1 Europe’s easy-money endgame (Hans-Werner Sinn in
The Guardian) The euro has brought a balance-of-payments crisis to Europe, just
as the gold standard did in the 1920s. In fact, there is only one difference
between the two episodes: during today’s crisis, huge international rescue
packages have been available.
These rescue packages have relieved the eurozone’s
financial distress, but at a high cost. Not only have they enabled investors to
avoid paying for their poor decisions; they have also given overpriced southern
European countries the opportunity to defer real depreciation in the form of a
reduction of relative prices of goods. This is necessary to restore the
competitiveness that was destroyed in the euro’s initial years, when it caused
excessive inflation.
There are four possible economic and policy
responses to this state of affairs. First, Europe could become a transfer
union, with the north giving more and more credit to the south and later
waiving it. Second, the south can deflate. Third, the north can inflate. And,
fourth, countries that are no longer competitive can exit Europe’s monetary
union and depreciate their new currency.
Each path is associated with serious complications.
The first creates a permanent dependence on transfers, which, by sustaining
relative prices, prevents the economy from regaining competitiveness. The
second path drives many debtors in crisis countries into bankruptcy. The third
expropriates the creditor countries of the north, and the fourth may cause
contagion effects via capital markets, possibly forcing policymakers to
introduce capital controls, as in Cyprus in 2013.
QE in the eurozone will bring about the inflation
that Draghi wants via higher import and export prices. Whether this effect will
be sufficient to revitalise southern Europe remains to be seen. There is a risk
that Japan, China and the US will not sit on their hands while the euro loses
value, with the world possibly even sliding into a currency war.
The southern EU countries, instead of leaving prices
unchanged, could abandon austerity and issue an ever greater volume of new
bonds to stimulate the economy. Competitiveness gains and rebalancing would
fail to materialise and, after an initial flash in the pan, the eurozone would
return to permanent crisis. The euro, finally and fully discredited, would then
meet a very messy end. One can only hope that this scenario does not come to pass,
and that the southern countries stay the course of austerity. This is their
last chance.
2 Brazil stagnates in 2014 (Straits Times) The
Brazilian economy, the world's seventh-largest, posted near-stagnant growth in
2014, expanding just 0.1 per cent, and will likely enter recession this year,
officials said.
Hosting the World Cup in June and July and gearing
up for the Olympics next year failed to reverse the drag of rising inflation, a
ballooning deficit and a $4 billion kickbacks scandal at state oil giant
Petrobras that has tarnished Brazil's largest company and President Dilma
Rousseff's party.
It was the fourth year of lacklustre growth for the
South American giant, whose economy expanded 2.7 per cent in 2013, 1.8 per cent
in 2012 and 3.9 per cent in 2011, under a revised calculation system that took
effect this month. Rousseff has never managed to match the blistering 7.6 per
cent GDP growth Brazil posted in 2010, the last year in office of her
charismatic predecessor and mentor, Luiz Inacio Lula da Silva.
The central bank is expecting an even worse year in
2015, forecasting a contraction of 0.5 percent. Analyst Alex Agostini, chief
economist at Brazilian firm Austin Rating, predicted modest growth of around
1-2 per cent in 2016 before a return to stronger growth of about 2.5 per cent
in 2017.
Of the Brics group of emerging economies - Brazil,
Russia, India, China and South Africa - Brazil posted the lowest growth for
2014. Russia's economy grew 0.6 per cent, China's 7.4 per cent and South
Africa's 1.4 per cent. Brazil, the largest economy in Latin America, also had
the poorest GDP growth in the region outside crisis-hit Venezuela.
3 Why people are so mean online (Jane Wakefield on
BBC) It used to be the case that people got their gossip over the garden fence
or from a bit of curtain twitching. But now we have the internet and the nature
of chat has changed forever.
We have all seen nasty comments online - whether
they be a row on Twitter or a catty response on Facebook. The internet acts
like a kind of digital-fuelled alcohol, freeing us to say things to strangers
that we would never dare to say if we met them.
Dave Harte, a lecturer in media communication at
Birmingham City University, believes that social media gives us a connection
with each other that we are all craving. "People with shared interests
come together but often they would disintegrate because the internet gives
people the opportunity to say things that you wouldn't say face to face,"
said Mr Harte.
Trolling has become an established term for people
who sow discord on the internet by starting arguments - and there are a lot of
them around. Women seem to be particularly prone - a survey conducted by
cosmetics firm Dove and Twitter found that in 2014 over five million negative
tweets were posted about beauty and body image - and four out of five of them
appeared to come from women.
The problem is that the nature of the internet means
that within groups and the wider social networks we are all part of, people are
only a few clicks away from being able to annoy frustrate or upset a whole
range of people - often strangers. And for many the temptation to respond to a
post they find annoying or frustrating is just too hard to resist.
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