All posts by Julien Alexandre, Paul Jorion : ‘Jean-Claude Juncker’s moral authority has been damaged’, 14th November 2014, Paul Jorion: ‘Jean-Claude Juncker’s moral authority has been damaged’

Does the LuxLeaks scandal represent a risk for the Commission?

Paul Jorion: Jean-Claude Juncker’s moral authority has been damaged. Of course, he hopes his investment plan will bring confidence, and it is a good idea. Especially if it can create employment and give purchasing power to European citizens. But his credibility has been tainted by the revelations about Luxembourg’s fiscal practices.

The current head of the Commission is the man who led the implementation of austerity policies within the Eurogroup, at the same time as organising tax evasion for big companies in Luxembourg. Member states lost billions because of him, and now he wants to impose austerity policies on us. This is an untenable position.

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Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (II/II), by H. Benisty (co-author with Timiota)

Guest post. The French version can be found here. Special thanks to Serge Boucher for the translation

We’ve shown in the first part of this post that a population of actors effecting “random walks” by betting their wealth daily, or more precisely a modest part of their fortune that lies above the poverty level, will eventually see a small group of “very rich” emerge, making everybody else comparatively poorer.

We now increase the number of actors to N=3600, all other hypotheses remaining the same, to get a more clear distinction between a continuum of the society and a few dominant elements. We’ll show how a small dose of “Pikettisation” avoids paralysis.

First, let’s study the situation as is, to identify the problem. Here’s a typical simulation with N=3600 actors during 35000 days. [See ((2)) in the appendix for a more detailed explanation, … even if you have already read ((1))!]

Continue reading Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (II/II), by H. Benisty (co-author with Timiota)

Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (I/II), by H. Benisty (co-author with Timiota)

Guest post. The French version can be found here. Special thanks to Serge Boucher for the translation

On the subject of wealth concentration and rising inequalities, Thomas Piketty tells us that there is indeed a growing rift, and that the fifties were only an exception. One can always pretend that the Gilded Age gave us several decades of only occasionally rusty capitalism, hence reviving those levels of inequality is nothing to scoff at, especially if millions of people concurrently rise out of poverty.

Entertaining that view requires that we ignore many aspects of the Great Depression, which is highly difficult to understand, having taken place between two world wars, and in a period mixing technical progress, colonisation and then decolonisation. In any case, one can conceivably believe that history as a whole is so chaotic that what we’ll get at the end of the current rise in inequality need not be exceptionally bad.

Many reasons, which one might wish to file under “our planet’s survival”, suggest that now is a horrible time for deadlocking a system already made rusty by wealth concentration and the mass poverty that it implies: even though a sizeable and growing middle-class manages to get by, a world where even in rich countries 30% of inhabitants are poor, with poor countries doing much worse, can’t be expected to make the right choices regarding our planet’s resources.

Continue reading Medical Breakthrough: Low Dosage “Piketty” Prevents “FT” Fits (I/II), by H. Benisty (co-author with Timiota)


Guest post. Translated from the French by Tim Gupwell

Whenever monetary creation, or the famous concept of printing money, is alluded to, the idea of hyperinflation is never far away. Subsequently, reference is made to history to predict a return to these episodes that left such an indelible mark in people’s memories. The conclusion immediately drawn is that the same cause will have the same effect.

However, the crisis we are living through might well lead us to a more nuanced picture. The first thing that needs to be considered is that we are seeing an inflation of financial assets, not of the prices of consumer products. The next remark that needs to be made is that this latter type of inflation has not been seen in the United States, in Japan or in Great Britain, all countries whose central banks have not held back when it comes to monetary creation.

Of course, it can always be countered that it is only a matter of time, and that the next flurry of snow will trigger the avalanche. But is this really a satisfactory argument? Looking at it another way, it seems that the liquidities lavishly distributed by the central banks do not actually trickle down into the real economy and are notoriously used to other ends, which do not lead to an increase in consumer prices. The heavy downward pressure on wages constitutes an additional obstacle to the appearance of the dreaded phenomenon.

Continue reading THREE STRATEGIES FOR REDUCING THE DEBT, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

The case is clear-cut judging by the current climate! The banks are behaving like louts, the regulators supervising them are looking the other way, and the politicians are covering their backs. Indeed, it is difficult to draw up a full list of the scandals which have just come to the fore without missing some of them.

Of course there is Barclays, not to mention all the other megabanks waiting for their fate to be made known, in a context spiraling out of control, hoping to escape from public condemnation, fines and judicial pursuits. There is the virtuous BNP Paribas, prosecuted in France for complicated mortgage loans based on the parity between the Euro and the Swiss Franc. Or indeed the French-Belgian bank Dexia, with its structured loans made to local collectivities and hospitals that one no longer hears about. The British bank HSBC is a big blow, involved according to the American Senate in money laundering operations for Mexican drug-trafficking cartels, and with direct links to organized crime, including the Russian mafia. The pearl of Asia has even achieved a double whammy thanks to secret financial transactions between 2001 and 2007 with Iran – forbidden in the USA – for an amount of 16 billion Dollars.



Guest post. Translated from the French by Tim Gupwell

François Hollande has confirmed that the Government is going to propose for adoption an organic law (which a simple law cannot undo) in order to have the balanced budget rule adopted, on the advantageous pretext that it is provisional. There have been many occasions in recent French history when special measures have been adopted for their presumed importance, without ever leaving good memories behind.

At the same time, the debate in Europe continues to move on, focusing once again on the reduction of the banks’ debts. Thanks to the Wall Street Journal, we have learnt that during their latest meeting, the ECB advised the European Finance Ministers to force the senior debt-holders to participate in the bail-out of the Spanish banks. A 180° U-turn which was not actually followed, since the draft of the memorandum which is supposed to be adopted during the next Eurogroup meeting on the 20th July makes no mention of it.

According to the newspaper’s sources, the ministers did not wish to follow Mario Draghi’s proposals at the meeting, as they were afraid of how the markets would react. It was also out of fear that the Irish government would demand equal treatment, since to save the European banks – in particular the British ones – the Irish Government had to borrow money to pay off the senior creditors of their country’s banks. Nor would the Greek and Portuguese Governments have failed to jump on the bandwagon.



Guest post. Translated from the French by Tim Gupwell

Once more, the crisis has taken a turn for the worst in the days after a summit which was intended to resolve it. Barely ten days ago, two practical decisions came out of it, and neither has been implemented in practice; nothing has really been done to seriously calm the bond market, while the link between public and private debt in Spain continues to be tightened, the complete opposite of the stated objective.

From meeting to meeting, the contradictions which seem insurmountable and resistant to compromise seem to be reaching a critical mass.

Spain has become associated with the idea of an inevitable disaster to such an extent, that it is already in the process of benefitting from a bail-out plan under another name. But not to worry, if one looks at the conditions attached for the rescue of the banks, it is clear that the risk is going to stay in Spain and won’t cross its borders! They are going to be bailed-out, put under the supervision of Europe, their shareholders forced to contribute, and the public deficit will be increased by the same amount. At the same time, the Government has just announced a new set of austerity measures which they estimate at 65 billion Euros over two and a half years, the effect of which can only be to accelerate the drop in fiscal receipts on the pretext of increasing them. The extra year granted to lower the deficit below the 3% of GDP mark does nothing more than prove the unrealistic nature of the previous timescale, without rendering the new one any more credible.

Continue reading A CRITICAL MASS OF CONTRADICTIONS, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

(Copyright Uly Martin)

In their hundreds, the ‘black march’ of the miners, who have come on foot from the North of Spain, has reached Puerta del Sol, where it was welcomed by thousands of Madrid residents. On strike since last May, they are fighting to prevent their mines from being closed as a result of cuts in government subsidies, something which would result in the devastation of coal basins in the Asturias, Leon and Aragon regions. Passing before Moncloa Palace, Mariano Rajoy’s residence, they chanted “We are miners, not terrorists”.


Guest post. Translated from the French by Tim Gupwell

The European Finance Ministers managed during the course of the night to finalize a minimal agreement, which needs, as usual, to be examined in detail due to its grey areas. They put together a set of nominations to the ECB and the ESM based upon the provisional re-appointment of Jean-Claude Juncker at its head, in the absence of any other solution. Then they reached a “tentative agreement” (another way of saying a broad outline) with regard to the particular case of Spain which needs to be wrapped up for adoption on the 20th July.

An additional year will be given to Spain to reduce its deficit and get back on track, which confirms that things are in the process of getting out of hand, and which depends on the new austerity measures that Mariano Rajoy is going to announce this week. These are said to include an increase in VAT, reduced social security payments, reductions in unemployment benefits and a revision of the methods used to calculate retirement benefits. A preview of the program has already been presented by the Spanish Finance Minister, Luis de Guindos.



Guest post. Translated from the French by Tim Gupwell

On Saturday the 16th June, the Prefecture of Fukui (in the West of Japan) officially gave its consent to the Prime Minister for two reactors at the Ohi nuclear power station to be restarted. The dates are set for the 8th July for reactor N°3 and the 24th July for Reactor N°4.

So the ‘nuclear zero’ experiment will only have lasted two months. Apparently, the painful experience of Fukushima will have no impact on the habitual order of Japanese political life.

No question meets with a clear answer anymore: extremely divergent figures are offered up for elements that should be purely factual, whether they concern radiation levels, the probability of fresh seismic activity, or evaluations of the summertime energy consumption. The most fundamental things seem to get lost in a haze. Why did the Fukushima nuclear power station continue to function beyond the date which had been set for its shutdown? Why did the ex-Prime Minister, Naoto Kan, immediately announce the shutdown of the Hamaoka nuclear power station after the Fukushima catastrophe? There is speculation about a possible link between the answers to these questions and a war lost by Japan some 67 years ago – but only on Twitter.

Some hundreds of thousands of Japanese have manifested their opposition to a restart of the nuclear power stations, but this information is virtually absent from the Japanese media: the photos of the demonstrations cannot be found anywhere. On the 7th June, women from Fukushima demonstrated in front of the Prime Minister’s residence. You can see them here. Will their suffering be brought to an end? Unfortunately the question is more or less asked in vain: citizens have ceased to exist in today’s Japanese society which is in the process of transforming into a simple technological dictatorship.


Guest post. Translated from the French by Tim Gupwell

We recently touched on the quartet engaged in drawing up a composite motion, in order to faire avancer le schmilblick (= to move the schmilblick forward, or in other words to make a limited contribution to solve a complex problem). Before describing their efforts it may be helpful to recall the definition (*) given to it by its creator, Pierre Dac.

Mario Draghi, Jean-Claude Juncker, Herman Van Rompuy and José Manuel Barroso (in no particular order) may not be aware of the schmilblick. Nonetheless, this has not stopped them from searching for it in the form of a bold compromise formula destined for the next summit, with the aim of exchanging debt pooling measures in return for the reinforcement of the budgetary union held so dear by the German Government. Because this is how the bidding is likely to pan out. But where is the happy medium? Sensibly, this question will be put back to the end of the year.

Continue reading DO YOU KNOW WHAT SCHMILBLICK IS ?, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

What can you say when you are in total disagreement? You can always assert, with one voice, the need for a union! This is this perspective that the quartet composed of José Manuel Barroso, Mario Draghi, Jean-Claude Juncker and Herman Van Rompuy (in alphabetical order) continues to work on.

A new magic word has been discovered and is going to be proclaimed with all its variations, to push for the implementation of four unions: banking, fiscal, economic and political. With the fiscal union already in the pipeline, the next stage which urgently needs to be reached is that of the banking union. According to a leaked document, it is supposed to be ready in a year – reverting back to a new season of this tactic of putting out feelers to see how people react.

Continue reading AFTER THE WORDS, THE MAGIC FORMULA…, by François Leclerc

RED HERRINGS, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

The magic word growth only needs to be pronounced in order for everything to become just like it was before. At least that is what the four European leaders gathered yesterday at Rome seemed to believe when they announced the figure of 120 to 130 billion Euros to stimulate growth, an amount which would have been colossal even a short while ago, but which, unfortunately, seems somewhat laughable these days.

It was the only subject, incidentally, on which they were able to agree, that plus a tax on financial transactions which sounded good in the press-releases but is less good in the pocket. The principal European financial centre, the City of London has refused to apply it, a refusal which they did nothing more than confirm.

Undoubtedly, now we have seen and heard it all. The utmost has been done to emphasize matters which are of only minor interest, so as to be able to brush aside what is truly important. In Europe, it is the competitive imbalances that need to be addressed, and the member states which need to find the path of virtue once again. In the United States, it is another sort of imbalance – as a result of the under-valued Chinese currency, the Yuan. So many causes that would need to be fought to solve all the problems…….. And all that without even attacking the most fundamental one of all: the imbalance in the financial system itself.

Continue reading RED HERRINGS, by François Leclerc

NOTHING TO WORRY ABOUT ! , by François Leclerc

Guest post. Translated from the French by Tim Gupwell

The G20 in Los Cabos seemed like a preparatory meeting for the Summit of the Heads of State and European Governments! This seems to highlight the fact that they no longer know what to do, and are running round like headless chicken.

The same ideas that had previously been abandoned are back on the table, only to be refused once again by Angela Merkel. Thus, Mario Monti proposed, during the G20, that the EFSF/ESM buy sovereign bonds in order to ease market conditions. He was supported in vain by Mariano Rajoy and François Hollande. The idea of a special treatment reserved for the “virtuous” (sic) European countries is gaining ground, but if one examines it more closely, it assumes – given the financial amounts that are foreseen – that the ESM will dispose of a banking licence in order to obtain finance from the ECB.

Out of sheer desperation – an expression which is likely to be used often – all eyes are turning once again to the European Central Bank (ECB) which could turn the liquidity tap back on again, in the form of a third Long Term Financing Operation (LTRO). The effect of this, as previous operations have shown, would be to further tighten the Gordian Knot between the debt of the states and that of the banks – which is exactly the opposite of what the final G20 press release recommended. This would render the debt-reduction problem even more difficult to escape from.

At the heart of this confusion, the hedge funds have just sent out a bad signal, according to a Financial Times article. They are said to be betting on an increase in German bond rates (Bunds), assuming therefore that the tensions on the European bond market will soon become more widespread. Future episodes are brewing behind the scenes…..

The European crisis used to be permanent with acute phases; it is becoming acute all the time. One thing however is unchanged: it remains on the brink of collapse. Following in the footsteps of Mariano Rajoy, Mario Monti has just declared that Italy will not need a bail-out; nothing to worry about then!

BACK FROM LOS CABOS, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

Given that the G20 has confined itself to mere generalities and that the European Summit on the 28th and 29th June is dangerously close, what can be expected of the meeting in Rome on the 22nd June between Angela Merkel, Mario Monti, Mariano Rajoy and François Hollande, intended to serve as preparation for it?

Two projects are being examined in parallel by the European institutions, which are being assembled together and presented as if they were one of Great Wonders of the World. Firstly, by issuing Eurobonds with a short maturity- and thus with limited risk – and secondly by the creation of a fund intended to bring together and finance over a period of 20 to 25 years the stock of debt which exceeds the threshold of 60% each country’s GDP – these countries will have to demonstrate their credentials beforehand with regard to their budgetary commitments. Thanks to these virtuous arrangements, we will all be saved and the chaotic debt-reduction strategy will finally work as it should!

Intended to ease the pressure on the debt-reduction strategy, this wonderful arrangement will not, however, get Europe out of the recession which is the main cause of the investors’ lack of confidence. Due to its global dimension, this prospect was at the heart of the discussions at the G20. In order to help private sector debt-reduction, these two complementary measures will be coupled with a ‘Banking Union’ based on the doubtful premise that the banks will be able to finance their own rescue-packages without any external intervention.

Continue reading BACK FROM LOS CABOS, by François Leclerc

ON THE EVE OF THE GREEK ELECTIONS, by Panagiotis Grigoriou

Guest post. Translated from the French by Tim Gupwell

On Thursday 14th June a woman from Crete, aged 32 years old, stole three packs of milk and an ice-cream from a supermarket in Héraklion, causing a loss to the shop of 20.77 Euros. For several days, her four children had been given nothing but plain pasta to eat. Caught in the act, the young unemployed woman was immediately remanded into custody. She has just been released (Friday the 15th June) and the charges have finally been withdrawn, thanks to the mobilization of the town’s workers’ trade union group and also, thanks to the media exposure of this local news which became decidedly…national.

On Thursday evening, a man aged 55, in long term unemployment, committed suicide in his garden in Agrinio, in the heart of the country, with his hunting rifle. “It was a blood bath”, declared the neighbours, shocked, according to the news report. In this way, political realities under the ‘Troïkans’ are rendered through the symbolism and practice of spilling blood. It’s already an established fact in the mentalities and the collective logic that the death instinct has been reawakened, thanatos is on the verge of becoming a political contract. There is no longer any point in feeling sorry about this, it has to be dealt with, but how?

Continue reading ON THE EVE OF THE GREEK ELECTIONS, by Panagiotis Grigoriou

A BIG BANG, OR NOTHING , by François Leclerc

Guest post. Translated from the French by Tim Gupwell

With the G20 meeting being held in Mexico at the start of the week, our perspective will find itself altered, falsely accustomed as we are to only seeing the debt crisis from a European angle. On the 18th and 19th June, the greats of this world are going to gather in Los Cabos, a tourist resort in Southern Lower California, under the double auspices of debt and global recovery.

To avoid standing idly by whilst confronted by a disaster of its own making, the British Government has just announced a plan to relaunch the economy with banking credit, funded by a Bank of England liquidity programme. In the context of an overall 80 billion programme, there are plans for monthly injections of around 5 billion Pounds (6.1 billion Euros). But the question that needs to be asked is whether the results will be as inconclusive as those obtained from the ECB’s massive injections, or indeed the tireless pursuit of zero-rate loans (from 0% to 0.1%) by the Bank of Japan – still without any further success – and whose 700 billion Euro acquisition programme of private and corporate securities is still in force.

The British Government wants to make these banking loans conditional on the latter making specific commitments, but hasn’t this been heard before? The monetary policy instruments of the Central Banks merely allow more time to be bought, and do not resolve any of the unanswered questions.

Continue reading A BIG BANG, OR NOTHING , by François Leclerc

STEPS TOO STEEP TO CLIMB, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

François Hollande is on the offensive and Angela Merkel firmly on the defensive, with both setting their sights on a compromise in the summit at the end of June (a compromise which remains inconceivable for the moment). How is it viewed by Paris, with Berlin continuing to stall, proposing a political union first and, pending this, the use of the existing mechanisms already in place – based on an analysis which sees the origin of the crisis as excessive public debt and a lack of competitiveness?

The main measure which is planned is based on the European Stability Mechanism (ESM) and on its capacity to bail-out the banks directly without passing via the states. This has the double objective of not increasing state debt, and of separating this state debt from that of the banks. At the same time, the ECB will be entrusted with supervising it, not only to make it more transparent, but also to give it greater independence from the political leadership of the states. A measure already supported by Angela Merkel. But the complementary idea is the adoption of a banking union which will be restricted to systemic establishments alone, in order to win the agreement of the German government. If all this is related back to the Spanish situation it becomes rather surprising.

Continue reading STEPS TOO STEEP TO CLIMB, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

The chorus of voices is becoming increasingly strident and events are moving very fast: the now inevitable Spanish request to benefit from a rescue package; plus the impending recognition of the failure of the second Greek plan, followed by the negotiation of a third one with a new extended timescale – whatever the result of the elections this week-end.

Having claimed as a “victory” the Spanish banking bail-out (which he had tried to avoid at all costs), Mariano Rajoy can no longer remain in denial, and will now have to acknowledge that he has had to accept seeking refuge under the protective umbrella of a Europe which is not adapted for a bail-out of this scale. All the more so since the ESM is not yet operational and the conditions in Germany are not conducive to its ratification and creation. The head of the Spanish government does risk, however, being asked – damagingly – to explain why he is trying so hard not to acknowledge that conditions for the bail-out of his country’s banks are in the process of being drawn up.

Continue reading NOW THE CHAINS ARE GIVING WAY, by François Leclerc


Guest post. Translated from the French by Tim Gupwell

Financiers loathe risk, though they don’t mind so much if it is others bearing it. When they refer to it they juxtapose terms of risk aversion or, its opposite, appetite for risk, but this is only another of their manners of speaking (of which they have so many). In reality they cannot stand others making them take risks and when this is required, they make their feelings known about it in the strongest possible terms.

For having played with fire to an excessive degree, the Spanish government is paying the price on the markets, as indeed are the European authorities, due to repeated prevarications. One has lost count of the number of videoconferences on the subject of the Greek elections, but nothing has come along to relieve the incertitude hovering on the horizon. Italy is also caught in the storm, Mario Monti obliged to deny the necessity for a rescue plan for his country, feeling the need to add an “even in the future” in his desire to be convincing. Three crises are in the process of coming together at the same time and the authorities are still discussing whether the EFSF or the ESM is going to be used to bail out the banks…

Continue reading THE CHAINS ARE GOING TO GIVE WAY, by François Leclerc