Good morning

The headlines:

  1. Consumer credit in the US is growing. Consumer credit “surged” in March: its largest monthly movement in a decade. The increase came mostly from new car and student loans (but the indicator released by the Fed doesn’t track home mortgages – so where else is the increase going to come from?). Some analysts ascribe the increase to good Spring weather. Some think that the student loan surge is ahead of an expected rates increase in July. Some say that the increase is due to poor job markets sending people back to school. Obama is trying to persuade Congress to freeze the interest rate on student loans – because Middle-Class Americans should get to go to college. To me, it sounds like fudging the issue. If the educated are returning to education for the lack of anything better to do, then subsidized student loans are just social welfare spend. Some would argue that education is productive spend. I would argue that Doctorates in Interpretive Dance and/or Renaissance French Literature are not. What are they studying? Link: Spend spend spend.
  2. Hollande (France) vows to choose growth over austerity. This guy is a clown: I’m all for alternatives to austerity; but I think that in Europe’s case, they’ve forgotten the ravages of hyperinflation in the 1940s. Monetary stimulus is not the answer – it continues the illusion that people can indefinitely spend more than they can ever realistically pay back. The real hope for the Eurozone is that the Socialists will lose the parliamentary elections (in five weeks time), and Hollande will then have an opposition cabinet to deal with. One determined to make him lose face. In fact, that’s not only the answer, it’s a better solution to Sarkozy in power: a pro-austerity cabinet with a Socialist President to be the fall guy. It’s the Capitalist sex dream (just without Carla Bruni). Link: The French Jester
  3. Chancellor Merkel rejects stimulus as the plan for growth. The Germans have not forgotten the hyperinflation of the 1940s. Nor, I’m sure, the one from the 1920s. She’s prepared to talk about “business-friendly changes” – like, what, lower licence fees? Not sure what those are – but her point is a favourite. “Growth is important, that’s not the issue: the question is whether we want growth driven by debt-finances programs or sustainable growth elements oriented toward a country’s strengths”. Dear Angela: you sound Austrian. The Austrian Economic School will sing your praises even if you fail. Link: Germany unimpressed by Hollande (France)
  4. Christine Lagarde advocates a middle ground. There’s always someone advocating the middle ground. But her middle ground sounds a lot like Angela’s position. I enjoyed her euphemistic description of austerity as “fiscal adjustment”. Because that’s what it is: adjusting fiscal policy into something sustainable, rather than adjusting fiscal policy for voters into something that resembles the original problem-causing pattern. Link: Yes, mom
  5. Samaras fails to form Greek Government. No one is surprised. The mandate now goes to Syriza, the radical left coalition that came second, to try form a government. When they fail, it will go back to Pasok. And when they fail, the country will go back to the polls. Link: More Greek elections to follow?
  6. Google found guilty of infringing Oracle’s Java copyright. There are nine lines of code out of 15 million that have been identified as the issue (by the jury). The rest are now excluded. The question facing the courts now is whether this was “fair use” by Google, if the use has caused a meaningful loss to Oracle, and to what extent. Oracle sought $1billion in damages. The 9 lines out of the 15 million disputed makes for $150 000 (apparently). Not the hoped-for payoff then… Link: My phone for 9 lines of code.
  7. Liquidator adds Madoff’s sons’ wives to lawsuit list. Link: Challenging the traditional sanctity of marriage
  8. Nobel Prizewinner says that South Africa should manage its Exchange Rate. Joseph Stiglitz suggests that the problem that South Africa faces is unemployment, and that this is exacerbated by appreciation of the rand. Therefore, be China about it. However, historical attempts to manage the exchange rate and target inflation by managing interest rates have proven somewhat flawed. I am cast back into first year macroeconomics where exchange rates, interest rates and inflation rates were the unholy triumvirate where you can control one or two concurrently, but to handle three is courting disaster. Why? Because there is speculator capital out there – and it likes arbitrage created by mismatches between the three. Link: This debate feels like an old one.
That’s all for now.
Have a good day.