Quote of the week

I haven’t done one of these in a while, so from Thomas Huxley:


If a little knowledge is dangerous, where is the man who has so much as to be out of danger?



Quote of the week

Two, just for fun:

As for foreign exchange, it is almost as romantic as young love, and quite as resistant to formulae. H.L. Mencken


And to the human, I know the difference, and am not impressed:

Things are seldom what they seem, skim milk masquerades as cream. Gilbert & Sullivan, “HMS Pinafore”

Quote of the week

David McWilliams is an economics popularist, having produced numerous televison shows and written a few books too. He is often criticised for this, in a way that is perhaps typical Irish “begrudgery” of those who are successful (to the Irish people’s credit, they recognise this fault within their national character and have worked hard to get rid of it). But David was one of the few people who, way back in 2003 predicted the collapse of the housing market. He was denounced at the time; a former Taoiseach once infamously suggested that doomsayers such as McWilliams should just do everyone a favour and top themselves.

Anyway, I’ve selected a few lines from a recent McWilliams article for this week’s Quote of the Week:

So we have bust banks lending to bust governments and we are calling it success. For a few months, as expectations of growth sprang eternal, bond yields fell because there was this gush of liquidity coming from the central bank. But many sceptical investors sold into this liquidity, using the “fake” demand driven by the ECB as an opportunity not to buy, but to sell.

Why would they do this?

Because they looked under the bonnet and saw a massive problem about to blow up in the ECB’s highly leveraged face.

Spain is a ticking time-bomb……………It is interesting to note that every time the Spanish government says it will respond to the crisis with more austerity, money flows out of Spain not into Spain as the government expects. The conclusion has to be every time the Spanish elite tries to gain credibility by promising to be tougher than everyone else, the very credibility they crave is chipped away at.

So we will lurch from one crisis to another and the ECB will keep printing more and more money to try to prevent Spain from going the way of Ireland, Portugal and Greece. But the more money it prints, the farther away it gets from the strong, no-nonsense currency that the Germans and Dutch signed up for.

Ultimately, the Spanish and Italians will get fed up with austerity and the Germans and the Dutch will get fed up with bailouts.

As we have observed over the years in economics, what is important is rarely complicated and what is complicated is rarely important. Things are only going one way for the euro and that won’t be pretty.