LCH Clearnet Lowers Margin Requirement for Irish Bonds
Clearing house LCH.Clearnet said Thursday it is lowering the margin it requires for positions in Irish government bonds cleared through its RepoClear service.
The additional margin required for Ireland will be dropped to 35% from 45% for long positions in its bonds.
The decision came as the 10-year Irish/German government bond yield spread hit 526.1 basis points, according to Tradeweb. Ireland’s 10-year government bond yield was around 7.13%.
Read more.
Here is piece from Reuters that features some quotes from Amartya Sen, the 1998 recipient of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
Sen, an economics professor at Harvard University, said it was folly for governments to bend all their efforts to eliminate deficit spending.
Apart from stoking democratic discontent, the "austerity disease" sweeping the West was killing the goose that laid the golden egg of growth.
"It is very hard to find adequately pragmatic grounds for severe austerity that cuts demand and makes economic expansion much more problematic," Sen said in a lecture at the London Stock Exchange last week.
Sen suggested that some governments were opting for indiscriminate cuts for ideological reasons or even regarded debt reduction as a moral imperative.
Christine Lagarde, in the same piece seems to agree:
"On fiscal policy, resorting to across-the-board, across-the continent, budgetary cuts will only add to recessionary pressures," IMF Managing Director Christine Lagarde said in Berlin on Monday.
"Yes, several countries have no choice but to tighten public finances, sharply and quickly. But this is not true everywhere. There is a large core where fiscal adjustment can be more gradual."
Read the whole thing but note the Madam Lagarde has at times expressed a different view
Lagarde said, "in terms of growth versus austerity, it’s the policy that we’ve adopted in pretty much all European countries [that] we need to address both issues. If we do not reduce the public deficit, it’s not going to be conducive to growth."
"Why is that?" she asked rhetorically. "Because people worry about public deficit. If they worry about it, they begin to save. If they save too much, they don’t consume. If they don’t consume, unemployment goes up and production goes down. So we need to attack that circle from the deficits," Lagarde said.
And while she now thinks that “a large core” can ease the pace of adjustment she previously said that:
“There’s a large majority for whom redressing the public finances is priority number one. For a minority, it’s supporting growth.”
Here is short extract from an interesting piece from the NYT blog entitled “Austerity Could Again Sow Seeds of Extremism in Europe”
In the autumn of 1931, Keynes was confronted by a bold and articulate foe, Friedrich Hayek, a young Viennese economist summoned by the London School of Economics to counter the potent ideas emanating from Keynes. Hayek was a member of the hard-headed Austrian School led by Ludwig von Mises, who argued that the market was self-correcting and that any interference by governments would end in disaster.
In broken English backed by intricate triangular diagrams, Hayek described why he believed that any attempt to trick the market into creating jobs would prove futile. Factories that expanded with cheap money may for a while take on extra workers to meet the artificial demand, he said, but unless the cheap rate continued indefinitely, plants would close and the new jobs would be lost.
Before long, Keynes and Hayek set out on an intellectual duel that came to define the debate still raging today about whether governments should intervene in the economy. At first through learned journals, then in private letters, the two men thrust and parried. Hayek came out punching, setting off a caustic, vituperative, unforgiving scrap in which Keynes, 16 years older than Hayek, felt he was not being treated ‘‘with that measure of ‘good will’ which an author is entitled to expect of a reader.’’
The dispute was so venomous that older hands rushed to pry the dueling dons apart. Arthur Pigou, a renowned professor of economics at Cambridge, scolded them for employing ‘‘the method of the duello’’ and clawing at each other ‘‘in the manner of Kilkenny cats.’’
The piece by Nicholas Wapshott, author of ‘‘Keynes Hayek: The Clash That Defined Modern Economics’’ concludes:
In this rematch of Keynes and Hayek, Hayek is at the moment in the ascendant. Europe has set out upon a decade of painful austerity, promising to slowly repay debt and force swollen governments to shrink. In the United States, all the Republican candidates back Hayek’s message of fiscal rectitude and smaller government. So has Hayek won the 80-year-long contest?
It’s too early to tell. There is a significant political price to pay for reducing the size of the state and paying off public borrowing. Economic growth slows and already high unemployment increases. Disillusionment with the political leaders who preside over such a mess may drive the voters to the extremes. In Europe in particular, these are treacherous times.
Read the whole thing.
You can watch a recent Al Jazeera documentary on the Irish economy here.
Economics Week at UCC starts the 23th of January 2012
Monday the 23rd
Dodgeball Tournament – Devere Hall – 12pm : 4pm
- €2 a team, 6 per team
Movie – Sicko – Brookfield G06 – 6pm : 8pm
- Sicko at 6 in 6!
Tuesday the 24th
Chinese New Year – Devere Hall – 12pm : 2pm
- This will be in collaboration with Trad Soc, Hot Beverages Soc and Dance Club to name a few. The event won “Runner Up For Best Event” last year.
Movie – Freakonomics – Devere Hall – 4pm : 6pm
- Freakonomics at 4
Wednesday the 25th
“Why Should We Pay More For College?” – Devere Hall – 12pm : 1.45pm
- Debate with lecturer Declan Jordan and SU Education Officer, Cat O Driscoll
“Career Opportunities with an Economics Degree” – Devere Hall – 2pm : 3pm
- Deirdre Parker from the UCC Careers Service will be talking to students about their future possibilities
Movies – Wall Street 1&2 – Devere Hall – 3pm : 8pm
- Wall Street Wednesday! Wall Street 1 & 2 shown back to back
The ninth ISNE annual conference is being held in UCC on Thursday 23rd and Friday 24th of August. This year’s organisers are David Butler, Robbie Butler and Justin Doran.
Researchers wishing to submit their work for consideration are advised to submit an extended abstract (300-400 words) to isne2012@gmail.com. Applicants are asked to include their name, institute or affiliation, current academic status (PhD, Young Professional, Masters) and JEL code(s) for their research on submitting an abstract.
The deadline for the abstract submission is Friday, 1st of June 2012.
Applicants will receive notification by Friday, 22nd June 2012.
There will be two plenary sessions:
- Professor Geoffrey Hodgson (University of Hertfordshire) Editor-in-Chief of the Journal of Institutional Economics, and
- Professor Bernard Fingleton (University of Cambridge) Editor-in-Chief of the Journal Spatial Economic Analysis and formerly co-editor of the Journal Regional Studies and a Fellow of the Regional Science Association International and the Spatial Econometrics Association.
For more details visit www.isne2012.com
Sometimes even those from up the road put their own slant on things. Here is an extract from a piece in The Belfast Telegraph.
Ireland’s travails a salutary tale for breakaway Scots
The experience of the Republic of Ireland from 1921 is a warning to Scots about what may lie in store for a Scotland ‘free’ from Westminster, namely a century of economic struggle, culminating in a Celtic Tiger boom which has now bust and left the Republic having to go cap-in-hand to Brussels and Berlin, seeking bailouts from the European Central Bank and – of all places – Westminster.
The crisis affecting the eurozone is a stark warning for anyone seriously thinking about breaking away from the United Kingdom. Larger European countries and economies than Scotland are having their economic policies dictated by Brussels and many are in utter chaos.
It’s not so long ago that Alex Salmond was assuring Scots that they had nothing to fear economically from independence and extolling the virtues of the ‘arc of prosperity’ made up of the Nordic countries and the Republic of Ireland as proof that smaller nations could prosper in 21st century Europe. This was until a worldwide recession saw Iceland go bankrupt and the Republic of Ireland be overwhelmed by debt.
Would an independent Scotland have been able to bail out the Royal Bank of Scotland? Or would it have joined the queue of Greece, Portugal and the Republic of Ireland outside the offices of the European Central Bank?
Northern Ireland, Scotland and Wales have been cushioned from the worst excesses of past and present global economic recessions by being part of the UK economy – the fifth-largest on the planet. The history of the last century – and particularly the Republic of Ireland’s experience – would indicate that the choice facing the people of Scotland may be between a broke, but independent Scotland and a comparatively prosperous Scotland still within the Union. Put like that, it’s not a difficult choice.
Read the whole thing. The author is the leader of this group. Maybe we’ve been blaming the wrong man.
Then again, maybe not.
Attempts to compare Australia’s economy to Ireland are so far from reality, they belong in fairytale
ATTEMPTS by the Opposition to compare Australia’s financial sector to those of Iceland and Ireland are so far removed from reality they belong in a Walt Disney script, the Federal Government says.
According to UBS, the big Australian banks are likely to scrap 7000 jobs over the next two years as they scramble to slash costs and send more jobs overseas.
Assistant Treasurer Bill Shorten concedes the banking sector is in for a tough time, but he does not believe the future is gloomy.
I guess they’re heading for a soft landing so. Read the whole thing.
Just one day after the China Daily reported on Ireland’s imminent exit from the eurozone, today we have the Russian website gazeta.ru reporting that “The European Commission stops funding Ireland”. Erm, wha? But need that money to be “fully funded to the end of two-thirteen”.
I think we can put this one down to Google Translate. The article is actually a glowing report on Ireland and the implication is that we don’t need EU funding and have left “the problem area”, i.e. the PIIGS have become the PIGS.
Ireland withdrew from the problem area
Ireland became the first country to get out of the European crisis: European Commission acknowledged that the funding is no longer needed her. But the debt contagion spreads: a major threat to the EU is now Italy. International rating agency Fitch warned on lowering its rating.
Ireland does not need the second package of financial assistance from the " troika "- the European Commission, European Central Bank and International Monetary Fund, said a spokesman for the European Commission Amadeu Altafazh Tardy Tuesday. He explained that this conclusion is provided by progress in the economy of Ireland. " The figures show that in Ireland in 2011 were positive indicators of growth. Progress was in the fiscal sphere, good progress has been recorded in the restructuring of banks "- quoted by RIA Tardy " News. " First aid package of 85 billion euros, was approved in fall 2010.
The remaining countries in the financing of " three "can not boast of such success.Portugal and Greece continue to need the money, and the termination of their funding question.
Read the whole thing but be wary of the Google Translate glitches.
Here are some quotes from a piece on page 8 of today’s China Daily
Today, many central banks around the world and many corporations as well, are preparing for a break-up, or at least a transformation of the euro. Indeed, some Central Banks are already checking their ability to print their pre-euro currencies. Ireland, for instance, has acknowledged it is doing this and many are assessing Greece’s capability to do so.
…
Europe is vastly diverse and includes some of the safest countries in the world – Norway, Switzerland – as well as some of the riskiest economically – Greece, Ireland, Portugal. The investments considered in Europe thus range from some of the safest in the world to some of the riskiest.
…
There are three potential scenarios to the euro break-up. The first and most probable scenario consists in peripheral countries, such as Greece, Ireland and Portugal, leaving the eurozone because of the fiscal discipline required to remain in. This would actually lead to a strengthening of the euro in the long term, as the countries leaving the euro would be the weaker ones. Indeed, the requirement for stronger fiscal discipline and the supervision of the IMF for some countries has reinforced the view that a stronger Europe could emerge from the crisis.
You can read the whole thing if you really want to. The byline is
The author is the director of the Global Board Center at the International Institute for Management Development, Lausanne, Switzerland.
