Whn Shinzo Abe resigned after just a year as prime minister, in September 2007, he was derided by voters, broken by chronic illness, and dogged by the ineptitude that has been the bane of so many recent Japanese leaders. Today, not yet five months into his second term, Mr Abe seems to be a new man. He has put Japan on a regime of “Abenomics”, a mix of reflation, government spending and a growth strategy designed to jolt the economy out of the suspended animation that has gripped it for more than two decades. He has supercharged Japan’s once-fearsome bureaucracy to make government vigorous again. And, with his own health revived, he has sketched out a programme of geopolitical rebranding and constitutional change that is meant to return Japan to what Mr Abe thinks is its rightful place as a world power.

Mr Abe is electrifying a nation that had lost faith in its political class. Since he was elected, the stockmarket has risen by 55%. Consumer spending pushed up growth in the first quarter to an annualised 3.5%. Mr Abe has an approval rating of over 70% (compared with around 30% at the end of his first term). His Liberal Democratic Party is poised to triumph in elections for the upper house of the Diet in July. With a majority in both chambers he should be able to pass legislation freely.

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In the thirty or so years that I have been following EU affairs ”“ or is it nearer 35 years now since I studied in French literature in Paris, and German philosophy in Mainz ”“ I have never seen ties between Europe’s two great land states reduced so low.

The French Socialist Party crossed a line by lashing out at Chancellor Angela Merkel in person. It is one thing to protest “German austerity”, it is quite another to rebuke the “selfish intransigence of Mrs Merkel, who thinks of nothing but the deposits of German savers, the trade balance recorded by Berlin and her electoral future”.

There is no justification for such an ad hominem attack. German policy is indeed destructive, but that is structural. It is built into the mechanisms of EMU and the anthropological make-up of the enterprise.

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Justin Welby, the new leader of nearly 80m Anglicans around the world, has won a respectful hearing for his ideas on banking and the British economy. Even if they disagree with the details, people have generally not reacted by saying “this man hasn’t a clue what he is talking about” or “he should go back to singing hymns.”

On April 21st, the archbishop of Canterbury suggested that big, unhealthy banks should be broken up into regional ones, as part of a “revolution in the aims” of banks designed to make sure that they served society as well as their own narrow interests. That sounded very like the proposal made last month by Ed Miliband, the Labour leader, for local lenders modelled on the German system. It comes at a time when the government faces hard decisions about the future of the Royal Bank of Scotland after its rescue by the tax-payer. Given the immediacy of the issue, some people will accuse the archbishop (who lists his hobbies as French culture, sailing and politics) of making narrow political points rather than broad moral ones.

But he also had some longer-term ideas on the financial sector. Drawing on his experience as a member of a parliamentary Banking Standards Commission, he said senior positions in banking ought to form a regulated profession which required qualifications.

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Speaking on Radio 4… [on Saturday], the Archbishop of Canterbury stressed the implications of Christian ethics for the City of London

The Christian Gopsel has “always had strong social implications” and been concerned with “the common good”, the Archbishop of Canterbury said….

In an interview for Radio 4’s Week in Westminster, Archbishop Justin said his main mission wasn’t to inject morality back into British business. But he said that how the City of London – which “is so important and so full of very gifted people” ”“ behaves in relation to the common good is a major concern not just for the Church but for society generally.

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Justin Welby, the archbishop of Canterbury, laughs when it is suggested that he has a mission to raise moral standards in the City. “My key mission is to lead the Church in worshipping Jesus Christ,” he says.

He points out, however, that Christian teaching concerns the “common good”, and he is concerned about “how the City of London, which is so important and so full of very gifted people”, relates to this concept.

Dr Welby is in a unique position to do something about it. Outside the cathedral he enjoys two political pulpits from which to shape the debate: in the House of Lords and on the cross-party parliamentary banking commission.

Read it all (another link ).

The City of London has been affected by a “culture of entitlement” at variance with what others think reasonable, the new Archbishop of Canterbury has said.

But the Most Reverend Justin Welby told the BBC business morality was in many ways much better than in the past.

He also defended his description of the UK’s economic situation as a depression rather than a recession.

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There has never been any doubt that Trinity Church is wealthy. But the extent of its wealth has long been a mystery; guessed at by many, known by few.

Now, however, after a lawsuit filed by a disenchanted parishioner, the church has offered an estimate of the value of its assets: more than $2 billion.

The Episcopal parish, known as Trinity Wall Street, traces its holdings to a gift of 215 acres of prime Manhattan farmland donated in 1705 by Queen Anne of England. Since then, the church has parlayed that gift into a rich portfolio of office buildings, stock investments and, soon, mixed-use residential development.

Read it all from today’s New York Times.

Culture change in financial services will not be achieved by “light touch” or “heavy touch” regulation, Archbishop Justin said at a Westminster discussion organised by the Bible Society.

Instead the banking sector must adopt “an aim of service to society and not mere rent-seeking, and a culture of virtue based in the realities of daily life and not a fantasy nirvana,” he said.

Describing what this change of culture might look like, the Archbishop said it would require “a ruthless honesty and a deep willingness to be made very uncomfortable indeed through listening to things one does not want to hear”.

Read it all.

We have no way of knowing how this all ends. One problem is that the smartest solution””having Germany and perhaps a handful of other northern countries leave the euro for a new currency (the Deutche Mark 2.0, or a “neuro” for northern Europe)””would make life easier in the south. The south based euro would fall in value, but since debts and contracts are denominated in that currency, the adjustment would be the same as in a normal devaluation. This course would likely lead quickly to a new burst of growth in the south, though inflation and other problems would take a toll over time.

But the euro’s break up day would cause a lot of problems for Germany and its northern friends….

So we’re in an interesting situation. The crisis is crippling the south, but the south has no power to resolve the crisis. The crisis isn’t comfortable for the north but still looks less painful than the solution. So the north, which has the ability to resolve the crisis, doesn’t have the will to do it and the south, which has the will, lacks the ability.

Read it all (and please note that the Financial Times article by Wolfgang Münchau which is mentioned, entitled “The riddle of Europe’s single currency with many values,” is indeed a must read as Mr. Read says).

MarketWatch: Since Nixon’s “abomination” as you call it, we have had some periods where government spending to GDP actually went down, like during the Clinton era. Doesn’t that show it’s just the choices made by Congress rather than the Fed to blame [for the problem of rising national debt as a % of GDP]?

Stockman: There is the issue that Congress ultimately is the fiscal authority. But my argument is, when the Fed becomes a massive buyer of bonds and debt and artificially suppresses interest rate below market-clearing levels, it’s a terrible signal to the Congress that debt is cheap, that running deficits is a viable strategy. So therefore they are induced to kick the can, to let it drift and avoid hard choices. Who wants to tell the public you are going to take your broccoli of higher taxes and lower benefits and spending if you can issue debt on a three-year basis for 40 basis points. That’s free. I was in Congress, they don’t do decimal math, OK? And they think the money is free, it’s a bad problem philosophically, we shouldn’t be doing this for the great long run, but it’s no harm today.

Then they have professors like Krugman who give them the disingenuous advice that the bond vigilantes don’t care. The market is saying, “fine with us, we don’t care, keep piling the debt on, we love it.” That is so much baloney. The reason the interest rate on the 10-year bond 10_YEAR -0.33% today is 1.8% or whatever it happened to settle today, is the market knows the Fed is buying half of the debt and is front running the Fed. And it is renting the bond on repo, 98 cents on the dollar, based on overnight money that’s free thanks to Bubbles Ben as well.

Read it all.

In 2012, the average cost of a movie ticket in the United States was $7.92.

This doesn’t include all of the (expensive) extras that you usually get roped into buying when you hit the theater, such as popcorn, pop and chocolate bars. We are just talking about the actual ticket.

In 1910, the average cost of a movie ticket was $0.07. Adjusted for inflation, a movie ticket in 1910 would work out to about $1.71 in 2013 dollars.

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Late one night 20 years ago, when I was an oil executive rather than an Anglican bishop, I had run out of steam and patience toward the end of a complex multinational acquisition. We came to yet another bit of box ticking and I suggested we skip it, because we knew the material was accurate.

“Justin,” our wise investment-bank director said quietly, “you know that’s not how we do it.”

Under pressure, everyone is prone to make bad decisions and that story remains in my mind as I sit on the U.K.’s Parliamentary Commission on Banking Standards, listening to people talk about banks, bankers and their failures.

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Understanding the developing attitude of the central banks, and the effects of their actions, obviously remains central for investors in all financial assets. The “big picture” for global financial assets, involving very low government bond yields and a gradual shift of risk appetite into credit and equities, is unlikely to change until one of two events takes place.

The first would be a decision by the central bankers themselves that the era of unlimited quantitative easing must end, either because of the risk of inflation and asset price bubbles, or because of concerns about fiscal dominance over the monetary authorities. The second would be a realisation by the markets that further action by the central bankers is irrelevant because they have run out of effective ammunition. Either of these events would probably remove the central prop from the equity bull market which began in March, 2009, but neither seems very likely in 2013.

There is certainly no sign that the central bankers themselves will call a halt to the extension of their balance sheets.

Read it all.

The Federal Reserve refashioned its bond-buying programs on Wednesday, extending its far-reaching effort to revitalize the jobs market and boost the economic recovery into 2013.

In addition, the Fed shifted its communications strategy by specifying the levels of unemployment and inflation that might prompt it to begin raising short-term interest rates, which are now near zero.

The central bank’s policy committee, in its final meeting of the year, said Wednesday it would “initially” begin buying $45 billion of long-term Treasury bonds each month. The latest stimulus from the Fed will replace an expiring program known as “Operation Twist,” in which the Fed has been buying about $45 billion of long-term Treasury bonds each month and selling about the same amount of short-term Treasurys.

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Budget negotiations between the White House and Republican House Speaker John Boehner have progressed steadily in recent days, people close to the process said, breathing life into talks that appeared to have stalled.

Both sides still face sizable differences before any agreement might be reached by the end of the year, and talks could well falter again over such controversial issues as taxes and Medicare before any deal is ultimately reached.

The people familiar with the matter say talks have taken a marked shift in recent days as staff and leaders have consulted, becoming more “serious.” Both sides have agreed to keep details private, according to the people, who declined to detail where new ground was being broken.

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Justin Welby, a former oil executive, may have hoped to have left the problems of Mammon behind on his appointment as Archbishop of Canterbury, but he could be plunged into an immediate cash crisis.

The Church of England’s pension deficit could reach £500m by the end of this year, putting a huge financial burden on congregations, an independent pensions consultant has warned.

John Ralfe said congregations, who already pay £68m annually to support the Clergy Pensions Scheme’s 24,000 members, will have to find £108m a year if an existing plan to eliminate the deficit over 12 years is not extended.

Read it all.

[Moody’s] said France’s long-term economic growth had been hit by its inflexible labour market and low levels of innovation eroding its competitiveness and industrial base.

Moody’s also flagged up the country’s exposure to the continuing eurozone crisis.

It warned the “predictability” of France’s resilence of further shocks in the eurozone was diminishing while the country’s exposure to the highly indebted countries such as Spain and Greece was disproportionately high.

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The threat of the euro’s collapse has abated for the moment, but putting the single currency right will involve years of pain. The pressure for reform and budget cuts is fiercest in Greece, Portugal, Spain and Italy, which all saw mass strikes and clashes with police this week…. But ahead looms a bigger problem that could dwarf any of these: France.

The country has always been at the heart of the euro, as of the European Union. President François Mitterrand argued for the single currency because he hoped to bolster French influence in an EU that would otherwise fall under the sway of a unified Germany. France has gained from the euro: it is borrowing at record low rates and has avoided the troubles of the Mediterranean. Yet even before May, when François Hollande became the country’s first Socialist president since Mitterrand, France had ceded leadership in the euro crisis to Germany. And now its economy looks increasingly vulnerable as well.

Read it all.

The eurozone’s return to recession is particularly bad news because it is now hitting once strong economies like Germany. This means the recession will last longer and have a bigger impact on U.S. consumers and companies.

Figures released today showed that collectively the economies of the 17-country eurozone contracted by 0.1 percent between July and September. While this is a slight improvement over the second quarter of the year when it shrank by 0.2 percent, the definition of a recession is two straight quarters of contraction. Most analysts believe that the recession will continue at least until the end of 2012.

“The recession in southern Europe is slowly creeping to other countries,” says Martin Van Vliet, an analyst with ING. “If you look at the indicators for the fourth quarter you see that even Germany many not grow again and that shows that the economy has an enormous need for a new impulse.”

Read it all.

German Finance Minister Wolfgang Schaeuble has asked a panel of advisers to look into reform proposals for France, concerned that weakness in the euro zone’s second largest economy could come back to haunt Germany and the broader currency bloc.

Two officials, speaking on condition of anonymity, told Reuters this week that Schaeuble asked the council of economic advisers to the German government, known as the “wise men”, to consider drafting a report on what France should do.

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Talks to agree the EU’s 2013 budget have collapsed, after negotiators from the EU and member states were unable to agree on extra funding for 2012.

The EU Commission and European Parliament had asked for a budget rise of 6.8% in 2013.

But most governments wanted to limit the rise to just 2.8%.

Read it all.

Finance chiefs of the world’s 20 leading economies are ringing alarm bells over the U.S. fiscal cliff and Europe’s debt woes at a meeting in Mexico this weekend as they look to push back deficit reduction targets to help boost growth.

Unless a fractious U.S. Congress can reach a deal, about $600 billion in government spending cuts and higher taxes are set to kick in on January 1, threatening to push the American economy back into recession and hit world growth.

“The Americans themselves acknowledge that this is a problem,” a G20 official said on condition of anonymity. “The U.S. administration says it doesn’t want to fall off the fiscal cliff, but right now it can’t tell us how exactly it will address it because that issue is on ice ahead of the election.”

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French leader François Hollande is uncomfortably close to a collapse in credibility. His poll rating has sunk to 36pc. The speed of decline has been shocking.
The latest broadside comes from ex-German chancellor Gerhard Schröder, supposedly his ally on the Left.
“The election promises of the French president are going to shatter on the walls of economic reality,” he said in Paris.

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To those who were surprised that the European Union received the Nobel Peace Prize, I say: “Think twice.” This was not only a deserved award for Europe’s contribution to bringing peace and stabilizing democracies in the recent past. The Nobel Committee was also sending a clear warning to contemporary leaders. I could almost hear them saying: “On this difficult odyssey, don’t abandon ship. In today’s world, the EU is too valuable to squander.”

It was an indirect but powerful rebuttal to the dangerous nationalist and populist rhetoric some politicians have adopted when describing the recent financial crisis.

This message couldn’t have come at a better time.

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The financial markets have been notably calm of late. Stock indexes have ticked upwards and interest rates on sovereign bonds have drifted downwards. The euro has also remained relatively stable against the dollar. And investor panic seems to have dissipated.

But appearances can be deceiving, said German Finance Minister Wolfgang Schäuble on Tuesday. “I’m not so sure that the worst of the crisis is behind us,” he said at a mechanical engineering conference in Berlin, warning that reform efforts needed to be re-doubled to ensure that trust in the euro returns.

His comments were echoed by Yves Mersch, a member of the European Central Bank Governing Council who was also present at the event. He warned that even if calm had returned to the markets, it could be deceptive. “The bleeding has been stopped, but the patient is not yet in the clear,” he said.

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For 33 years, Sánchez Gordillo has been mayor of Marinaleda, pop. 2,700, another farming settlement about 100 miles west of Jódar. Like Jódar, Marinaleda is mostly inhabited by jornaleros. Over the decades, Sánchez Gordillo has transformed the poor village into an islet of social justice and relative prosperity, with almost full employment through communal farming, low taxes, a salary of €1,200 ($1,572), food and housing considered as rights, and “direct democracy” exercised through frequent general assemblies. Sánchez Gordillo and his townsmen launched their movement to build what he calls “a communist utopia” after the death of general and dictator Francisco Franco in 1975, occupying land owned by a member of the royal family and distributing it for communal ownership as well as taking over local airports.

His efforts in Marinaleda long ago earned him a regional following, but Sánchez Gordillo and his lieutenant, the 57-year-old Diego Cañamero, the SAT union’s national spokesman, have gained renown in recent months with a series of controversial protests against the austerity measures embraced by Prime Minister Mariano Rajoy and the Spanish government. On Aug. 7, the two led union members on raids on Carrefour (CA) and Mercadona supermarkets, leaving the stores with shopping carts full of “expropriated” food they gave away to the hungry poor.

Read it all.

Indeed, the impact of this latest round of unconventional monetary policy is already fading. Analysts at Morgan Stanley this week decided that returns in the high-yield market were no longer attractive in the face of deteriorating fundamentals. The stock market is struggling to make further headway, while yields on mortgage-backed securities have started to turn up after an initial drop. A drop in third-quarter capital expenditure suggests the Fed policy hasn’t been a catalyst for corporate investment at all.

One major reason for the lack of effectiveness of this latest round of quantitative easing may well be a growing concern with the “fiscal cliff”, automatic US tax rises and spending cuts due to kick in on January 1. Uncertainty over “cliff risk” ”“ and the prospects of a deal in Congress on deficit reduction ”“ seems to be offsetting any positive impact of Fed policies.

Read it all.

From an interview with the authors of the Simpson-Bowles reform plan and Goldman Sachs CEO Lloyd Blankfein:

“…We just met with — a dozen of the largest high-tech company CEOs in the country. Not only are they hoarding cash. All their customers, all their suppliers are. They’re scared to death we’re going to go over this cliff and it could be a catastrophe….”

You can find a summary article to read there, it has briefer video links, but the best use of your time is to watch the full interview over here or read the transcript (about 42 1/2 minutes). Also, David Brook’s piece on the debt indulgence is worth a careful revisit.

The greatest risk to US financial markets stems from other countries’ willingness (or lack thereof) to continue to hold dollar reserves as the value depreciates. If those nations suspect that the US cannot maintain the strength of our currency, they will begin to drain assets from American banks ”“ seeking safer havens for their wealth. That could entail trading US treasury bonds for perceived “safer” currencies such as those of New Zealand or Canada or even switching to an entirely different asset class such as gold or silver.

While there may not be any significant signs of capital flight yet, just look east. The Chinese are the largest, external holder of US debt. And they’re already heading down this path ”“ dropping the share of their portfolio comprised of US dollar assets from 74 to 54 percent in the last five years. It may very well be a harbinger of what’s to come.

Attempting to counter fears fanned by trends like this, Bernanke talks of a “soft landing…”

Read it all.

Greece is teetering on the edge of collapse with its society at risk of disintegrating unless the country’s near-empty public coffers are shored up with urgent financial aid, the country’s prime minister has warned.

Almost three years after the eruption of Europe’s debt drama in Athens, the economic crisis engulfing the nation has become so severe that democracy itself is now imperiled, Antonis Samaras said.

“Greek democracy stands before what is perhaps its greatest challenge,” Samaras told the German business daily Handelsblatt in an interview published hours before the announcement in Berlin that Angela Merkel will fly to Athens next week for the first time since the outbreak of the crisis.

Read it all.