Daily: On the EU’s retroactively recapping Ireland’s banks and Lagarde’s challenges to orthodoxy
Yesterday I wrote a lot about this topic for Gold subscribers, asking “Will Merkel grant ‘austerity model’ Ireland retroactive bank recap mutualisation?” This post gives a full account of the European bank recap issue, so I won’t re-hash any of that here. Briefly, the issue is whether the Irish government will get debt relief for having bailed out its banks or whether they will be saddled with the consequences of that bailout for years to come. The article below from the Telegraph telling us that the IMF wants Ireland to get debt relief is interesting more for what it says about the IMF under Christine Lagarde than for the topic itself. What Christine Lagarde has done at the IMF is pretty revolutionary in my view. In quick succession, she has bucked the leading orthodoxy on three important issues.
First, Lagarde made the IMF the first major economic policy voice to move away from the austerity line. We see now increasingly that people are questioning whether austerity actually works as prescribed or whether it leads to debt deflation. The IMF, while still maintaining the deficit hawk line has shifted to backloaded austerity instead of front-loaded austerity as an official policy view. That’s a big shift, especially when you think the IMF was brought into Europe to crack the whip.
Second, Lagarde contradicted Fed Chairman Ben Bernanke on the Fed’s easy money policy recently. During the IMF’s last big meeting in Japan, Bernanke gave a speech vigorously defending QE3, while Christine Lagarde was saying just the opposite – that QE3 had negative unintended consequences that needed to be addressed. I heard a bit of buzz about this in the press but no one wanted to make a splash about it and so this juxtaposition quickly faded from the headlines.
Third, now Lagarde is telling the EU that it needs to reward Ireland with sovereign debt relief just days after German Chancellor Angela Merkel said she was unwilling to do so. Spain has been asking for this as part of its efforts to avoid a sovereign bailout but the Germans have continued to thwart those efforts – even after acceding to a bank bailout that was ostensibly designed to cut the sovereign – bank nexus that has been killing Spain. The good news on this front is that bank deposit outflows have stopped and so the problem is less acute (see article below). But this is probably the ECB’s doing , with its OMT program designed to stop re-denomination risk, and, hence, capital flight.
Overall, I am left with the impression that the IMF is changing into a more pragmatic and ideologically heterodox organization under Christine Lagarde. Watch for more signs that the IMF is leading economic policy changes because this will give government’s an umbrella to use as cover when they need to switch tack. And ultimately, political cover will be necessary for larger shifts in policy. All reason to be somewhat optimistic
Debt crisis: as it happened – 25 October, 2012 – Telegraph
“The IMF has urged Europe to follow through on its pledge to ease Ireland’s debt burden by directly recapitilising its banks, which could cut the country’s debt by up to 15pc.”
Ireland urges ECB to commit to bond-buying – FT.com
“Dublin has asked the European Central Bank to commit to buying Irish government bonds to help smooth the country’s exit from its international bailout at the end of next year.
Michael Noonan, Ireland’s finance minister, said on Thursday that the government had asked its international lenders to outline “confidence-building measures” to drive down Irish bond yields as it prepared its long-term return to markets.”
Bank deposits rise in Spain and Greece – FT.com
I believe the ECB’s OMT program has a lot to do with this. If we continue to see the bank run problem go away, we will know that it was all about the OMT.
“Consumers and businesses put money back into Spanish and Greek banks in September, European Central Bank data showed, ending a run of declines driven by concerns about both countries’ finances.
Private sector deposits at Spanish banks rose to €1.505tn at end-September from €1.492tn a month earlier, reversing the August fall.”
Technology
Swiftkey Introduces Swiftkey Flow, a Gliding and Predicting Typing Experience – Droid Life
I have recently switched from SwiftKey to Swype and now use Swype across all of my mobile devices. But this will get me to move some of them back. I don’t see SwiftKey as a good standalone company though. While their stuff is clearly better than the standard keyboard, if they ever want to hit the big time, they will need to be bought out.
“Swiftkey, one of the most popular Android keyboards, announced a new keyboard experience today, called Flow. As the name implies, Flow allows you to glide between keys so that you can type words without lifting up a finger. Before you jump in with the “This is like Swype!” comments, I recommend that you watch the video. Swiftkey’s version of swiping between keys comes off as being much more predictive than other options. During the video, Flow shows that it can predict words after you have swiped only a couple of letters. According to Swiftkey, it also stays top notch at normal typing for those rapid tappers out there.”
Pocket’s Mac App Brings All That Saved Content To The Best Place To Use It | TechCrunch
Does this make Pocket a competitor with Evernote? And what is the exit strategy for these companies – being bought out or IPO? I use both apps religiously and see utility but I would be concerned about how this gets monetised before another larger company replicates the service. Right now, it’s all about building up a user base. At some point, social media integration will be a factor.
“Pocket (formerly ReadItLater) delivered a new native Mac OS X app today, allowing you to save and access content for later reading from around the web. Pocket’s rebrand was all about going beyond just being an article-saving tool and becoming a catch-all scrapbook for anyone’s digital life, and the new Mac app is a good complement to that mission.”
Microsoft’s Touch-Screen Tablet Is Designed for Work – WSJ.com
“I have been testing the Surface almost daily for three weeks and I like it. It’s beautifully and solidly built and it’s the purest expression of Microsoft’s new Windows 8 touch-screen operating system which, like the Surface, goes on sale on Friday. The new operating system also works on laptops and desktops. It can be operated with a mouse or touch pad, but its dramatically different, touch-optimized user interface begs to be used on a touch-screen tablet.”
Triposo makes a travel guide for iPad and smartphone toting users — Tech News and Analysis
“Triposo, a maker of smart downloadable travel guides, has updated its app to version 2.0, which allows users to bookmark places on their iPad and then retrieve them on their iPhone or Android device. They can also create a journal of their travels while offline.”
“Apple leads the consumer electronics business in enslaving us to the idea that we must have the latest device. But must we?”
U.S. ITC judge says Samsung infringed Apple patents | Reuters
“Apple had filed a complaint in mid-2011, accusing Samsung of infringing its patents in making its Captivate, Transform and Fascinate smartphones, as well as the Galaxy Tablet.
Judge Thomas Pender said that Samsung infringed four Apple patents but did not violate two others listed in the complaint. There had been seven listed initially, but one was dropped during litigation.”
Apple says Samsung being investigated by DoJ over FRAND patent misuse
“In a filing with the U.S. International Trade Commission on Monday, Apple said that the Department of Justice has opened an investigation into whether Samsung misused standards-essential patents as weapons against rival handset makers.”
Economy
GDP Estimates Move Lower Following Durables Report – Real Time Economics – WSJ
“Details within the report were discouraging — and could point to a weaker-than-expected figure in Friday’s much-anticipated report on third-quarter gross domestic product.
Perhaps most concerning: Business investment has fallen over the last three months. Orders for nondefense capital goods excluding aircraft — a proxy for business spending on equipment and software — were flat in September, after rising a bleak 0.2% in August and falling 5.6% in July. Shipments of those goods have fallen in each of the past three months.”
Mantega fights on | beyondbrics
“For those unhappy with his hands-on approach to markets, he delivered a clear rebuke, saying the government was controlling the exchange rate and so be it. After approaching a strongpoint of R$1.50 against the dollar, this year the currency has been hovering at R$2.
Since everyone else in the world was manipulating their exchange rates, Brazil, which preferred a floating rate mechanism, would have to do so too and maintain what he called a “dirty float”.”
Britain moves out of recession – FT.com
“The quarterly growth rate was the strongest in five years, though the economy is still no bigger than it was a year ago.”
Politics
New Obama ad invokes 2000 recount – POLITICO.com
“The Obama campaign is up with a new ad that invokes the 2000 Florida recount to encourage supporters to vote.
“Five-hundred and thirty-seven. The number of votes that changed the course of American history,” the ad charges, referring to the margin that George W. Bush beat Al Gore by in the hotly contested state of Florida.”
U.S. Congress’ Approval Rating at 21% Ahead of Elections
Twenty-one percent of Americans approve of the job Congress is doing, higher than the 13% Gallup measured in September, and the highest rating in any month since May 2011.
More Americans Feel Better Off Than Worse Off, Financially
“For the first time in more than five years, slightly more Americans are feeling financially better off, rather than worse off, compared with a year ago, by 38% to 34%. This represents a significant improvement since May of President Barack Obama’s first year as president, when the majority — 54% — said they were worse off.”
WikiLeaks says releases hacked U.S. detainee rules | Reuters
“the documents showed “a formal policy of terrorising detainees during interrogations, combined with a policy of destroying interrogation recordings, has led to abuse and impunity”.
A number of what can only be described as “policies of unaccountability” would also be released, it said.”
Cycling
Kimmage felt rage, deflation during McQuaid’s Armstrong press conference
“McQuaid and his predecessor, Hein Verbruggen, are suing the Irish journalist over an article he wrote in London’s Sunday Times, which detailed a seven-hour interview with Floyd Landis, and an interview he gave to France’s L’Equipe newspaper last year. The UCI heads say Kimmage was “dishonest” in accusing them of being irresponsible and not applying the rules fairly.
The Kimmage/UCI battle has gone on since 1989, when Kimmage retired as a cyclist and wrote “Rough Ride.” The book documented his four years in the pro ranks and the doping within. Since then, he has continued as a journalist, but his articles last year put him in hot water with the UCI. They highlighted the governing body’s acceptance of Armstrong’s $50,000 donation in 2002, tying it to allegations that the governing body overlooked positive doping test results for the banned American.”
LeMond calls on McQuaid to quit – The Irish Times – Thu, Oct 25, 2012
“Three-time Tour de France winner Greg LeMond has called for the resignation of Pat McQuaid, the president of cycling’s world governing body the UCI.
In an open letter published on Facebook, LeMond, winner of the 1986, 1989 and 1990 Tours and now the only American winner of the Tour after Lance Armstrong was stripped of his seven titles, was critical of Irishman McQuaid and his predecessor Hein Verbruggen, who remains honorary president of the organisation.”
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