Charting Ways Out of the European Impasse #AUGUR

This memorandum written by participants of a 3-year research project on Europe and the world’s socioeconomic future to 2030 (the AUGUR project) discusses possible ways out of prolonged stagnation and low growth. The current trajectory can trigger renewed crises of political-economic sclerosis in Europe and progressively undermine social standards and well-being. Such an outcome would strengthen the forces that aim to dismantle European integration. An overriding priority must be given to rebalancing the distribution of growth between different parts of Europe.


There is a lot of resistance to internationalist economics as there is too to environmental concerns especially climate warming and carbon tax implications, which are not merely short-run crisis responses but will be embedded long-term etc. Environmentalism Industry as a sector is still something of a super- or para- industry classification not unlike how the personal computer industry was viewed in the 1980s as a service not resented because promoted as a cost-saving efficiency also by business gurus and all major consultancies. Environmentalism has the opposite profile by not obviously offering cost-savings and because the gains are social as if more like a tax and therefore in some views an unwarranted restriction on growth.


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Stress-tests are supposedly harmonised, at least for banks in the banking sectors of each country, but not across all EU member states, to test for shocks to a country's banking system when current risk assessments are suddenly inverted by falls in investment, in consumer demand, savings, loans, and by fast rising long term bond yields, and when presumably wholesale financial markets become 'one-way' (either buy-buy or sell-sell)!  The indicator values of sudden change are provided by the EU regulatory authorities, but in a narrative form and using an abstractionist, sometimes over-coy, language that is farcical.

This is not how the CRD and BIS Basel II regulations and guidelines specified the laws for this.

In the original regulations, stress-test calculations are expected to be conceived by the banks from their own macro-economic models including their own models of their banking sectors and of how and where their banks fit within those sectors. Instead, the regulators of today provide precise values by which asset class prices and some macro-economic variables are expected to adversely move according to a shock scenario, according to a narrative that cannot make sense to bankers or economists! Moreover, they do not provide models for how to assess the whole scenario. Consequently, banks must assess balance sheet impacts on a line by line basis and not worry about whether the overall picture or its timeframe is realistic or if there are allowances for effective risk mitigations, merely the summing of capital losses (nominal, as if crystallised instantly in full).

The reason for this is that banks proved to be extremely reluctant to invest time and resources in building macro-models of their business and of their banking sectors, largely because they also wished strenuously to avoid accepting responsibility for what happens in  underlying macro-economies, nationally and internationally. They are suspected of being likely to game any degrees of freedom given to them to try and intelligently work it out for themselves. This way no one will learn anything new and really useful.

The Bundesbank: ECB massively exceeds its mandate

It's no secret that the Germans are negative to further financial support of the weak euro countries. Germany's current strategy is inaction to the calls of introducing Eurobonds or Germany to leave the Euro. What they dread is the other option - that a weak country would leave the euro and its implications on... Germany.

Reinhart, Rogoff... and Herndon

Thomas Herndon, the UMass Amherst PHD student who discovered an Excel coding flaw in the famous paper "Growth in a Time of Debt" by economists Kenneth Rogoff and Carmen Reinhart, which had claimed that when a country's debt surpasses 90% of GDP, then growth slows precipitously, was the man of the week.

EU commissioner Olli Rehn and influential US Republican politician Paul Ryan have both quoted a 90% debt-to-GDP limit to support their austerity strategies.

Budget 2014-2020: Don't sacrifice EU's future to the current crisis, say MEPs

EU member states must not use the economic crisis as a pretext to force austerity upon the EU until 2020, MEPs warned in a debate on Wednesday. The EU needs a budget that is flexible enough to cope with unforeseen events and is funded from new sources, they added. The debate with Commission President José Manuel Barroso and Ireland's EU Presidency Minister Lucinda Creighton was Parliament's final input to the 7-8 February EU budget summit.

Handelsbanken - A brand new type of Bank has sprung up in the UK

A bank, new to Britain, is expanding rapidly across the UK.  Its name is Handelsbanken and it is from Sweden. However, it is about to open its 150th branch in the UK.

Decision Making

The world hasn't learned anything since The Kreuger Crash

The reason no one wanted to lend to or trade with the banks during the fall of 2008, when Lehman Brothers collapsed, was that no one could understand the banks’ risks. It was impossible to tell, from looking at a particular bank’s disclosures, whether it might suddenly implode.

Growth and renewal in the Swedish economy

The 2012 McKinsey Global Institute report Growth and renewal in the Swedish economy shows that the nation can’t afford to coast on its achievements. Sweden’s economic growth mainly reflects productivity gains in the areas most exposed to international competition: manufacturing and business and financial services, which together account for only about one-third of the nation’s economy. In its two other main components—the public sector and local services—economic growth has been much slower, at a pace comparable to that of the rest of the EU-15.

1 trillion dollar platinum coin

The theory of the one trillion dollar platinum coin has been around a few years. But recently Krugman decided to take a stance pro-coin. http://krugman.blogs.nytimes.com/2013/01/07/be-ready-to-mint-that-coin/

Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely,” Krugman wrote. “He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous.

Asymptotix in CIOmag 2012
















Haldane giving evidence at the Parliamentary Commission on Banking Standards

Haldane: No change is not an option. Fully 70% or 80% of the IT spend of the big banks currently is about the maintenance of legacy (antiquated) systems...

Macroprudential Supervision and the Transmission Mechanism


What is the Central Bank thinking?

Below is a review of recent central bank literature in the area of macro prudential supervision, this review is intended to elucidate why it is that a banking crisis crosses the line between free market private individual economics and public sector control, in a sense why the banking system is “different” in that executive officers of a financial institution have a higher order responsibility (ironically) to the general welfare of the population which flows form their interrelatio

the asymptotix of the basel accords

The asymptotic Basel II Tier One Capital formula

The Basel II Capital Accord seeks to improve on the existing rules by aligning regulatory capital requirements more closely to the underlying risks that banks face. One of the risk types described in the Capital Accord is credit risk. Banks need to hold capital to cover the credit risk on their credit portfolio.

Drupal 6 Views 2 custom handler for a dynamic select list

The current Drupal project has a network directory, that uses manual entries of data. During a multiple-step migration we have a temporary system where we instead synchronise data from a separate system (ColdFusion and a combination of SQL server and Oracle).

Tomorrow, summer is over in Euroland

If anyone of you thought this Summer was quieter than last year, then it's not due to less hazards for the EU leaders, it's rather that they are more skilled than last year in the profession as holidaymakers. We could for instance see Pedro Passos Coelho swim in Algarve relatively anonymously, but he was eventually caught up by some road toll protestors.

What is all this Basel regulation stuff about, anyway?

Back in the mists of time (about 10 years ago) it must have been; that was the question I was asked to answer; I did a lot of work so the client must have been seriously interested;-

What the bloody hell is this Basel Thing Anyway?

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