Category Archives: Finance

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, 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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« Stewardship of Finance » Chair, VUB, lectures resume on Monday September 29 at 4 p.m.

Paul Jorion, Ph.D., holder of the “Stewardship of Finance” Chair at the Vrije Universiteit Brussel, will resume his lecturing on Monday September 29 at 4 p.m.

The course is taking place every Monday afternoon at that time in lecture hall D0.03 of building D (central building) of the university, Pleinlaan 2, 1050 Brussels. The course is held in English and it is open to the public.

Exorcising animal spirits out of Keynes, by Paul Jorion

Exorcising animal spirits out of Keynes

Paul Jorion, Stewardship of finance chair, Vrije Universiteit Brussel

To be published in a forthcoming issue of the European Journal of Social Theory: special issue on “Rethinking Capitalism”, 2014

Might be referred to as “European Journal of Social Theory (forthcoming):″


Torn between the duties associated with the capacities of academic, banker and statesman, Maynard Keynes was in a constant hurry. He glossed over the missing parts of the economic theories he devised by referring to various unfathomable ‘psychological mechanisms’. It is claimed here that interest rates set at the level defined by the marginal yield of capital, a hypothesis Keynes envisaged cursorily but only to assert it leading to ‘circular reasoning’.

Keynes never considered the power balance between lenders and borrowers to be relevant in setting the level of market rates. However, resorting here as a blueprint to the economic arrangement known as sharecropping, power balance between involved parties is shown to be at the core of a fitting explanation.


Continue reading Exorcising animal spirits out of Keynes, by Paul Jorion

“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.

« Dédicace too big to … », by luami

Guest post.

« Dédicace too big to … »

Have you heard of “too big to fail !”?
Now they say “too big to jail !”
They know they have the whole power
Because they finance the lawyer!

They don’t care about Justice
Nor about the State Police
They have put the money somewhere
But no one can really know where!

They only want to be The Boss
And let the others share the loss
They will be away if the war
Starts at the corner or next door!

They act as the worst parasites
Because they have more than 2 seats
And they look for good protection
Even with weapons in action!

Are they part of Humanity
Or just dealers in the city?
Can their children say anything
Else than “Bring me here everything!”?

Signature : luami CREER
« Un médiateur d’ l’innovation
Qui allie raison et passion
Pour mieux vivre le temps restant
Et en partager les instants ! »

Bon voyage dans la Vie !

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!

VUB, “Stewardship of Finance” Chair, inaugural lecture : Why Stewardship of Finance?, October 4 2012

The inaugural lecture of the chair “Stewardship of Finance”, delivered by me at the Vrije Universiteit Brussel, on the 4th of October 2012.

Why Stewardship of Finance?

When in the Autumn of 2011 I was first approached by Michel Flamée on behalf of the Vrije Universiteit Brussel about the chair I’m privileged to speak from today, the question of how it would ultimately be called was still undecided. The Flemish phrase used in the early discussions was “ethisch financieren”: financing in an ethical manner.

“Ethical finance”, “responsible finance”, “sustainable finance”, so many different phrases have been used to name chairs with similar intent as this one. The difficulty I see however with such ways of speaking is that they have been used in the past sometimes as mere euphemisms when referring to investors in search of a good conscience in the choice of an investment out of a mere concern for political correctness.

Continue reading VUB, “Stewardship of Finance” Chair, inaugural lecture : Why Stewardship of Finance?, October 4 2012


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!


Translated from the French by Tim Gupwell.

In the Wall Street Journal today:

Since the beginning of the crisis in 2007, one thing has become clear in European politics: the outgoing parties are not voted back in. Confronted by the incapacity of the governments and the majorities in place to resolve the problems of the moment, the electors – at least, those increasingly few and far between who still go to the trouble of travelling to the urns – vote for the opposition, whoever it may be.

In these conditions, the merry go-round can only make a restricted number of turns before passing to national unity governments, which are really warm-ups for some kind of dictatorship.

The French Government has only just celebrated its first 100 days in power, but it is not too early for it to start thinking about this new trend which is starting to emerge in the European electorates.

“What we need is audacity, more audacity and then yet more audacity!” This is exactly what is needed if we are to get out of the rut we are stuck in; even more so when this rut is merely symptomatic of the immense quagmire that the Eurozone has now become in its entirety.

Nonetheless, the European treaty which France has to ratify in October is anything but audacious. The famous balanced budget offers a false sense of security when things are going well – if indeed this could ever go well again– and it dramatically worsens the situation when things are going badly.

A nation’s expenses are not measured in Gross Domestic Product points; they are measured rather more mundanely by its fiscal receipts. The GDP is a poor yardstick at the best of times since the more it contributes to the destruction of the planet, the better it seems. But that isn’t even the point: in a world where jobs are fast disappearing and where the concentration of capital is scaling new heights due to the excessive manner in which the wealth created is distributed (and which we tolerate) the GDP of nations nowadays are like bodies attacked by a fever, and it seems therefore a very inappropriate moment to use it as a thermometer.

If, since 2007, those leaving power are no longer being re-elected in Europe, it is because they have kept a low profile, gone with the flow, waited for things to sort themselves out. However, unfortunately things won’t sort themselves out any more: the crisis we have endured since 2007 – a crisis stemming from substituting leveraging and easy credit for salary – is within a whisker of being transformed into a full-blown depression. This is what all this is about; this is what needs to be attacked, since there has already been a tremendous delay – five years in fact.

“The means must be commensurate with the gravity of the situation” said Barroso a few years ago. But neither him, nor any of his European colleagues, nor anyone at the head of one of the 17 nations making up the Eurozone, has really understood the true meaning of these words. Those who in the future speak as members of government, or as representatives of the French nation, need to bear these words in mind.

Marching in perfect unison works well for a regiment which is progressing calmly through the countryside, but here there is something else at stake: saving one’s skin as the bombs rain down!



Translated from the French by Tim Gupwell.

In the Wall Street Journal today:

A new American law requires US-listed companies to mention on products containing certain minerals that their extraction fuels conflict in Central Africa.

Too expensive for businesses, said the lobbyists! Get rid of it!

The Securities and Exchange Commission (SEC), the financial regulator in the US, has developed a host of measures designed to prevent a repetition of the collapse in short-term money markets, which cost American taxpayers more than six hundred billion dollars, plus a few hundred billion Euros for European taxpayers.

 Too expensive for the banks, said the lobbyists! Get rid of it!