The President of the European Investment Bank defends the stimulus for sustainable consumption, social justice and the consolidation of banks by public subsidies. Maystadt was speaking on Monday, March 23 at Braine-le-Comte on the theme of the crisis before an elected regional pareterre of the HRC, the centrist party Francophone Belgium.
Both election rally and extension conference on the crisis, this mix has proved instructive ... Here is a summary of "The crisis Financial: why, how, what next? "streaky graphics of its author, and, of course, our comments.
** The reason: the credit bubble **
We began by analyzing the causes of the crisis. Philippe Maystadt, the crisis is primarily the result of the credit bubble, bubble which is itself the result of three important trends which have occurred over the long term
1. The global trade imbalance . The Western consumerism, living on credit and that is not producing, contratse with Asia (China, but also India, Singapore, Taiwan) in trade surplus and holds a huge surplus of cash: 10 trillion in foreign reserves accumulated reinvested mostly the United states in the form of Treasury bills .
2 policy interest rate minimum . This policy, introduced by Alan Greenspan, was very accommodating to U.S. consumers and put some oil on the fire, increasing the abundance of payment methods, so that interest rates, given the inflation, by the time it was negative ... (Chart below)
3. Securitization : Securities created in the United States based on mortgages were Easter and insecure, so that Maystadt has himself forbade his managers to acquire the Bank for more than 1% stake in the bank. Worse, these securities were guaranteed bad investment with leverage ["leverage"], which multiplies their impact on the system in case of crisis. Result: during 2007, not only the credit has increased, but (be sure to follow) the pace of credit growth has also increased: it''s the exponential growth of credit [ Editor's Note: this is call'd a bubble of credit].
The two graphs below show the variation in growth of credit granted to households and businesses. [ ed. As long as the line is above zero, it is in credit growth, when the line goes, we are in the exponential growth or bubble. The small gray line on the first diagram is the bubble of credit granted to households in Europe, that is to say you and me ...]
There was something to ask questions, so that Maystadt itself by its own admission, had warned the IMF officials on the risks of bubbles in the field of credit cards in early 2007. ** How: the non-surprise, sectoral impacts, public finance **
Once the credit bubble in place, the crisis is easily explained. This is the second part of the conference, Maystadt, who argues that the fall estate is not the cause but the consequence the credit crisis. [ ed. : You said since July 2008: The Crisis for Dummies: "Why , how far the credit crisis? "].
And remember that the bubble above credit cards would have been the first burst.
So the crisis was not a surprise, there were signals for some time. Maystadt cites an example written by Jacques de la Rosiere, former IMF Managing Director, former Governor of the Banque de France [ ed. and indicted in the case of Credit Lyonnais], which provided in January 2007 exactly, what happened since ...
"That is to say that from the time when prices have been increasing there has been a reversal, and it was first produced in the U.S. housing market, the system has collapsed. "The following two charts show the impact of the crisis on the real estate and automobile sectors. One can compare situations American, English and European.
" In Europe, we failed to find consensus. The Germans, under their EU presidency, demanded to submit to the supervision of Europe uncontrolled elements, such as hedge funds, but the measure was blocked by the English. "
" We lack of foresight, was ridiculed those who threw red flags, while young traders in the City of London where the General in Paris were obviously much smarter and believed that everything could go on, the trees rose to heaven. "
There is then the deleterious consequences of the crisis on the finances of members of the European Union: European government bonds, which were aligned on the same course since the creation of the Euro, are being dispersed.
As shown in the graph below, Germany stands now significantly better than Greece and Ireland who have abused easy money during the good times, and are now declining credibility:
As shown in the graph below, Germany stands now significantly better than Greece and Ireland who have abused easy money during the good times, and are now declining credibility:
And the consequences of this on our budget and our finances are already being felt, since, while the cost of money now costs 2% more expensive in Ireland and Greece to Germany, Belgium now borrows at a rate comparable to that of Spain:
Finally, investments will most likely deeply affected by the crisis because the Ralet economic (recession) has was preceded by a financial crisis.
In such a case (black curve) investments shrink more significantly (10%?) And for a longer period (9 months?) [ ed. : interpretation to be confirmed]
In such a case (black curve) investments shrink more significantly (10%?) And for a longer period (9 months?) [ ed. : interpretation to be confirmed]
** Solutions: Banking amnesty, targeted stimulus, sustainability **
In the third part of his presentation, Maystadt discussed our options out of the crisis. [ ed. : In fact, it is limited to recovery policies, see below our comments reviews].
1. revival of monetary policy no longer within our reach, interest rates are already very low. Moreover, if the money stays in the banks and the credit does not restart, it's not because banks are afraid to lend, but rather because the debtors potential (especially households) are afraid of borrow.
The cause of the crisis are the debt [ ed. 'deleveraging'], people will not want to borrow even more attractive rates. Maystadt and quote the trite example of the Japanese crisis, with its monetary stimulus ineffective for ten years because of investor nervousness.
2. revival by exports, it is not feasible in the context of a global crisis ...
3. The increasing deficit budget is now the only way forward. This is the Keynesian path, that of fiscal stimulus and state investments. Maystadt thus defends the revival of consumption by public subsidies.
Mystadt then reviewed the conditions for passing a policy. There are three:
A. Consolidation of banks through the subsidization of losses. [ ed. : Ouch!]These three points are worth some attention a bit, what Maystadt has done. Let us follow his reasoning, starting with the subsidization of bank losses.
B. Temporary stimulus plan, quick and focused.
C. Choice of recovery that fall within the sustainability and social justice.
"We must first résourde problems of the banking system and put banks in a condition to lend," said EIB President, by rushing to concede that "it may seem odd given that greed and pride of some bankers to be counted among the causes of this crisis. "Later, during questions, he will expand somewhat on the situation in Belgium:
" Unfortunately, "continues Maystadt," we have never seen a country recover from a crisis without banks in working order. "We must therefore resolve to help them by the public sector.
"It is perhaps not out of what we must discover or at Fortis Dexia. "Regarding the recovery plan itself, the possibilities are numerous and must three criteria used to select the most appropriate interventions:
" The challenge in Belgium is to return to fiscal balance "and that is to limit the budgetary cost that has addossé BNP-Paribas. The standalone option (Fortis alone without BNP) was "Possible but more risky."
Given the consequences of an aging population, which puts pressure on medium-term public finances, "the Belgian government has done well to play safe budget.
- " Timely" means the measures must have an immediate effect. For example, the bonus policy in the event of redemption of a less polluting vehicle, already established in Germany, would, according Maystadt license sales in February 2009 in this country exceed sales in February 2008.
- " Targeted" means measures must be targeted towards those in most need in the context of the current rise, such as increased allocations for victims of redundancies.
- "Temporary ": the duration of the measures should be limited in time, otherwise consumers will continue to wait out the crisis before turning his hand to the portfolio.
It gave him the opportunity to teach his audience a new technical term: the "social rate of time adjustment, which enables the recording of the impact on future generations . And examples include climate change, the aging of the population, and the reserves of fossil fuels, whose preservation conflicts with some cleanup goals. themes and places it in the context of growth , the decrease is not according him a plausible hypothesis.
But
Maystadt, sustainability, can not be completely separated from the social justice : if there are many risks of social dislocation to tolerate too much inequality in the same age is worse among different age groups, because a population too poor not think of the future and not worry about future generations.
It will be understood, is the aging workhorse of Mr. Maystadt.
Meanwhile, here is the menu of things to come (Chart: Table of stimulus in Europe, click the image to enlarge) shows that the German measures are more generous than the Belgian deficit requires :-(
** In non-response to our question **
Before 150 people, we did not have room for a real debate, but rather has been an excellent demonstration of political rhetoric . I'm not here to tell you how he very trained in public games, rebounded to his advantage on all issues which were not consistent in its recovery plan , it was really painful.
Just an example, distressing: in non-response to our question "bankers are they not responsible for the excessive risks taken in securitization?" Maystadt has just the opportunity to place one or two interesting proposals to limit conflicts of interest in the financial world, I summarize :
- He proposed to pay the bonus annual Traders three years after On the basis of financial results medium term rather than year-end.
- In the same vein, he plans that prohibit audit firms (Price Waterhouse Cooper, Accenture) are both consultants and auditors and for companies they review ...
- The rating agencies (like Standard & Poor's) conflict of interest because they are required to evaluate financial products often they have helped to conceive.
- Moreover, these agencies should be paid by institutions seeking to dispose of quotations, rather than by the institutions listed, as is currently the If ...
- If the remediation plan for European banks had to go through the isolation of toxic assets into a 'Bad Bank ' Maystadt proposes that it be funded, as in Germany, by a consortium of banks, rather than, as in the USA and England, directly by the state.
- Regarding securitization, we should require the issuer to retain some risk on the securitized debt.
** What Maystadt did not say **
"But, could we say," what's new regulations, while the rules are already being flouted at large day? "
[ Crisis for Dummies: "Ten questions to economists "]
And I am not referring here to Madoff or Kerviel but the most respectable banker. Those who are not ashamed to tighten the clamp. For
Crisis for Dummies, the a fundamental cause of the crisis, the mismanagement of mortgage agents, managers credit risk managers, rating agencies, management of banks, regulatory bodies and institutional investors.
[ Crisis for Dummies: "Why , how far the credit crisis? "]
The disempowerment chain, in violation of existing rules, triggered the crisis. The plea of the President of the EIB for a new regulation is wishful thinking, a way to excuse the establishment by limiting the liability of the crisis of aporia unusable bank accounting rules and the lack of regulation in securitization.
The absence of rules in these matters does not relieve the bankers to ensure the successful completion of their investments on "good fathers" (and not by Pastors Pandy).
Moreover, by dissim ulation of these responsibilities, Maystadt obscures the fundamental uselessness there to plug the hole of credit by an additional loan. A recovery plan for the budget will not solve the crisis, it will prolong the aprofondissant hole public finances.
[The Crisis for Dummies: A hole patch to plug the hole wooden leg "]
[Mish's Global Economic Trend Analysis: "Spend Now Pay Later "]
Economists called "Austrians", only to common sense, require euthanasia banks currently under infusion of public money to restore confidence. One can only dream of a better world where bankers would listen. But they prefer to run their Moneytron, that, at least it pays!
* The farm shop Friedman **
The most relevant issue, was probably the next , raised by a deserving Brainois Title:
"You put on SELETTE as fundamental causes of the crisis, the trade balance global interest rates and securitization. Should we not do due mainly to the monetarist economics and the Friedman School, which has justified all these excesses by promoting virtualisation of the economy? "is a fundamental issue because monetarism was indeed the offcial doctrine of capitalism throughout the period of "bubble" in the graphs presented, during which Maystadt put monetarism into effect at the Belgian level and then Europe.
[Read more: Crisis for Dummies: Naomi Klein: The Shock Doctrine ]
We would have loved to know how the President of the EIB has come to embrace his new faith Keynesian, and motivations that led him to deny the dogma of Friedman which he was the apostle.
this excellent question, as a reflector in broad daylight, the response was Maystadt luminously opaque:
"Friedman does not interest us, what we see now is a stimulus package."... at this level of bad faith is most of kung fuck , we can talk bluntly révisionsisme.
Worse, this means the complete amnesia amnesty politicians responsible for the banking system, complementary to that amnesty Bankers, operated through the socialization of losses, and denounced above.
Charity, the edifice of social justice developed by Maystadt for HRC's campaign covers a wide aporia on the responsibility of politicians.
We will punish anyone, everyone can rest easy, at least in Knokke and Rhodes-St-Genèse. For
others, there will be fiscal austerity, intergenerational solidarity, and new banking regulations, which washes whiter than white.
icing on the cake, Maystadt explains that he saw the crisis coming and did nothing! (see supra, its December laration on its "no surprise")
I nadmissible ? Well more , ultimate stupidity and unbearable that broke the camel's over the market, we ask ourselves, voters continue to vote for his party.
order, probably it can continue to do nothing?
I did not know the Bank has provided to the FARC in Colombia. Obviously, it's good ...
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Crisis for Dummies 
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