence. There is no point in agreeing to have your own throat slit just to see people you don't like have their's slit first.
Martinsa Fadesa The First To GoThis week's filing by the Spanish property developer Martinsa-Fadesa for protection from its creditors has brought Spain's ongoing economic agony back to the headlines. The decision follows a request from Martinsa Fadesa last Friday to its creditor banks for a postponement of the deadline on their requirement that the company obtain a 150 million euro ($235.7 million) loan. The banks refused the request and the rest is now, as they say, history. The failure of Martinsa - Fadesa whose debts are in the region of 5 billion euros - is not only the largest corporate bankruptcy in Spanish history, it is also a reflection of the pain which must now be being felt in Spain's troubled banking and construction sectors, and a harbinger of what is, in all probability, going to be much worse to come.
Spain At Risk
So to come directly to the matter which has provided me with the header to this post, just what is the risk that the present recession in Spain is something a bit more than a mere recession? What is the risk of a real and serious economic melt down just across France's Southern border, a mere stone's throw away (by plane) from Brussels or Frankfurt, yet still on the other side of that intellectual and cultural divide which seems to be formed by that ever so picturesque natural barrier known as the Pyrennees? Well it is a non-negligable one, in my view. Let me explain a bit.
First, as background it would be worth reading my Artemio Cruz Syndrome post, since all the main macroeconomic arguments are presented there (and those who seriously want to know what is going on should definitely read the excellent "Spain:Bubble Bursting - We now expect a full-blown recession" desknote from PNB Paribas).
Secondly, we need a bit of vocabulary clarification, since the terminology being used has become somewhat confusing of late. We could reasonably break things down as follows I think:
i) Soft Landingii) Hard Landingiii) Melt Down
Now, in terms of the available semantic space, why don't we allow that "soft landing" means a recession of the more or less garden variety (as Portugal or Italy have at this moment, or as say France may anticipate, or Denmark) and not consider this to mean avoiding recession completely, which is how some seem to have used the term in recent times (I think it is hard to imagine any EU 15 economy avoiding recession completely between now and Q2 2009). Possibly Hungary up to this point could also be said to have had a comparatively soft landing.
"Hard Landing", on the other hand would be what they are currently experiencing over in the Baltics, what they may well soon experience in Romania, Bulgaria, the UK, and Ireland, and what is now most certainly taking place in Spain. Thus by "hard landing" I mean a very sharp slowdown in growth, a medium sized contraction in consumption, financial distress and bankruptcy in some areas, and a recession which drags itself on for more than a mere two quarters (in and out of negative growth) and probably results in annualised negative growth for a period of at least 12 consecutive months. What happened in Turkey in 2000 was certainly a hard landing in this sense.
iii) "Melt Down", following such definitions, would then be a Hard Landing plus, a Hard Landing plus a shock (or in Hungary's case, where the shock would be a run on the forint, you could imagine what initially is only a Soft Landing being converted into a melt down, but arguably Hungary's case is very special given the very high level of exposure of household balance sheets to CHF denominated forex loans).
'As far as I am concerned, this is ... the most complex crisis we've ever seen due to the number of factors in play'Spanish Economy Minister Pedro Solbes speaking this week to Spanish radio station Punto Radio
Jose Luis Borges tells a story about two rascally villains, eternal rivals, who - under sentence of death - are offered one last bet: rather than accepting a conventional execution they can agree to have their throats slit simultaneously, just to see who is a able to run the farthest. Immortality, rather than fame, in an instant. Now I mention this since tale I can readily anticipate the immediate feelings many will have on reading what follows (I am at the end of the day going to argue that it is necessary to inject money - and I do mean rather a lot of money - into a banking and construction system which many will want to argue is largely responsible for Spain's present distress, and indeed, that having made a good deal of money out of the operation, these are the very people who should now be forced to don that sackcloth and ashes costume which so behoves them (actually the way things stand they are much more likely to find themselves reduced to a sporting a loincloth, but still). I understand why many ordinary Spanish people may have such feeling, but I do think this is a time for cool heads, and that what is most needed here is an extreme dose of pragmatism coupled with a lot of emotional intelligence. There is no point in agreeing to have your own throat slit just to see people you don't like have their's slit first.
Martinsa Fadesa The First To GoThis week's filing by the Spanish property developer Martinsa-Fadesa for protection from its creditors has brought Spain's ongoing economic agony back to the headlines. The decision follows a request from Martinsa Fadesa last Friday to its creditor banks for a postponement of the deadline on their requirement that the company obtain a 150 million euro ($235.7 million) loan. The banks refused the request and the rest is now, as they say, history. The failure of Martinsa - Fadesa whose debts are in the region of 5 billion euros - is not only the largest corporate bankruptcy in Spanish history, it is also a reflection of the pain which must now be being felt in Spain's troubled banking and construction sectors, and a harbinger of what is, in all probability, going to be much worse to come.
Spain At Risk
So to come directly to the matter which has provided me with the header to this post, just what is the risk that the present recession in Spain is something a bit more than a mere recession? What is the risk of a real and serious economic melt down just across France's Southern border, a mere stone's throw away (by plane) from Brussels or Frankfurt, yet still on the other side of that intellectual and cultural divide which seems to be formed by that ever so picturesque natural barrier known as the Pyrennees? Well it is a non-negligable one, in my view. Let me explain a bit.
First, as background it would be worth reading my Artemio Cruz Syndrome post, since all the main macroeconomic arguments are presented there (and those who seriously want to know what is going on should definitely read the excellent "Spain:Bubble Bursting - We now expect a full-blown recession" desknote from PNB Paribas).
Secondly, we need a bit of vocabulary clarification, since the terminology being used has become somewhat confusing of late. We could reasonably break things down as follows I think:
i) Soft Landingii) Hard Landingiii) Melt Down
Now, in terms of the available semantic space, why don't we allow that "soft landing" means a recession of the more or less garden variety (as Portugal or Italy have at this moment, or as say France may anticipate, or Denmark) and not consider this to mean avoiding recession completely, which is how some seem to have used the term in recent times (I think it is hard to imagine any EU 15 economy avoiding recession completely between now and Q2 2009). Possibly Hungary up to this point could also be said to have had a comparatively soft landing.
"Hard Landing", on the other hand would be what they are currently experiencing over in the Baltics, what they may well soon experience in Romania, Bulgaria, the UK, and Ireland, and what is now most certainly taking place in Spain. Thus by "hard landing" I mean a very sharp slowdown in growth, a medium sized contraction in consumption, financial distress and bankruptcy in some areas, and a recession which drags itself on for more than a mere two quarters (in and out of negative growth) and probably results in annualised negative growth for a period of at least 12 consecutive months. What happened in Turkey in 2000 was certainly a hard landing in this sense.
iii) "Melt Down", following such definitions, would then be a Hard Landing plus, a Hard Landing plus a shock (or in Hungary's case, where the shock would be a run on the forint, you could imagine what initially is only a Soft Landing being converted into a melt down, but arguably Hungary's case is very special given the very high level of exposure of household balance sheets to CHF denominated forex loans).
3 comments:
A Espanha, o Reino Unido, a Itália, a França e, até a Alemanha aqui tão perto...
Ensinaram os Chineses e os Indianos a 'pescar' e agora, eles pescam que se fartam e nós (Europa e USA)pescamos cada vez menos...
Estive a ver um documentário sobre a China e era ver edificios com as marcas Siemens, Nokia, Intel, etc...
Até a porcaria da comida do gato é Made in China (e está uma verdadeira porcaria).
Comecem a olhar para o que está a acontecer à Danone e vejam se percebem onde o 'outsourcing' desenfreado dos últimos anos nos vai levar.
Parece que a Siemens vai despedir cerca de 16000 funcionários, 6000 só na Alemanha.
A Ericson mais uns milhares.
As falências continuam a aumentar.
Nos EUA é ver os bancos a anunciar prejuízos na ordem do biliões de dolares.
Mas o FMI e alguns economistas continuam a dizer que isto é passageiro, que só está um nadinha lento o crescimento, que para o ano que vem já deve haver melhorias, bla, bla , bla,...
Vão tapar o Sol com a peneira até quando?
Acho que o Medina Carreira tem razão quando diz que estamos a empobrecer e vamos empobrecer ainda mais e com barulho.
"Acho que o Medina Carreira tem razão quando diz que estamos a empobrecer e vamos empobrecer ainda mais e com barulho."
Talvez tenha.
E o que é que ele propõe para resolver o problema? Sabe?
Denunciar, lamentar, criticar, todos somos capazes de o fazer. Fazer, construir, mudar é que é difícil e é disso que precisamos.
Quanto aos chineses e indianos, é graças a eles que, apesar de tudo, não nos confrontamos hoje com uma crise económica ainda pior.
Salvo melhor opinião.
O problema é que acho que isto já atingiu uma tal dimensão que soluções não são faceis de apontar.
Crises destas, de fome e desemprego já existiram ao longo da História da humanidade, normalmente com desfechos "barulhentos".
O problema agora, parece-me, é a população ter crescido (e continuar a crescer) desmesuradamente, logo, o "barulho" será maior.
Não conto muito com os Chineses e os Indianos para equilibrar as coisas.
Eles são MUITOS e cheios de problemas tambem.
Uma distribuição mais equilibrada dos recursos básicos, alimentação, água potavel, cuidados de saude, educação talvez ajudasse.
Deixar de medir o crescimento economico pelo dinheiro que entra no país mas, sim, pela qualidade de vida da população em geral.
Mas, isto é um sonho, porque como gostam de dizer alguns economistas, devemos deixar o mercado governar e, logo, a ganancia passa a ser conhecida como obter capacidades de investimento e produção empregos.
Não interessa se o investimento é feito em palacios dourados, iates,Ferraris ou clubes de futebol e os empregos criados são precários e pagos a preço de escravatura. Tem que se deixar funcionar o mercado.
Porque acha que houve esta febre de deslocação de empregos e fábricas para a China e a India?
Ganancia.
Descobriu-se que se podia produzir com trabalho escravo por uma tigela de arroz e vender na Europa e nos EUA por 300.
As populações destes países ficaram desempregados ou a receber subsidios de desemprego então, vamos lá dar-lhes empréstimos para continuarem a comprar.
Claro que isto só podia acabar mal.
Agora estão a tentar trazer a produção de volta até, porque os salários no Ocidente já baixaram e as leis laborais regrediram mais de um século.
Será que vão a tempo?
Os chineses adquiriram o know-how e começaram a fabricar os mesmos produtos com outro nome (Veja o caso da Danone).
Não, meu amigo, não sei qual será a solução mas, parece-me que a coisa está preta e vai ficar mais preta para as gerações mais novas e pôr paninhos quentes não vai benificiar o quer que seja.
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