German Recession Digs in Deep

It still isn't official of course, but there is every sign that recession in Germany is here, and that it is digging in for the season. The latest Bundesbank monthly report doesn't expect recovery any time soon, and neither do I.

The German economy, Europe's largest, failed to rebound in the second quarter from a contraction in the previous three months and there are no signs to suggest a recovery soon, the Bundesbank said. "The available indicators don't suggest that economic output in the second quarter managed to detach itself from the basic trend of stagnation,'' the Bundesbank said in its monthly report. "An improvement in the near future is not in sight.'' Germany's economy - about a third of the economy of the dozen euro nations - is close to recession after shrinking in the first quarter. To boost growth and fight unemployment, Chancellor Gerhard Schroeder plans to speed up income-tax cuts, ease labor laws and trim jobless benefits. Bundesbank President Ernst Welteke said today the government shouldn't expect any more help from the European Central Bank, after it cut its main lending rate to a half-century low in June. "I see no need to act at the moment,'' Welteke said in a televised interview with Bloomberg News in Frankfurt. "The conditions are there for stronger growth'' in the dozen nations sharing the euro.
Source Bloomberg
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Pointing the Finger Elsewhere Won't Help

Well, just as I get off on holiday, Maynard arrives home. His holidays have been more like a world tour by the look of it, but he seems to be full of ideas and ready to go. His main point, that bashing China won't solve our problems, is one I fully agree with. China is a reality we have to learn to live with.

persistently weak global economy is now moving into a dangerous place - the blame game. Temptations are rising to point the finger elsewhere rather than look in the mirror. Such sentiment is nearly unanimous in singling out a new scapegoat: a rapidly growing Chinese economy. I have picked this up in my recent travels to Japan, Europe, Australia, and around the United States. World opinion is becoming increasingly united in putting pressure on China to defuse this threat by revaluing its currency. In my view, that would be a serious mistake. The world has got the China story dead wrong.

Isn't it nice when you see something you predicted come true? Makes you think you perhaps do have some understanding of the situation. Based on what happened in Japan in the 80's, last year I expected this to happen, but I expected it to be a big part of the 2008 election. I wasn't sure about 2004, and still am not, because on the one hand I
suspect a large number of Bush and Dem funders harbor dreams of getting wealthy through China, or even if they have abandoned those, have enough FDI now committed that they can't afford to anger the country; while on the other hand I don't yet see the steady drum-beat of China blaming that's a necessary prelude to such a political stance - you'll see the usual nutcases like Limbaugh and Coulter floating this line and seeing how it plays way before you see politicians discussing it. So I'm not sure that it will play a large role in 2004. But 2008, absolutely.

The one story I am still looking out for is whether Cheney runs as VP in 2004. My suspicion is that if things continue to go badly for GWB, he will be ditched (at the appropriate time which is still probably 6 months from now) as the fall guy for every single one of GWB's sins, leaving the puppet in a more-electable position and ready to do his masters' biddings for another 4 yrs. At that point the interesting question becomes who his replacement will be, something that will tell us just who controls the Republican party - the war-mad neo-cons, people who are so ideologically blinkered (Grover Norquist et al) they simply cannot see that their tax cut regime is imperiling their future prosperity, or pragmatic adults who realize that heck, the way things worked during the Clinton years weren't that bad for a wealthy person.

Currency Problems in Singapore

Well here I am on holiday, in the lovely Spanish-French border village of Camprodon , right in the foothills of the Pyrenees. As is now becoming habitual I am continuing my survey of cyber cafees. This one is run by Brazilians. Having a quick Google, I find that Eddie has been busy again in Singapore. This time it's another visit to the problems of a high currency:

THE Monetary Authority of Singapore (MAS) took many people by surprise when it softened its hitherto strong exchange rate policy last week. After all, the strong-dollar policy has been well-ingrained. The MAS has established a large pool of foreign reserves - $153 billion at last count - as a deterrent to speculators. The net surpluses of the Central Provident Fund (CPF) and the government Budget surpluses, deposited with the MAS, have also put pressure on the currency to appreciate.

Now that the MAS has chosen to adopt a more transparent approach to policy-making, managing expectations is a tricky task. But ultimately, the role of monetary policy in Singapore is to establish the appropriate exchange rate, given the economic circumstances. While the MAS has often stated that its primary task is to maintain domestic price stability, with inflation virtually non-existent in the past three years, an appropriate exchange rate is now more often associated with a competitive rate. A surplus in a country's trade account is often used as evidence of a competitive currency. Surely, if a country is able to export more than it imports, it must have a competitive exchange rate. In reality, the trade account is often a poor guide. A surplus in a country's trade account does not necessarily reflect a competitive currency or even economic strength.

When the Thai baht collapsed in 1997, the country's trade account swung almost immediately from a deficit to a surplus. Of course, no one believed that indicated an equally swift improvement in the Thai economy. Thailand's trade surplus was required to repay the country's large foreign debt. The urgency of the matter meant that the only way the economy could quickly raise the foreign currency was via a deep recession that stopped imports. The consequence was the country suffered a tremendous fall in its standard of living. The typical developing economy tends to run a trade deficit because it needs to import the capital it requires to grow.

Singapore is under no pressure to generate a large trade surplus to repay foreign debt. But it is a non-starter to argue that its large trade surplus validates a strong currency. Causality runs the other way around. The preference for a strong Singapore dollar induces a policy to generate a trade surplus. Singapore does this, partly by building institutional features into the system that allow for the bias.Budget and CPF surpluses take away purchasing power that could have gone into imports. This enables the economy to build up foreign reserves to support the strong Singapore dollar policy.

But as it turned out, the strength of the currency made it hard to generate such a large surplus in the trade account without other compensating price adjustments. Based on the MAS' basket of currencies, the Singapore dollar rose about 10 per cent during the past decade.However, export prices fell by around 23 per cent. Part of the reason for the sharp decline in export prices was the deflationary trend of technology goods being exported. Still, import prices fell just 8 per cent in comparison. The economy, it seems, found it hard to sustain both a strong currency and a large trade surplus without sharply lowering its export prices. Something had to give.

Arguably, it is better to have a strong exchange rate policy to counter the inflationary environment during a period of rapid economic growth, like the 1990s. Stripped of the advantage a cheap currency gives, export-oriented manufacturers will be induced to look for productivity improvements. This stick, however, turns into a rod in a weak economic environment. When the MAS adjusted its exchange rate policy last week, it implicitly acknowledged this. But by keeping a neutral stance, the MAS signalled to the financial market that the downward adjustment is to be viewed as a one-off. While it is understandable that central banks want to discourage excessive speculation on their currencies, questions have been raised. The MAS move was viewed by currency analysts as late. And if the economic situation was worse than the central bank had earlier thought, was last week's single move sufficient? Mr Cliff Tan, chief of Citigroup's Asia-Pacific economic and market analysis, asked in a report this week whether the central bank needs to clearly define its 'neutral' policy. He noted that, while Singapore's stance has been mostly 'neutral' in the past four years, the Singapore dollar policy has been adjusted twice and is now weaker by about 3.5 per cent. It is to be hoped that, in the months ahead, the incipient economic recovery, as signalled by the strong rise in exports and the equity markets, will gather a sustainable momentum. Otherwise, even maintaining the current level of the Singapore dollar rate will be a delicate task.
Source: Eddie Lee, Straits Times
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On the Merits of Blogging

There's so much in the papers about Ronald Reagan and it looks like he's on his way to become president, it does look scary. I voted once. In the fifties, I don't remember which election. I pulled the wrong lever because I was confused, I couldn't figure out how to work the thing. There was no practice model outside, it was a church on 35th Street between Park and Lex. This was when I was living at 242 Lexington. And then I got called for jury duty and I wrote back: 'Moved.' I have never voted again.

This piece from Andy warhol, which comes from Eamonn's Rainy Day sums up the way I feel about a lot of things I suppose. Some devices just defeat me, there's no point in denying it. Take the mobile phone: last week I took my wife's away with me, because for the work I was doing it just seemed so useful. People with mobile phones are always localizable (I guess that's why I don't have one). Many people worry about internet privacy. This topic doesn't bother me in the least. I post as much as I can about myself, just to make sure the authorities don't complain I try to make sure I don't leave anything out. Years ago I read a book by Franz Neumann, called Behemoth, about the concentration camps (where Neumann spent part of his life), and the Nazi bureaucracy which collected detailed information on every aspect of German life under Hitler, so much detail in fact that it was entirely useless. No-one new what was important. That's when I learned to come clean, as early and as often as possible. This is just a more intelligent strategy for protecting privacy by creating information overload. Just like the infamous American power grid, one extra piece of information too many in the right place, and all the snooping in the world comes to nought. The system collapses. Henry would put this in game-theoretic terms and call it the zigga-zagga move. So here I am, with e-mails everyday from all over the globe, but the phone never rings. This is the way I like it, the kind of privacy I need, where I can think what I want when I want, without fear of interruption.

So where was I? Yes, last week I had a mobile, only I didn't have it, if you get my meaning. After three days I dropped the damn thing on the floor, and like Humpty Dumpty it would never go back together again. Well that's not entirely right, I adjusted the card and put everything nicely back into place. But it seemed dead. Oh god, I thought, now I've done it. But what I didn't know was there was a button I needed to press to switch the thing on. So I spent three days trapesing down the road to a phone cabin, when I had a perfectly good phone lying on the table. Five minutes after returning home I gave the thing to our resident technology 'doctor', my daughter, and of course she pressed the button, and...............

But there is more to the Wharhol piece that I identify with. You see many would say that he was conservative and a-political. What a load of tripe. He revolutionised the way we see the world. I still think his Electric Chair images are among the most devastating and effective reflections on the barbarity of the death penalty (I'm also pretty sure they influenced Marc Foster in his excellent film critique Monster's Ball ). What I think then, is that there are many ways of changing how we see the world, and thus of changing the world. Of these ways the political process as we know it is about the least effective. To be outrageous, I guess long-term Sid Vicious may well be judged to have had more influnce on the course of history than George W Bush will be - barring of course, unforseen accidents. Our problems are so complex, and the political process so centred on the simplistic, I just cannot believe that this is where the real action is. So like Andy, I haven't voted since the time of Harold Wilson. On the other hand, Richard Dawkins and his idea of the meme, now this is something else. The idea that you can put a little idea in circulation, and that one day this idea can go orbiting the globe at faster than the speed of light, this really fascinates me.

And this brings me back to blogging. Now many there are who like to laugh or cry when the word blogging crops up in conversation. The polite outsiders just nod knowingly and maintain a discrete silence. Others, normally conventional journalists, tend to fulminate when they are not actually foaming at the mouth (as I keep admitting, we do make an awful number of spelling mistakes). But then, they may be considered to have the incumbent's problem, they have an investment to protect. Now one of the interesting things about blogging is that you get better as you go (learning by doing?). A very good example of this is Eamonn (you see I am getting back to where I started, and, finally, to the point), another also probably is Frans , although we can't really be too sure, since not speaking Dutch it's kinda hard to check out our hunches. But back to Eamonn. The point is there is no recipe to blogging. You just suck it and see. It is also an intensely personal and individaulistic activity. Maybe Brad and I have it easier, the economy trundles along, and in between wheeling in and out our favourite theory obsessions, we get driven along by the data.

In this sense Eamonn is being really inventive, doing a great job, and getting better by the week. This week there are four pieces I really like (and one of them I disagree with). Firstly on the death of photo-journalist Zahra Kazemi:

The "facts", as far as they can be established, are as follows: the Canadian-Iranian photojournalist Zahra Kazemi went to Tehran to take pictures of the recent student protests for the British agency Camera Press. Ms Kazemi was arrested on 23 June for taking pictures of the capital city's Evin prison. She was later pronounced dead in the Baghiatollah military hospital. The Iranian authorities initially said Ms Kazemi had died of a stroke after falling ill during a police interview, but Iranian Vice President Ali Abtahi now says that she died "of a brain haemorrhage resulting from beatings".............
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I agree with Eamonn, it is important that we do not let these atrocities pass un-noticed and without comment. But now for a second, and trickier area, where I am not by any means on the same wavelength as Eamonn. The topic: Tony Blair:

"And the threat comes because in another part of our globe, there is shadow and darkness, where not all the world is free, where many millions suffer under brutal dictatorships, where a third of our planet lives in a poverty beyond anything even the poorest in our societies can imagine, and where a fanatical strain of religious extremism has arisen that is a mutation of the true and peaceful faith of Islam; and because in the combination of these afflictions, a new and deadly virus has emerged. The virus is terrorism, whose intent to inflict destruction is unconstrained by human feeling and whose capacity to inflict it is enlarged by technology."
Source: Blairs Speech to the Joint Session of Congress
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Now what I feel we have here Eamonn is a horrible load of what I would call simplistic political rhetoric (actually it could almost be considered a fushion of Ronald Reagan and Margaret Thatcher: yes our blessed Margartet used to love this kind of thing. This is all a far cry from Macmillan and the 'winds of change', or Heath and 'the unacceptable face of capitalism'). Will all good men and true please stand up. But unfortunately, life is not so simple, as unfortunately 25 years of internicine warfare in the North of Ireland only serves to show. We could call the men and women of the IRA 'evil', we could call the men and women of the UVF 'evil' too, probably we did. But this didn't put a stop to the killing. I doubt one single life was saved by the combined speeches of this type from the totality of the politicians (in fact you can find something similar from a PP politician every day on Spanish TV about the 'evil' in the Basque country, but the problem continues with no end in sight). Does that mean there is nothing to do, clearly not. But the way to advance things is with less speeches and more constructive policies.

Or at least, if you are to make speeches then possibly, at least in the case of Tony Blair, you need to avail yourself of the opportunity of giving the British public an apology. You see, from my peculiar and convoluted standpoint three issues in the recent history of British politics stand out above all others: the Belgrano affair, the Lady Di affair, and the WMD affair. As regards the Belgrano I will write something in due course, on Lady Di I have no comment other than to note that the judicial investigations have proved to be less than satisfactory, scrupulous and convincing, and on the WMD, well what do you want me to say. The point is, all these three have one common thread: veracity.

Many British people like me would never take at face value any pronouncement from a Republican US President like George Bush (really I think he's not as 'original' as he's made out to be when you take a long hard look at Reagan and Nixon). But when someone like Blair puts their reputation on the line, and tells you this is like this, well at least you have to give him some benefit of the doubt (mind you, I had been warned, I had had some inkling that all was not well when I saw the way he climbed into the pulpit at the Lady Di funeral). So the problem is not that there are no WMD, the problem is not that there may have been a systematic attempt to mislead, the problem is the cavalier attitude to the truth that is demonstrated by the subsequent attitude that nothing important has happened. Now if Blair had said that the war was simply to remove Saddam, or that it was to make possible a peace process between Israel and Palestine, then maybe things would have been different. But that was not the explanation we were given, and now are in an increasingly difficult situation , and we're one step more backwards, because in the UK at least, many have lost what confidence they had in their leader.

Well, that's enough of the 'heavy' serious stuff, on a lighter note Eamon has a wonderful piece about
Power Genitalia

First, this hilarious URL is real. Check out powergenitalia.com. But, and here's the thing, despite what the writer says, it has absolutely nothing to do with Powergen, the diversified British utility company, which, by the way, is now a division of E.ON, the German energy services giant headquartered in Düsseldorf. Since the story began making the rounds, the unfortunate press people at Powergen have been forced to deal with dozens of queries asking how they could have picked such a double-meaning domain. All Powergen can do in self defence is say that it doesn't have an Italian division and, therefore, didn't have anything to do with choosing the "dirty" domain name. Fact is, powergenitalia.com is the domain of an Italian company that sells battery products.

And talking of titillating domain names, there's this company that gives information about the managers, agents and publicists representing actors, it's called "whoRepresents". And the domain name? Why, it's whorepresents.com. What's the betting that in the remake of "Pretty Woman", the Richard Gere character won't log on there and order that perfect gift? Ladies and gentlemen, for your pleasure, whorepresents.com. And while we're at it, one more. What about the IT info company, Experts Exchange? Its address used to be expertsexchange.com, but following a barrage of inquiries about gender alteration procedures, it inserted a surgical hyphen and is now experts-exchange.com.
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and finally, a reflection from Franco Zeffirelli on ageing:

"Life is made of things that have to happen, but the moment they happen, they are already in the past. The anticipation, the expectation — that's what keeps you alive. I don't want to sound ungrateful to destiny, but to survive at my age, you need some purpose. Even if I was perfectly healthy, I couldn't continue jumping from one place to another, like I have these past six months. What keeps me going is not so much the joy of what I'm doing, it's thinking ahead to a new project."
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So maybe between Warhol and Zeffirelli I find some harmony, tranquillity and symmetry. That's it. I'm off on holiday. My wife deserves a good rest from all this. See you sometime next week, from I don't know where.