Europe s Shaky Foundations

Shaky Social Contracts

But this is very shaky.

This becomes an isosceles triangle again, very shaky.

The ceasefire agreement of 3 May 2003 has remained shaky.

So the physics is that you cannot prove a hypothesis, but it's easy to disprove it any hypothesis is shaky.

They understand the structural integrity of a deep avuncular lap, as compared to the shaky arrangement of a neurotic niece in high heels.

But this argument s intellectual foundations first laid out in a 2002 paper by 13 members of the Fed s Washington, DC, research staff are shaky, at best.

I was visiting a cousin of mine in an old age home, and I spied a very shaky old man making his way across the room on a walker.

And they also have to dodge bullets, because we have got to operate during shaky cease fires and truces to try and vaccinate children, even in areas affected by conflict.

Now, my math's a little shaky, but this is pretty good, and it depends whether a pig is four feet long or five feet long, but you get the idea.

Neither scenario is very likely. Only fire breathing free market advocates, seemingly oblivious to the fact that China s shaky financial system cannot survive liberalization overnight, are calling for an extreme version of floating.

But the second and third reasons look shaky. Those with access to finance appear to be capable of resisting the urge to locate production in poor low wage parts of the world (China aside).

Netanyahu may even succeed in bringing Yitzhak Herzog s Zionist Union into his government, thereby shoring up his shaky coalition. His comparison of the Iranian threat to the Holocaust may be absurd and obscene, but it is politically effective.

It has been a great ride for the US, and America s financial supremacy has certainly eased the burden of being a superpower. But, between the sub prime US mortgage crisis and the dollar s ongoing decline, America s exorbitant privilege now looks a bit shaky.

Faced with rising gasoline prices as a result of the ongoing crisis with Iran, Americans concerns about the cost of driving have contributed to Obama s shaky popularity ratings. Thus, the Obama administration may find it more politically expedient to seek a deal with Iran.

Another round of bank bailouts is politically unacceptable and economically unfeasible most governments, especially in Europe, are so distressed that bailouts are unaffordable indeed, their sovereign risk is actually fueling concern about the health of Europe s banks, which hold most of the increasingly shaky government paper.

Finally, mutual funds are at risk as well, because their supposedly safe investments may sour and the insurance that backs them now appears shaky. The sub prime contamination of money market funds would prove disastrous, with consequences far beyond what we have seen up to now.

NEW YORK The risks facing the eurozone have been reduced since the summer, when a Greek exit looked imminent and borrowing costs for Spain and Italy reached new and unsustainable heights. But, while financial strains have since eased, economic conditions on the eurozone s periphery remain shaky.

The headline consumer price index (CPI) is near zero, and core or underlying inflation the Fed s favorite indicator remains significantly below the seemingly sacrosanct 2 target. With a long anemic recovery looking shaky again, the doves contend that there is no reason to rush ahead with interest rate hikes.

Papal authority stands on shaky ground, especially in the comparatively secular West. Francis can attract attention by opining about social justice outside the church, but it is difficult for any pope to influence the habits and theological views of Catholics themselves, who think and act as they please.

CDOs are a form of financial alchemy special purpose vehicles that buy the financial equivalent of lead (low rated mortgaged backed securities) and finance themselves mostly with the financial equivalent of gold (highly sought after AAA bonds). This transformation is based on one sound principle and two shaky ones.

Unfortunately, no precise mathematical model can determine correlation across securities, which is always an educated guess based mostly (sometimes entirely) on past behavior. Thus, the explosion of CDOs in the United States during the housing boom was predicated upon the shaky assumption that house prices never fall nationwide.

More worrisome is the current uncertainty about whether a shaky Europe will stand up to Russia, upon which Serbia depends to maintain sovereignty over Kosovo. So far, the Kremlin has resolutely stated that it will accept only a settlement agreed to by both parties, in effect endorsing Serbia s position.

Countries tend to pick the low hanging fruit as they benefit from imported technologies in the early stages of economic take off, and growth rates generally slow as economies reach higher levels of development. In addition, China s economy suffers from inefficient state owned enterprises, a shaky financial system, and inadequate infrastructure.

Although the numbers were never as rosy as market enthusiasts seemed to think, they did divert attention away from the shaky foundations of the newfound prosperity. The growing need for measures to correct global imbalances was met with disbelief by influential policymakers and market analysts alike Why change a winning formula?

Similarly, Erdoğan s recent visit to Egypt, Libya, and Tunisia brings out the ambivalence of Turkey s new claim to regional hegemony. While Egypt s shaky military junta welcomed Erdoğan, many Egyptians were not happy about his hectoring them and other Arabs to follow Turkish policies and to regard Turkey as their Muslim leader.

Since much of the money market funds assets are IOUs from the world s biggest banks, the withdrawals weakened the already shaky global banking system. The Federal Reserve, seeking to stem the growing panic and stabilize the American and international banking system, promptly guaranteed the value of all money market funds.

The first shaky principle is that if the return on these bonds is highly correlated, so that they all default at the same time, overcollateralization is not much help. By contrast, if the returns are uncorrelated, it is extremely unlikely that they will all default at the same time, making overcollateralization sufficient to guarantee a safer return.

Finally, Xi s power base is far broader than that of his two predecessors, Jiang Zemin and Hu Jintao, both of whom had shaky transitions in the first years of their leadership. Unlike Jiang and Hu, Xi assumed quick command of the Chinese Communist Party, the government, and the military, and very effectively shepherded the Third Plenum s historic reforms.

Considering China s huge and growing income inequalities, and its massive disguised rural unemployment, it is easy to imagine a period of political instability that sends investors heading for the exits. Mix in China s shaky financial system and the prospect of trade sanctions after an altercation over, say, Taiwan, and it is clear that the Yuan might not always be a one way bet.

Political parties that rely on an aging constituency are not tempted to call for change. The sort of shaky short term political coalitions that rule Japan nowadays prefer to buy time through so called public stimulus, or to preserve inefficient companies with subsidies. Twenty years of such shortsighted policies, whatever the party in power, have fueled government debt, hindering private investment.

To be sure, the introduction of the euro was a true revolution, and we cannot yet see all its effects. But what is clear is that the revolution took place on shaky national economic foundations, transforming the upper floors of the European economy financial markets and macroeconomic policy institutions while leaving intact the ancien underpinnings of supply side distortions induced by misguided national policies in the 1970 s and 1980 s.

De Mistura's plan aims to stabilize the situation by shifting the policy focus away from a relentless military campaign an approach that is benefiting only the Islamic State. The plan's emphasis on Aleppo which is not only a commercial hub and Syria's largest city, but also represents a sort of microcosm of the country distinguishes it from the shaky cease fires that have been implemented in Homs and elsewhere in the country.