Just in case you need it – an update on Spain’s Omicron situation, which is pretty dire – case-wise, if not hospitalisations or deaths-wise.
Cosas de España/Galiza
A bit disturbing – but not terribly surprising – to read that books and films butchered during the Franco years are still in circulation in Spain.
Of lesser import . . . Reader Perry has surprised me with the news that, according to Wiki, Spain’s New Year grape-gorging should be accompanied by the wearing of red underwear received as a gift. Corporate collusion?
Someone writes that Pedestrians in the UK are the true victims of the war between cars and cyclists. This has been the case for years in Spain, where cyclists use the pavements(sidewalks) in preference to the risky roads. This is illegal but – as with e-scooters – is un-policed. Evidence of an official pragmatism that’s never shown to car drivers – the low-hanging fruit of the revenue-generating multas industry.
Ah, that old Romanian clipboard trick . . . British golfers have been warned of female Rolex thieves. The women approach lone men in the car parks of golf clubs or Waitrose stores and outside victims’ homes carrying clipboards, claiming to be conducting research. With the questions answered, the women pretend to be pleased, kissing or hugging a victim and a luxury watch disappears. In Galicia, they just pretend to be deaf and dumb and are content to relieve you of cash for their fake charity.
As if I didn’t know . . . December is set to be the dullest in 65 years after just 26.6 hours of sunshine recorded across the UK. Ironically, it shone in North Cheshire during the short visit of my Madrid-based daughter – the least deserving member of the family
AEP returns to the fray: Europe is pushing its luck by letting German inflation run wild. . . . Inflationary policies are fuelling a eurosceptic backlash in the Continent’s largest economy. See the article below.
Brits – with temporary relief over New Year – have been banned from driving through France to homes in other EU countries. Vindictiveness? Or just a good pre-election ploy for M Macron?
What an horrific headline: 1,000 children shot in a year as US gun violence soars. Will this madness ever end?
The Way of the World
Richard North rails here against the rampant dishonesty of those reporting on AGW. Sections of the media, he avers, are actively engaged in perpetrating lies. They ask for trust – they deserve our contempt.
Comparable and incomparable, and their adverbs . . . Now almost universally pronounced differently from how they used to be, with the stress now on par, not com. You can hear what used to be the norm here and here. We can’t blame Spanish.
Here’s 2021’s best new words, of which a lot of are probably going to be quite ephemeral.
A missed bump
Meta and Metaverse
The Great Resignation .
Important to note: Fashions in language are shorthands for understanding the zeitgeist. Whatever age you are, the new words are being used by someone younger than you.
Finally . . .
Since my car occasionally brushes against unseen Galician granite blocks, I ordered some spray paint on line and yesterday went to pick it up at the company’s local branch – to find I’d somehow arranged for this to happen in a store on the south coast. But, luckily, they had a couple of cans on the shelves. Just as well, really. As, driving out of my parking spot, I brushed against a high kerb on my left that I hadn’t fully taken stock of before turning towards the exit. But I don’t think it was made of granite. As if that matters . . .
Nice from Caitlin Moran: A great deal of 2021 was taken up by the penis-off — sorry, ‘space race’— between Jeff Bezos, Elon Musk and Richard Branson. In a vibe that is best described as “arks for arseholes”, all 3 are competing to become the first straight white male billionaire to jet off and leave our burning planet behind.
If you’ve landed here looking for info on Galicia or Pontevedra, try here.
Europe is pushing its luck by letting German inflation run wild. Inflationary policies are fuelling a eurosceptic backlash in the Continent’s largest economy: Ambrose Evans-Pritchard, TheTelegraph
Germany’s famous aversion to inflation and monetary disorder is the dog that has declined to bark all through the last half-decade of quantitative easing.
Outrage was brief even when the European Central Bank cut interest rates to minus 0.5pc, and banks started to impose confiscation fees on deposit holders, or “punishment rates” as they are called in the German press.
One might conclude that German inflation-phobia was always a myth, but there are clear signs that this strange political calm will finally break in 2022. What if monetarists are right and German headline inflation – currently at a euro-era high of 6pc – proves stubbornly persistent?
Germany faced this level of inflation during the Reunification boom of the early 1990s. The Bundesbank crushed it by raising rates 500 basis points to 8.75pc, and in the process blasted sterling out of the Exchange Rate Mechanism, with potent political consequences for Britain’s relations with Europe.
This time the ECB is persisting with negative rates even as Germany hits full employment and full capacity, and even as the ECB’s own staff union demands a 5pc pay rise.
The central bank is continuing to soak up eurozone budget deficits with QE bond purchases on a vast scale, essentially shielding a string of insolvent Club Med states from market forces under scarcely-disguised “fiscal dominance”. The ECB’s balance sheet has hit 81pc of GDP. The US Federal Reserve is calling it quits and is preparing to tighten hard at less than half this level.
With apposite timing, German fund manager Count Georg von Wallwitz has just published “Die Grosse Inflation” – no translation needed – a forensic exploration of events from the end of the First World War to Wiemar’s hyperinflation in 1923.
His conclusion is that the Reichsbank under the hapless Rudolf Havenstein allowed inflation to spin out of control as a way to clear the legacy debts of the war, deeming expropriation of creditors to be a lesser trauma than mass unemployment and grinding deflation in the chaotic circumstances of regional revolutions.
Great Britain opted for deflation because it was able to do so. It still had a full-functioning government, and powerful creditor interests in the City. But that British policy of austerity and the Gold Standard was a painful failure in retrospect. It led to the General Strike and the lost decade of the 1920s. Neither model worked.
Count von Wallwitz is not of course suggesting that today’s QE is comparable to Reichsbank printing. He is too sophisticated for that. The German imperial regime collapsed in 1918 and the Weimar government lacked a reliable stream of tax revenue, which he likens to the dysfunctional hybrid structure of the EU today. It was almost a patriotic duty to withhold taxes diverted to cover reparations payments to the victors of Versailles.
But there is an obvious parallel today with legacy debts from the pandemic, coming on top of earlier damage from the global financial crisis in 2008. Debt ratios have risen by as much as they did in the First World War, and in several countries by considerably more.
Debt ratios have jumped by 52 percentage points since 2007 in France (118pc), 54 points in Italy (155pc), 72 points in Portugal (135pc), 84 points in Spain (120pc), and 104 points in Greece (206pc), despite serial write-offs.
It is staggering to think that the ratio has risen by just four points in Germany to 69pc of GDP. This divergence in debt burdens is now the central political fact of eurozone economic management.
A cartel of mostly Latin debtors has in effect seized control of the ECB in alliance with academic New Keynesian economists, and is pushing through loose-money policies chiefly in its own interest, regardless of German needs and sensitivities.
This cartel is violating the founding contract of Europe’s monetary union: that the ECB would be a hard-money replica of the Bundesbank, and that German people would not be swapping their beloved D-Mark for a lira. A lira is what they may get.
“The Latin model has arrived: we’ve got a full industrial policy, a green deal (i.e. fiscal expansion), and now we’ve got Latin inflation as well,” said Thomas Mayer, Deutsche Bank’s ex-chief economist and author of Europe’s Unfinished Currency.
“The northern model of independent monetary policy and hard budget constraints is finished,” he said.
France’s Emmanuel Macron and Italy’s Mario Draghi are now trying to push the envelope even further, signing the bilateral Quirinale Treaty in Rome last month in a bid to take control of Europe’s fiscal regime as well.
They aim to dismantle the legal architecture of budget discipline, allowing states to run much bigger deficits by excluding public “investment” from the normal figures. They are right in one sense: the austerity bias in the deficit rules led to frightening economic blunders during the EUM debt crisis. But while their proposal looks like a variant of Gordon Brown’s Golden Rule, the implications are radically different in the creditor v debtor context of monetary union.
They also aim to usher in a de facto European treasury with joint debt issuance, even though the German constitutional court has already ruled that this violates the country’s Basic Law.
Professor Daniel Gros, head of the Centre for European Policy Studies, said this Quirinale demarche was seen as a provocation by Berlin, an attempt to bounce Chancellor Olaf Scholz and his new coalition into a high-spending “transfer union”. The Draghi halo changes nothing.“Draghi will not be there in the future: the debt will remain,” he said.
Italy is the lynchpin of what unfolds over the next two years. “It is too big to be bailed out by fiscal transfers, and it cannot roll over its outstanding debts unless the ECB is there to keep the market open. The market will shut the moment that the ECB steps away,” said Professor Mayer, now at the Center for Financial Studies in Frankfurt.
Three years ago Matteo Salvini’s Lega and the Five Star Movement, the two leading parties in Italy’s parliament, were both flirting with exit from the eurozone. Neither have any further reason to do so since the ECB has been fully captured by their camp. The threat of rupture in the one-size-never-fits-somebody structure of the euro therefore rotates northwards. This new tension is likely to be the story of the early 2020s.
Inflation is highly corrosive in the particular circumstances of Germany, where the poorer half of the population rents rather than owns property, and almost none have equities or inflation hedges. They keep their life savings in bank accounts. These are currently being eroded at a real rate of over 6pc a year. It implies galloping pauperisation, even if it is not 1923.
Negative rates are also destroying the business model of the smaller cooperative and savings banks that fund 90pc of loans to the Mittelstand family firms, the stable backbone of German society and its industrial machine.
Prof Mayer said Europe should not to take German quiescence for granted, warning that it is only a matter of time before a political backlash starts to convulse the political scene. “People are waking up. The longer inflation goes on, the more it will fuel populist forces in Germany. It was the migrant crisis that revived the fortunes of the right-wing AfD party, and I fear that inflation will have the same effect,” he said.
The Christian Democrat Party and Bavaria’s Social Christians already have hardliners itching for a fight with the ECB. They are now in opposition and ideologically liberated by the departure of Angela Merkel. These parties may well tilt in a eurosceptic direction to cover their flank against the AfD.
This has a familiar feel to those who followed the series of incremental irritations that turned the UK against Brussels and ultimately led to divorce. These tensions are too long to list, but they culminated in the Lisbon Treaty, which created a European supreme court in the fullest sense, and gave euro-judges sweeping powers to rule on almost anything they wanted by making the EU rights charter legally-binding.
British opposition was swatted aside, and a supposed opt-out protocol later turned out to be meaningless. Lisbon was followed quickly by the breezy decision of the EU Council – against all precedent – to circumvent David Cameron’s veto of the Fiscal Compact in 2011. Did they have any idea that this would set off the chain of events that led to the Referendum?
At the root of Brexit was an inchoate but widely felt sense among the British people that their country was being pushed around, and that its souverainiste vision of how Europe should evolve counted for nothing. This process of disenchantment takes a long time to unfold but the early signs are already there in Germany.
It is courting fate to try to strip Europe’s dominant power – and long-suffering cash cow – of control over monetary and fiscal policy, and doubly hazardous to do so without much regard for the niceties of EU treaty law.
A debtor country cannot walk out of the euro without scorched-earth economic consequences: a rich creditor country most certainly can.