Category Archives: Economy

Trends-Tendances – The danger zone, August 27 2020

The danger zone

If someone had solemnly said to me at some point in my life: “in ten years time we will look back and realize that humanity is at a turning point at this very moment, and that its survival depends on the great decisions that must be taken now in a hurry”, I would have asked my interlocutor a question in return, I would have said to him: “Why this moment rather than any other: the human race has gone through many trials”. I might even have added, a bit sarcastically: “Perhaps you know something that the rest of the world doesn’t? Is an asteroid heading straight for us? “».

Continue reading Trends-Tendances – The danger zone, August 27 2020

Where is the French revolution on the move heading? by Pierre Sarton du Jonchay

Guest post. The French version is here.

The generalisation of unemployment insurance to all entrepreneurs is a break with ordo-liberalism and a practical and paradigmatic entry into the universal knowledge-based economy. Work recognized as such by labour law is no longer defined as a subordination to an employer who is the sole owner of the surplus value, but as an investment by the individual entrepreneur in a production of potential surplus value for society as a whole. Continue reading Where is the French revolution on the move heading? by Pierre Sarton du Jonchay

The Chinese Exception

(Published in French on October 18th 2017 in Le Monde as Qu’est-ce qui met les Chinois de si bonne humeur ? and in L’Écho as L’exception chinoise)

It is hard to imagine that there would be today a people somewhere approving without any soul-searching the policy pursued by its government or the economic circumstances of the nation. We are thus stunned to hear that since 2010 over 80% of the Chinese people express the view that they are satisfied with the direction taken by their country. And here is not a statement more or less tinged with government propaganda as it shows in investigations carried out by the American think tank Pew Research Centre.

Continue reading The Chinese Exception, 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)

On Europe, an answer to Mr François Hollande, president of the French Republic, by Pierre-Yves Dambrine

An English translation of Sur l’Europe, en réponse à Monsieur François Hollande, président de la République, par Pierre-Yves Dambrine by Johan Leestemaker

Invited commentary, in response of a tribune de François Hollande published today May 8 in the daily newspaper Le Monde, Paris, France.

Mr. President,

I have carefully read your speech on Europe, published today in the newspaper Le Monde, in the perspective of the very near European elections. I hold no doubt that you are a European by conviction. As many of us still are, because, as you remind us, the Union was a great and beautiful idea, and remains so. Undeniably she has been a factor of peace and has contributed to the economic rise that followed upon the Second World War. However you forget that for a great deal this peace has been also the result of the balance of terror, as Europe owes a part of its security to the American nuclear shield. Certainly, the peace could be maintained based on specific positive grounds, but also somehow by imperfection.

Continue reading On Europe, an answer to Mr François Hollande, president of the French Republic, by Pierre-Yves Dambrine

“The future of the Eurozone from an interest rate standpoint”, European Parliament, November 5, 2013

Here my contribution to European Parliament, Committee on Economic and Monetary Affairs, November 5, 2013, 3:30 to 6:30 p.m.

The future of the Eurozone can be approached as a logical problem. If not solved, it can at least be significantly clarified when the issue is examined from the single standpoint of the sovereign debt’s coupon for the nations belonging to the zone.

Within the economic zone where a currency applies, a single coupon level only should be in existence for each obligatory maturity. The founding fathers of the Eurozone assumed no doubt that such would be the case also for the zone – or at least would tend to become so on the long run. They did not envisage that measurable default risk would develop for individual member nations of the zone, neither of course that reverting to the old currency would ever be considered an option. The fact that for a single maturity coupons vary according to country within the Eurozone is as such an alarming symptom of its current troubles.

Continue reading “The future of the Eurozone from an interest rate standpoint”, European Parliament, November 5, 2013

A mail exchange about JP Morgan’s “The Euro area adjustment: about halfway there”, Europe Economic Research, 28 May 2013

From : Paul Jorion
Object : The Euro area adjustment: about halfway there
Date : 21 June 2013 21:33:20 UTC+02:00
To : Malcolm Barr, David Mackie

Good day MM. Barr and Mackie,

I’m writing to you as I receive several mails drawing my attention to the following paragraph of your recent May report:

“The political systems in the periphery were established in the aftermath of dictatorship, and were defined by that experience. Constitutions tend to show a strong socialist influence, reflecting the political strength that left wing parties gained after the defeat of fascism. Political systems around the periphery typically display several of the following features: weak executives; weak central states relative to regions; constitutional protection of labor rights; consensus building systems which foster political clientalism; and the right to protest if unwelcome changes are made to the political status quo. The shortcomings of this political legacy have been revealed by the crisis.”

The authors of the mails I receive are under the impression that this paragraph means that you regard “constitutional protection of labor rights” and “the right to protest if unwelcome changes are made to the political status quo” as detrimental to business. There is however a wide consensus in the community that such principles are basic to democracy.

Would you be so kind as to dispel any doubts about this, so that I can reply to the mails I received?

Should I not receive any reply from you, I would conclude that you, Gentlemen, do indeed regard some basic democratic principles as detrimental to business, and mention that fact on my blog for the education of the public.

Yours sincerely,

Paul Jorion

From : David Mackie
Object : Rép : The Euro area adjustment: about halfway there
Date : 23 June 2013 14:39:56 UTC+02:00
To : Paul Jorion


Thank you for your email.

The paragraph that you refer to is not intended to suggest that there is a clash between democracy and business and, in any case, we do not believe that to be the case. Rather, the paragraph is intended to be about the functioning of EMU.

There are many ways that EMU can be constructed. One of the key trade offs is between regional burden sharing and national level flexibility.

In principle, the region can choose any point on this trade off. For now, the region is moving towards a point on this trade off which involves a very modest amount of regional burden sharing and a lot of national level flexibility.

Against this background, some countries are struggling to make the adjustments required by this particular vision of EMU.

I hope this clarifies the point we were trying to make.

Best wishes

David Mackie


N. B. : Published with Mr. Mackie’s full approval.

VUB: STEWARDSHIP OF FINANCE CHAIR, February 27 and 28, 2013

Wednesday, 27 February, 2013 – 19:30 to 21:30
VUB, Etterbeek
Building D
Promotion Hall

Monica Mächler & Hugues Pirotte

Monica Mächler served since January 2009 until the end of September 2012 as Vice Chair of the Board of Directors of the Swiss Financial Market Supervisory Authority FINMA, after having served as CEO of the Swiss Federal Office of Private Insurance from 2007 to 2008. In the International Association of Insurance Supervisors she was a member of the Executive Committee and Chair of the Technical Committee.

Hugues Pirotte is professor at the Solvay Brussels School of Economics and Management, ULB. He is cofounder of the Finance Club of Brussels and Finmetrics. He is also member of the BEL20 Committee.

Thursday, 28 February, 2013 – 16:30 to 18:00
VUB, Etterbeek
Aula QB

Following my lecture 15:00 to 16:30, Panel discussion with Antonio Cano (AGI), Jos Brumagne (Belfius Ins), Henk Janssen (Baloise Insurance), Monica Mächler (FINMA) & Hugues Pirotte (ULB) moderated by Steven Rombaut (VRT journalist)


VUB, “Stewardship of Finance” Chair, panel discussion, 25th October 2012

The panel discussion topic was the same as that of the lecture of the day by myself: “Law, Ethics and the business world”. The participants from left to right were: Geert Noels (Econopolis), Ivan Van de Cloot (Itinera), Marc Beaujean (P&V) and Benoît Frydman (ULB). The moderator was Steven Rombaut (vrt).

Unfortunately due to the camera angle, Benoît Frydman was hardly visible when he spoke and me… not at all!

LOTS OF FROTH, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

A brand new development in the history of the ECB has occurred: leaks yesterday revealed the broad outlines of its new sovereign debt securities’ purchase programme. One cannot help thinking that it was necessary to prepare the ground in advance, with the ECB decisions falling well short of some of the mounting speculation.

According to Mario Draghi, there will be no limit to the amount of bond purchases on the secondary market – but the scope of the announcement needs to be put into perspective. They will in fact be decided on a case by case basis, and not as soon as a specific threshold has been crossed: based on interest rates or spread for example. It has also been confirmed that it will concern securities with a maturity of between one and three years, something already anticipated recently by the market, judging by the result of the issues which have occurred.

Continue reading LOTS OF FROTH, by François Leclerc


1.    Historians of finance

Martin Meyer:

The Bankers, New York: Weybright & Talley, 1974
Markets, New York: Norton, 1988


Peter L. Bernstein:

Capital Ideas, New York: Free Press, 1992
Against the Gods. The Remarkable Story of Risk, Hoboken: John Wiley  & Sons, 1996


Steve Fraser:

Every Man a Speculator. A History of Wall Street in American Life, New York: Harper Collins, 2005


LOOK NO FURTHER!, by François Leclerc

Guest post. Translated from the French by Tim Gupwell

In Spain, nearly 220 billion Euros have vanished into thin air during the first quarter. According to the Bank of Spain, foreign investors, but also Spanish ones, are responsible for this massive exodus of capital which concerns loans and deposits, but also share portfolios and sovereign debt securities. The capital outflows are accelerating: during the month of June alone, 56.6 billion Euros were registered. For the first six months, this outpour was triple the figure that had been recorded in 2011. The Madrid Stock Exchange lost 15% of its value during this same period and the proportion of the public debt held by foreign investors has plunged in a year from 56.3% to 36.1% last June.

Also observed in Greece, this same phenomenon might well emerge in Italy on a far greater scale. The investors concerned predict the exit of one country or another from the Eurozone, and ultimately its collapse, thus contributing to this becoming a reality. It is this that Mario Monti has issued a warning about.

It is with regard to this that Benoît Coeuré, an ECB board member, indicated during his appearance at the Summer Workshop of the French Business Confederation MEDEF that he sees “advanced signs of a disintegration of the single capital market in Europe”, and made the observation that the Euro’s integrity is “under threat”.

Continue reading LOOK NO FURTHER!, by François Leclerc

LE SOIR, ‘The only solution is to pool all the debts’, September 4, 2012

Translated from the French by Tim Gupwell.

4 September 2012

An interview with Dominique Berns which appeared today in the economy pages of the daily newspaper, LE SOIR.

“To save the Euro, we must mutually pool the debts”

Q : The president of the ECB, Mario Draghi, has pledged to do “everything within his power to save the Euro”. Numerous observers expect the ECB to start buying up sovereign securities once again, only this time in a far more pro-active manner, in order to reduce the interest rates for the countries in difficulty, in particular for Spain and Italy. And this is in spite of opposition from the Bundesbank, the German Central Bank. Do you also think that Draghi is the only person now who can save the Euro?

A : Perhaps a little paradoxically, I feel very close to Jens Weidmann, the President of the Bundesbank on this point. There aren’t many things one can be certain about in Economics, but the principles underlying the monetary system are fortunately one of the things we do know. A monetary mass needs to be managed prudently as one would manage a household’s finances. It has to reflect the economic situation of the monetary zone where it is being put into circulation. One can – and one has to – create additional money when more wealth has been created, but one cannot simply create money because there isn’t enough of it. That is a recipe for disaster! Apparently this is not something which is well understood. Jens Weidmann understands it, as did his predecessor Axel Weber and the former Chief Economist of the ECB, Jürgen Stark, both of whom resigned last year because they disagreed with the European institution’s sovereign debt repurchase programme.

Q: But all the same, wouldn’t you say that the interest rates asked by the markets for Spain and Italy are excessive – and, above all, unsustainable if they stay at current levels?

A : Indeed. But we are trying to lower the level of Spanish and Italian interest rates by buying their debt, as if the problem was an issue of supply and demand! Their rates are elevated to these levels because they include a double risk premium: one premium to cover the risk of non-repayment, but also a conversion premium since there exists a real risk of a Eurozone collapse and a return to national currencies. It is these risk premiums that need to be reduced, by implementing a real solidarity with these countries, and guaranteeing that they will not be abandoned. If this was done the risk would be reduced and as a result the rates would automatically fall.

Q : But isn’t that just it, isn’t the real problem that absence of any real solidarity between the various Eurozone members ?

A : To pool the debt or not to pool the debt? That is the question! However, for the moment, in words everyone swears it is a ‘yes’, but the facts only seem to indicate a ‘perhaps’. Jens Weidmann declared, quite correctly, that the ECB cannot implement a policy of integration which the political leaders do not have the courage to carry out. The politicians content themselves with saying to the ECB, “get printing then!” (money, that is). Yes, it is true to say that the Federal Reserve, the American central bank, has not held back. But it can, because it still benefits from the fact that the Dollar is the reserve currency. The Eurozone cannot allow itself to do the same. So, there remain two choices: either one puts an end to the Euro, acknowledging that one hadn’t understood that a monetary zone could not function without fiscal unification; or on the other hand, one creates a federation.

Q : But who wants European federalism today ?

R : But that is really the only solution – mutually pooling the public debts of all 17 members of the monetary union. One Sunday evening, before the financial markets open in Asia, the decision needs to be taken that there will no longer be any national sovereign debts, only Eurozone debts, a Eurodebt. As a consequence it will be restructured in accordance with the cash that remains in the Eurozone as a whole.  The next day, the market will decide what the Euro is worth in relation to the other currencies. This is the only solution if one wants to avoid a gradual break-up of the Eurozone, which will see countries jumping overboard one by one. First Greece, then Portugal, then Spain…..and still without resolving any of the problems of those still on deck!


Guest post. Translated from the French by Tim Gupwell

A united front of German banks has opened up, refusing any kind of interference from a supervisory body – in this case the ECB – due to their little idiosyncrasies and their little hidden frailties, but also the risk of being made to contribute via a European fund to the saving of other countries’ establishments. The savings banks, mutuals and regional banks (Landesbanken) which comprise it represent 70% of the deposits held in Germany.

Talking of deposits, the prospect of a separation of deposit activities from speculative activities has also caused a general outcry, this time from the ranks of the all-purpose (universal) banks. All of them would like to see the deadline for the reinforcement of their capital base, required by the Basel III agreement, put back. It would be impossible to list – with all the open files, including some only just opened, or even quickly closed again – the extent to which the financial establishments are successfully digging in their heels at the rather half-hearted attempts to rein them in, regulate and reinforce them. They want to remain the masters of their own destiny.

Continue reading THE DRAWBRIDGE MENTALITY, by François Leclerc