Monthly Archives: December 2008

What not to read in the Financial Times

Avoid the FT’s coverage of American politics. In so many other respects, the FT is the best newspaper in the English language. It has a comprehensive world view, it assumes sophistication among its readers, it regularly covers issues no one else touches. But something is badly wrong with its Washington staff.

I’ve written before about the failings of Washington bureau chief Edward Luce (here and here). Today may mark a new low. Luce writes the FT’s feature proclaiming Barack Obama as the person of the year. And the entire, page-filling piece revolves around the idea that Obama has no capacity to take tough decisions. Amazingly, Luce doesn’t talk to historian Sean Wilentz, Obama-haters’ favorite quotemeister. But he roots out a Clinton White House official, Bill Galston, and “academic and novelist” Diana Sheets. Galston is a fellow at the Brookings Institution and was a deputy assistant to the president for a couple of years. Fair enough. Sheets is a blogger — not that there’s anything wrong with that — who doesn’t hold an academic position and has three unpublished novels. Both authorities confirm the thesis: Obama shies away from conflict, he avoids choices. Oh, and of course it raises the issue of Obama’s votes of “present” in the Illinois state senate.

There are plenty of bizarre twists and turns in Luce’s article. How about this:

In contrast to George W. Bush, whose instinctive response to crises was a badge of honour as well as notoriety, Mr Obama is likely to prove a very different kind of “decider”. During the election conservatives attacked him for being weak and tardy after Russia’s invasion of Georgia. Mr McCain came out guns blazing, proclaiming: “We are all Georgians now.”

In what way was Bush’s instinctive response a “badge of honour”? Luce has the good grace to note, after this paragraph, “Mr Obama’s modulated statements now look much more impressive as new facts have surfaced pointing to actions by Georgia that helped precipitate Russia’s invasion.” So how was he being “weak and tardy”?

The next sentence, however, rendered me mute. “Mr Obama was also attacked for refusing to follow Mr McCain’s lead in getting involved in the enactment of the $700bn troubled asset relief programme – a cat’s cradle of measures that has since been harshly criticised.” That’s not my recollection of what happened with TARP. McCain had his ridiculous grandstanding about “suspending” his campaign, even though he didn’t. He stayed in New York, despite his claim that he needed to rush to Washington. He then sat silently throughout a lengthy meeting in the White House. Obama, in stark contrast, solicited expert views and then worked responsibly both with congressional leaders and the White House to craft a deal. Now perhaps that deal wasn’t ideal, but Obama certainly was involved.

I’m confident Luce knows he’s writing rubbish, but he can’t help himself. I’ll continue to read the FT every day, but I think for my blood pressure I’ll have to avoid anything on US politics.

Quote of the day: what matters in politics

The Wall Street Journal reports today on possible plans to install a regulation basketball court in the White House and demolish the bowling alley that was added by Richard Nixon in 1969.

Jim Sturm, president of the Bowling Proprietors’ Association of America, gets slightly carried away in response:

I think his political analysts ought to take a long look at removing [it]. It could have a long-term impact on his political prospects.

We need a new definition of outrageous

Via FT Alphaville, I read Saxo Bank’s self-described outrageous predictions for 2009. They don’t look so outrageous:

  1. There will be severe social unrest in Iran as lower oil prices mean that the government will not be able to uphold the supply of basic necessities.
  2. Crude will trade at $25 as demand slows due to the worst global economic contraction since the great Depression.
  3. S&P will hit 500 in 2009 because of falling earnings, vaporizing housing equity and increased cost of funds in the corporate sector.
  4. The EU is likely to crack down on excessive government budget deficits in several member states, and Italy could live up to previous threats and leave the ERM completely.
  5. The AUDJPY will drop to 40. The decline in the commodities markets will affect the Australian economy.
  6. EURUSD will fall to 0.95 and then go to 1.30 as European bank balances are under tremendous pressure because of exposure to the faltering Eastern European markets and intra‐European economic tensions.
  7. Chinese GDP growth drops to zero. The export driven sectors in the Chinese economy will be hurt significantly by the free‐fall economic activity in the Global Trade and especially of the US.
  8. Pre‐In’s First Out. Several of the Eastern European currencies currently pegged or semi‐pegged to the EUR will be under increasing pressure due to capital outflows in 2009.
  9. Reuters/ Jefferies CRB Index to drop 30% to 150. The Commodity bubble is bursting, with speculative excesses so large they have skewed the demand and supply statistics.
  10. 2009 will see the first Asian currencies to be pegged to CNY. Asian economies will increasingly look towards China to find new trade partners and scale down their hitherto US‐centric agenda.

Continuing woes of

From FT Alphaville:

We have ongoing problems with the registration system, which means you will only be reading this on Tuesday morning if you have never logged in to FT Alphaville before.

A reminder of why I always have a second browser fuelled up and ready to go. But I can’t think of any major media site that has as many technical glitches as That was true at its foundation and it remains true years later.

More kvetching Also, what’s with FT Alphaville’s style of providing linkless text in RSS feeds and on the home page. You only get links by clicking through to “more”. Yuck.

A bridge too far

Axner Excavating gift cards

I spent a cold weekend standing on soccer fields in Redding, California. There aren’t a lot of reasons to go to Redding — youth soccer tournaments aside — but The New York Times amazingly saw fit last year to publish a travel feature on 36 hours in Redding. (One wag among the fellow freezing parents noted, “The series is usually 48 hours, but it was adjusted for Redding.”)

Photo by Informedmindstravel

Photo by Informedmindstravel

The one sight in Redding well worth seeing is the Sundial Bridge, a pedestrian span across the Sacramento River, designed by Santiago Calatrava. Even on a cold, cloudy December day, it was a great experience. And I can testify that a bunch of boys love to try to shimmy up suspension cables, even if they are freezing.

More typical of Redding, however, was our amble through the Olde West pawnshop, located conveniently next to our hotel. It was, as far as I could tell, the busiest place in town. A few people were pawning things, but the real crowds were around the three-quarters of the store devoted to guns. Plenty of hunting rifles, of course, up there in the woods and mountains. But most of the interest was in the many sleek black and silver handguns. Instituting effective gun control is a political non-starter in the US, but I wish it could happen.

German meltdown

While most people I know have been understandably fixated on the continuing slide of the American economy, Germany is also going down the drain. What’s remarkable about this, at a time when recession is the norm in most so-called advanced economies, is the absolute complacency of German politicians.

Eurointelligence is my go-to site for what’s going on. This morning two of its posts are particularly startling. First, they point to a great scoop from the Frankfurter Allgemeine Zeitung. An internal memo from the German economics ministry reveals an expectation of -3% growth next year, the worst performance in the post-war period. The reaction from the ministry?

When confronted with those data, the government spokesman presented his usual complacent interpretation. One should not overestimate those figures, he said, given the lack of experience of this type of crisis. The newspaper said there will be a new stimulus, but the focus will be on infrastructure investment (meaning not in time for 2009). Der Spiegel quotes a member of the government who said that the next programme would have a size of at least €20bn, which is less than 1% of GDP.

Wolfgang Münchau, who runs Eurointelligence, then weighs in with a magisterial debagging of German finance minister Peer Steinbrück and chancellor Angela Merkel.

Over the past three years, I have closely followed the German finance minister with a growing sense of disbelief. Peer Steinbrück’s lack of diplomacy is remarkable only insofar as that it has now become known to a wider audience. He has been talking like this forever. His bashing of the “Anglo-Saxons” goes down very well in Germany for now. But at the time of the general elections in September 2009, Germany and the rest of the eurozone will be in the middle of an economic depression. Then people will be asking why their chancellor and their finance minister have been so extraordinarily complacent.

Given the extreme economic deterioration in the past few weeks, I actually expected they would have done something by now. But they are digging in. Angela Merkel, the chancellor, held a domestic summit in Berlin to discuss the economic situation. I suspect another stimulus package will come eventually, sometime next year. But I doubt it will come in time to help the economy in 2009. Whatever is eventually decided will have no economic effect until well after the elections. Germany is thus entering 2009 with a total stimulus of 0.5 per cent of gross domestic product, in other words, with essentially no fiscal support. Since monetary policy has little traction when credit markets are dysfunctional, there is hardly any support at all.

Two weeks ago, I forecast that the German economy would contract between 2 and 4 per cent in 2009. What looked to some like an eccentric forecast has now become mainstream. Last week, two of Germany’s large economic institutes forecast a decline in growth for 2009 of 2 and 2.2 per cent respectively. Norbert Walter, chief economist of Deutsche Bank, said a contraction of 4 per cent in 2009 was possible. The Ifo institute predicts that the contraction will continue in 2010.

Expect all those forecasts to get progressively worse throughout the winter, especially if global trade continues to contract at current rates. Germany ran a current account surplus of 7.6 per cent of gross domestic product in 2007. This means that a global trade crisis will hit Germany disproportionately hard. Last week’s most shocking economic news was the 2.2 per cent year-on-year fall in Chinese exports in November, which is a bellwether of global trade volumes. To make matters even worse, the real effective exchange rate of the euro is beginning to rise again.

The reaction from Serbia

A friend who does a lot of work in Serbia writes to me about the Blagojevich scandal:

I said to someone in the office that I was sure that half of the Serbs, when they read it in the paper, would be saying, “yes and what did he do wrong?” She replied that the bigger half would be saying, “They’re only going after him because he’s Serb.”

Leaders of the English-speaking world

Fascinating point from James Crabtree at Prospect:

Thought for the day. If Ignatieff becomes Canadian PM – which, even if not next year, he probably will soon – then the anglo saxon world will be lead by four morally serious, weighty liberal intellectuals: Obama, Brown, Ignatieff and Kevin Rudd.

That would really be jaw-dropping. There are good things happening in the world.

Things that made me smile today

There’s so much grim news that I relish finding things to brighten my day. Today brought three particularly notable items.

First, as a native Illinoisan, I goggled at the Blagojevich corruption charges. Rachel Maddow read out one reaction, apparently from a comment to The Chicago Tribune: Oy vey-evich. Priceless.

Second, through Brad DeLong, I was able to indulge both my one-time English major persona and my occasional Facebooking. From Austenbook:

Finally, Felix Salmon pointed to this great commentary on the car bailout: