Michael GoldfarbJanuary 30, 2012 06:48

Austerity: Cause and predictable effect

Post-Davos consensus growing among enlightened commentators: policy makers haven't got a clue

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There's a general strike on in Belgium today. The predictable effect of austerity cuts to services and wages. (VIRGINIE LEFOUR/AFP/Getty Images)

Davos is not a place where policy gets made or treaties get negotiated, as I wrote last week. If it has a benefit, it is that the World Economic Forum gets a bunch of the one percent in a single place for a concentrated period of time and allows thoughtful commentators an equally undiluted opportunity to assess what they are thinking.

The result this morning is three excellent essays by commentators working in the mainstream press.

At The New York Times, Paul Krugman makes much of a chart published last week by British think tank, National Institute of Economic and Social Research (here, scroll down right column). It shows that the current economic downturn in Britain is now longer than that of the Great Depression, if you measure the length of time it takes to return to pre-downturn economic output.

Michael GoldfarbJanuary 27, 2012 14:01

Mario Draghi at Davos

ECB chief says bond markets are overestimating the risk attached to many euro zone countries' sovereign debt

An interesting week in the euro zone crisis is over. Most of the important players made it to Davos so nothing definitive was being decided. As I wrote yesterday, Davos isn't a place where policy is made.

It's clear it has been a week where the center held and the sense that a corner has been turned continued to frame the week's activities. Even Greece and her creditors inability to reach final agreement on debt reduction hasn't ruffled feathers.

Michael GoldfarbJanuary 26, 2012 14:19

Davos takes on euro zone crisis

Old arguments about how to solve the euro zone crisis are re-hashed at World Economic Forum annual meeting

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Davos: the euro zone crisis followed the leaders to the Alps (FABRICE COFFRINI/AFP/Getty Images)

Davos. The name, the place, what it stands for is a challenge to an ideal of journalism. It seems to be one of those events that become a story not because of any intrinsic news value but because a bunch of famous people get together and allow journalists to mingle among them.

There are many national leaders at the World Economic Forum's annual meeting in Davos but no treaties are signed, nor are there joint declarations of policy made. That would be news and worth reporting. There are titans of industry in Davos, but no products are launched or companies acquired. That, too, would be news etc.

It can't be news because the comments about the year to come actually shape events. I came across this article from The Washington Post a couple of years ago on Google about some famously wrong predictions made by the rulers of the planet at the World Economic Forum. It's pretty amusing. (For that matter, did anyone at Davos in 1996 or 97 predict there would be something like Google (founded in 1998) and that a search engine would upend all previously known models of information aggregation and dissemination?

Anyway, the leaders are at Davos, journalists are tweeting like fan-boys and girls about rubbing shoulders with them.

Bill Gates pledges $750M to fight AIDS, TB and malaria at Davos

Luke BrowneJanuary 26, 2012 11:07

The Bill & Melinda Gates Foundation will inject $750 million into the Global Fund through a promissory note, adding to the $650 million that the charity has already contributed since the fund’s launch

Michael GoldfarbJanuary 25, 2012 11:45

Austerity bites, pt. 2

Second thoughts about austerity cuts as the cure for what ails Europe's economies

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Retired hedge fund manager George Soros at Davos today. He expressed concern that the euro zone's austerity policies would create social unrest that would engulf Europe. (VINCENZO PINTO/AFP/Getty Images)

Austerity cuts seems to be the theme of my blog posts today. Heavily indebted European governments need to "deleverage," as the current buzz word has it, but how far and, crucially, how fast?

In Britain, despite warnings from the opposition Labour Party about the pace and size of cuts doing more harm than good, Britain's Conservative-led coalition government has reduced the size of government spending with abandon. Predictably Prime Minister David Cameron's austerity program has landed the country on the door-step of a double-dip recession. The economy contracted in the last quarter of 2011 by 0.2 percent.

At Prime Minister's Question Time today, Cameron contemptuously swatted away criticism from Labour leader Ed Miliband. But that is party politics. The IMF's chief economist Olivier Blanchard is no left-wing politician and he told the BBC today it would be wise for Cameron and his Chancellor of the Exchequer George Osborne to slow down the pace of the cuts.

Michael GoldfarbJanuary 24, 2012 13:53

IMF report sharply downgrades global growth and blames the euro. European daily economic round-up

IMF dramatic revision of figures projects euro zone as a whole will be in recession in 2012

The IMF has sharply cut its growth forecast for the global economy this year and reason number one is the euro area. Just last September, in its World Economic Outlook, the IMF had projected world output to grow by 4 percent in 2012, now because of the euro zone debt crisis it expects growth of just 3.3 percent. The organization made clear what this dramatic reassessment means.

“Given the depth of the 2009 recession, these growth rates are too sluggish to make a major dent in very high unemployment,” the IMF said.

Michael GoldfarbJanuary 16, 2012 14:12

European economic news round-up

Quiet day in the financial markets but heating up elsewhere

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The Occupy movement has begun setting up Camp Igloo in Davos in advance of next week's annual World Economic Forum meeting. (Sean Gallup/AFP/Getty Images)

Update: S&P has just announced it is making one more downgrade, to a critical issuer of European debt: the European Financial Stability Fund has lost its AAA rating. In parallel with France, it has gone from AAA to AA+.

Last Friday, Standard & Poor's downgraded several euro-zone countries credit ratings, most notably France, which went from AAA to AA+. The headline the next day Britain's Guardian newspaper was "Friday the 13th" with its attendant implications of misfortune.

Today, there was no sign of Jason Voorhees ripping up Europe. The financial markets shrugged everything off. The CAC 40 in Paris finished up 0.9 percent while the DAX 30 in Frankfurt closed up 1.25 percent. The FTSE in London was up 0.4 percent. Not exciting but not negative.

Michael GoldfarbJanuary 12, 2012 06:32

Davos prepares for gloomy discussions

World Economic Forum publishes report into Global Risks for 2012

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Davos, scene of the annual World Economic forum. The view from the mountaintop this year is as bleak as it is down below in the real world (Harold Cunningham/AFP/Getty Images)

It takes a long time for news to get up the mountain, but it seems to have finally reached the alpine area near Davos: things down below where 99 percent of the world lives are getting dangerous. Things are so dangerous that the one percent better pay attention.

The World Economic Forum holds its annual get together at Davos starting January 25th and in advance it has just published Global Risks 2012, a survey of the views of 469 "experts and industry leaders." It is a bleak read. The report is divided into three case studies titled Seeds of Dystopia, How Safe are our Safeguards?, and The Dark Side of Connectivity.

Pull a quote from any page and you will be sent into a dark tunnel of despair:

Michael GoldfarbNovember 10, 2011 06:47

Europe: can anyone save it from itself?

As Italian bond yields reach unsustainable highs and world markets begin to fall, Europe faces the worst crisis of leadership since August 1914. And we all know how that turned out.

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A statue to one of the fallen of World War I. Are today's European leaders as inept in guiding the continent through troubled times as those in charge in August 1914? (Peter Macdiarmid/AFP/Getty Images)

A snapshot of a moment in history:

November 10, 2011. Global stock markets are falling. The yield on Italian bonds continues to rise.

A German newspaper reports that Chancellor Angela Merkel is going to float the idea of re-writing the rules governing the euro zone at her Christian Democratic Union party meeting next week. At present there is no mechanism for countries inside the euro to leave.

Merkel reportedly wants a new treaty provision that defines the ways in which a nation can leave - or be asked to leave - if it doesn't meet the basic conditions of euro zone membership. You want to know the basic conditions?: an annual budget deficit no higher than 3 percent of GDP and a national debt lower than 60 percent of GDP. Italy's debt is currently 120% of GDP. Got the picture?