Why the US Economy Recovered Faster than Europe from the 2008 Crisis

The Federal Reserve: The Biggest Scam In History
The Federal Reserve: The Biggest Scam In History (Photo credit: CityGypsy11)
The reason is simple and everyone knows it (including economists): quantitative easing. That's what the Federal Reserve has been doing - and done twice since 2008, spending hundreds of billions of $$$ to buy bonds (Treasury bills) thus automatically pumping money in the economy and helping to jumpstart it. And that's what the European Central Bank (ECB) has NOT done - or done very little of it: just €212 billion (some $ 260 billion). 

Peanuts compared to the Fed!

So it should come as no surprise that the crisis in Europe has lingered on, indeed has grown explosively while things in America are looking (a little) better - and it might go on this way provided the whole world (and international trade) is not taken down by a European implosion...Not to mention the other four reasons threatening the world economy according to Mr. Doom (see the first article below about Nouriel Roubini's predictions - all frighteningly likely). 

English: Nouriel Roubini, Turkish economist, p...
English: Nouriel Roubini, Turkish economist, professor of economics at the Stern School of Business, New York University. From the Confederation of Norwegian Enterprise conference, 2009. ‪ (Photo credit: Wikipedia)
This is also why the IMF, in a recent report highly critical of the Eurozone policies, called on establishing a stronger monetary union to break the tide stemming from what it diplomatically described as the "adverse links between sovereigns, banks and the real economy" that have grown "stronger than ever". It warned of an economic slow down accompanied by a high risk of deflation (25% by 2014), and told the ECB to engage in quantitative easing or else...

What's this business of "adverse links"? Put in simple words: European government finance their deficits with bonds (what the IMF calls "sovereigns") that are snapped up by banks (lately national banks rather than foreign) that finance themselves from the ECB at super low interest rates (less than one percent). Thus they are able to fill up with bonds that give them returns many times higher (in the 6% area and more) than the cost of the money they borrowed. And they do this rather than lend to local businesses ("the real economy"): it's a sure way to fill their coffers and achieve the reserve levels required of them by European regulators. 

In short, a vicious circle.

Quantitative easing, since it turns the Central Bank into a major bond buyer, can break the said vicious circle. Banks will find the Central Bank is competing with them, hence, with more buyers in the bond market, rates on bonds will inevitably drop and become less enticing. That will force them to turn elsewhere to make money and (hopefully) start lending to business, which is what they really should have been doing all along.

But quantitative easing makes people uneasy and fiscal disciplinarians (like the Germans and the Republican Tea Party) downright furious. They see it as reckless pumping of money that causes inflation - for them, it's a scam, it's immoral, it's something that destroys the future of our children. Moreover when the ECB was established, it was meant to fight inflation, not deflation.  

So will the ECB listen to the IMF's advice?

LONDON, ENGLAND - MAY 22:  Christine Lagarde, ...
LONDON, ENGLAND - MAY 22: Christine Lagarde, the Managing Director of the International Monetary Fund, addresses a press conference in the Treasury on May 22, 2012 in London, England. A report on the IMF's annual assessment of the UK economy has recommended that the Treasury consider measures to improve its current economic weakness such as Quantitative Easing and cutting interest rates. (Image credit: Getty Images via @daylife)

But there's something else at work here: the ECB is also mandated to defend the stability of the Euro - thus if prices will slow down significantly, as they may well do, particularly in the so-called European southern periphery (read: Greece, Italy, Spain etc), the ECB may well have to engage in quantitative easing, whether it likes to or not.

Because worse than inflation is deflation: when consumer prices fall, investment prospects collapse, sales slow down, businesses close down and unemployment soars. Whatever advantage to the consumer may derive from lower prices simply evaporates.

Which brings me to my last point: sovereign debt is NOT the equivalent of a private household debt - whatever the Germans and the Tea Party say. There's no moral payback for keeping it in balance year in, year out. To think of it that way is wrong. But to never balance the budget is also wrong. You should be a fiscal disciplinarian in good times, not in bad times. When things are going well, that's when you should call on governments to balance their budget. Otherwise no. It's the government's role to ensure stability of the currency and limit economic downturns and the pain of unemployment. 

Since John Maynard Keynes, we know what government policies work, so why not use them? Why repeat the mistakes of the Great Depression?
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The End of Commuter Trains? How the One Percent Uses Technology to its Advantage

High speed trains have displaced commuter trains - at least here in Italy on the much travelled Rome-Milano route, and I suspect in all other countries where super fast trainst have been introduced using the existing railways. Now if you build special railroads for your fast trains, there's no problem, it's an additional service for those who can afford it and are looking to save on their travel time - namely big time politicians and managers, in short the one percent.

But, and this is a big BUT, if you force your high speed trains on existing railways, you necessarily cut into the scheduling of  slower local trains, in particular commuter trains. And that affects the rest of us, the 99 percent. I was sharply reminded of this yesterday when I decided to spend the day in Rome with my 98 year-old mother: I took the train from the Chiusi-Chianciano station which is not far from our summer place in the Umbrian countryside, figuring that it would be less tiring than driving into town. In addition, I'd be able to enjoy my Kindle and catch up on my reading. A nice train (yes, that's the picture up here) with good seats and air conditioning. But so slow...It took two hours on a trip that used to last one hour or maybe one hour and ten minutes only a few years ago!

And there was simply NO faster alternative!

Now, some five years ago when I travelled like this - in the halcyon days before the Rome-Milano high speed train service came on - it was possible to find several convenient options of reasonably fast trains that made it to Rome in about one hour. 

No more. 

The fastest train now makes it in one hour and 45 minutes and most of them take two hours. That's a doubling of the travel time! Plus the options are far fewer than before: about four or five trains a day as against a train every hour. 

That makes for a very big difference! I remember I had colleagues who had chosen to live in nice big country houses near Chiusi Chianciano and used to commute into Rome every day, taking about an hour an half, considering the subway ride added at the end of the train trip. A long commute but bearable. I wonder how they manage now with a two and half hour commute!

Thus Italy can proudly say it has a "Ferrari" train service driving a "high-speed rail renaissance". Sounds good, looks good, here it is, the "Red Arrow" (Frecciarossa):

Italiano: Frecciarossa ETR500 a Milano Central...
Italiano: Frecciarossa ETR500 a Milano Centrale, opera propria, 03/05/2009, l'autore sono io, copyright libero (Photo credit: Wikipedia)
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Caravaggio: 100 Drawings Just Discovered...Really?

Medusa, after 1590, by Caravaggio; Uffizi Gall...
Medusa, after 1590, by Caravaggio; Uffizi Gallery, Florence, Italy (Photo credit: Wikipedia)
Caravaggio is one of my favorite painters. Imagine my joy when two Italian art experts unveiled last week their discovery of 100 drawings dating to Caravaggio's youth before he came to Rome and became famous. In fact, Caravaggio's formative years are a complete mystery, no one has ever seen any drawings or early work of the master. Which is why the discovery of 100 early drawings by Caravaggio is a major finding.

Or would be a major finding if true.

NOTE: Since I first wrote this post, the controversy has heated up: the Sole 24 Ore, the country's most respected paper, called the finding a hoax in its Sunday cultural page while Claudio Strinati, a major art critic and ex-director of the Polo Museale of Rome has come out with a statement in support of the two experts. Of course, the perfectly rounded figure: 100 new drawings will inevitably draw skepticism...

It's a pity the two experts didn't go the usual route of peer review and publishing their findings in a respected art journal. Instead they chose to produce an e-book and have it published by Amazon in four languages - or so it is reported in the press. I was only able to find the Italian version, here:

Including VAT and wireless delivery, it costs a hefty $17.50 (we e-book readers are not used to such prices!) but then it's a big book (over 470 pages) and it has plenty of illustrations. It is only available on advanded devices like the Kindle Fire, or else you can read it on your computer (Kindle Cloud Reader) or the Kindle for iPad or Android.

I downloaded a sample on the Cloud Reader and quite frankly I found myself a little frustrated. Oh sure, it's well done, the pictures are stupendous. But much time is wasted in the opening chapter on Carvaggio's early life with pictures of the places where he was brought up (the small town of Caravaggio of course, and Milan). 

What I would have liked to see in the opening is a presentation of the method used to identify Caravaggio's work out of the 1378 drawings in the Simone Peterzano archives. True, we're told that as Caravaggio had the reputation of being a fast worker, one could reasonably assume that in the four years he spent in Peterzano's workshop he might have produced over 1300 drawings and other artwork. Therefore, to uncover just one hundred Caravaggio drawings in those archives is not all that surprising.

Maybe. Still, it would have been better to explain right away what criteria were used to identify the drawings. In addition, according to the curator of the Sforza Castle collection where the Peterzano archives are maintained, the two experts worked from black and white photographs they had asked for and not from the originals.

So is this discovery to be dismissed as a hoax - possibly just a novel marketing trick to launch an e-book? 

Not necessarily. The authors of the book are serious people: Maurizio Bernardelli Curuz is the artistic director of the Brescia Musei Foundation (though not on the Executive Board), the author of many publications and an expert on...Caravaggio, of course. He is also the artistic director of the monthly magazine Stile Arte (he really is, I checked). It's an interesting magazine focused on art history as well as contemporary art issues - though no announcement in there of his e-book on Caravaggio, very discreet of him... His assistant in the Caravaggio project, Adriana Conconi Fedrigolli, is a young art historian, published author and expert in the Lombard painting school, with experience in the use of scientific analytical methods, including radiography, reflectography etc.

It's a pity they didn't pick a more conventional route to launch their Caravaggio project in the art world, because doing it this way has caused a negative backlash (take a look at the articles below). It will now take some time before other art historians verify their findings. 

I'm no expert on Caravaggio, but based on the four drawings presented in the opening pages (an old man's head etc) and that are claimed to correspond to details in oil paintings produced later (the old man's head is repeated in an oil painting, pretty much under the same angle), I can say just one thing: the drawings are remarkably similar, yet...they are strangely better drawn than the later paintings! They appear to reflect a better control of the line, more nuances in the shadows than you can find in his later oil paintings.

Very strange. I know what you're thinking: it the drawings are better than the oil paintings - from a purely technical standpoint - then they can't have been done by Caravaggio, right? He couldn't have evolved backwards through time, getting worse at drawing as he grew older and achieved fame with his extraordinary chiaro-scuro oil paintings, a technique no one had ever used before him. 

Well, I would argue the reverse. The fact that the drawings look "better" may just be an unwanted side-effect of using his chiaro-scuro technique. Believe me, it's a daunting technique to execute drawings: you use white paint on a dark background - in effect, it's the reverse of a classic drawing, say lead pencil or ink on a white paper. While it's possible to maintain volume and perspective, certain nuances and light plays are next to impossible to control using the chiaro-scuro technique. 

I know because I experimented with it. I'm not Caravaggio (far from it!) but I liked the challenge of "drawing in reverse" and I did that for a while in 2007-8 (I called that "counterlight painting"). 

Let me show you what it looks like so you get an idea of what I'm talking about. Here's a woman asleep in the subway (I've done a whole series of people in the subway - I love the way people look weird in there):

And here's the drawing it's taken from:

The drawing is more nuanced, if you see what I mean. Did I go "backwards"? No, I don't think so (I hope I didn't!). What happened is that the chiaro-scuro technique constrained me. It forced me to simplify the lines, also the play of light. The simplification is not necessarily a step back, it makes for a stronger overall effect on the viewer (in my humble opinion). All this to explain why some Caravaggio drawings made in his youth before he became the famed creator of the chiaro-scuro technique could well look "better", and yet be really his and hardly a sign that he has evolved backwards!

So are the 100 drawings really his? I'd like to think they are but I don't know, I'm no expert. We have to wait for the conclusions of a peer review, and I sincerely hope we won't have too long to wait!

PS. If you're curious and want to see more of my "couterlight" paintings, you can find them here.

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The Real Solution to the Euro Crisis? Devaluation!

English: €2 commemorative coin Euro Zone 2007 ...
English: €2 commemorative coin Euro Zone 2007 50th Anniversary of the Signature of the Treaty of Rome Français : Pièce commémorative de 2 euros de la Zone Euro en 2007 pour le 50e anniversaire de la signature du Traité de Rome (Photo credit: Wikipedia)
The Euro Crisis started two years ago and thanks to Ms. Merkel's single-minded obsessive focus on austerity and debt reduction, we haven't moved one step closer to resolution of the crisis. The immediate result of this pig-headed approach is that default becomes the only alternative to devalution. Available fixes for the Euro mess are by-passed and the easiest one (devaluation) is simply ignored.


Because our narrow-minded, chauvinistic politicians can't think in Europe-wide terms. You have to consider the Euro-zone as a whole. If five out of the 17 member countries are in deep trouble (Greece, Ireland, Portugal, Spain and lately Italy) and a major 6th one is about to sink in recession (France) not to mention other smaller ones that are suffering too (Belgium, the Netherlands), why, it's obvious: you should stop pretending the Euro-zone currency is in perfect health! 

It's not. 

Its value on currency markets quite clearly does NOT reflect the real state of the Euro-zone economies. It makes no sense at all that the Euro should be higher than the dollar: the US is slowly climbing out of recession while Europe is falling ever deeper into it. The Euro could perhaps be a little above the dollar but not some 25% above it! That's way too much.

The economic solution to such a situation is a classic: devalue! We all know the reasoning: devaluing the currency makes exports cheaper giving them a boost. Et voilà! The economic machine whirrs up again. Exactly what the suffering Southern Europeans need, but mind you, it's also going to help the Germans. Their exports will soar and everybody will be happy again in Europe, and, incidentally, the rest of the world too. Because a sick Europe is making the whole world sick, including China, India, Brazil - the emerging economies that had pulled us out of the 2008 slump and are now in pain as they find they aren't exporting to Europe anywhere near the levels of two years ago. Yes, two years ago when the Euro crisis started...

So why the hell doesn't our political class wake up? I fervently hope Draghi is listening and that the ECB Board meeting will take the right economic decision today and lower the prime interest rate...That would be a first healthy step towards devaluation aand re-aligning the Euro with the dollar.
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Writing more and more books per year...Why should you bother?

Books (Photo credit: henry…)
Is it madness? American writers are gearing up to writing more than one book per year - some set themselves the goal of 4 books per year! Of course big name writers who have long been on the NYT best seller list and have the means can do it: they use teams of assistants to help them - people who do the research for them and (probably) write up pieces that they can then use with a minimum of editing. But the others?

Why should any author aspire to writing 4 books a year? A writer on a popular blog, Author Culture, recently wrote that he would "love to be in a position where [he] could churn out upwards of eight titles a year". Why would he ever want to do such an apparently insane thing? Because he is extremely ambitious, that's why: he's planned on producing some 50 to 60 titles over his lifetime as a fiction author, and by speeding up yearly production, he'd be able to achieve his life goal much, much sooner,  in seven years instead of seventy! And probably produce more than 50 books, maybe double that or triple that amount! Imagine going to your grave having authored upwards of 200 or 300 titles!

Wow! I'm impressed! And why so many books? Because he says he's bubbling up with stories: he had started out with the modest goal of one book/year when he realized that if he kept that pace, he'd have to live past one hundred years "just to write the stories that had come to [his] mind in the last seven years"...An explosion, a tsunami!

Certainly this is admirable. And also it helps that he writes in a genre - action/adventure thrillers - where you tweak the setting, twist the plot and modify the characters and voilà, you get a new story with every new variant.

If you're in that enviable position of having so many stories to tell in your genre, then follow his advice, I found it quite thoughtful and spot on, particularly the idea of participating in NaNoWriMo to get your writing hand exercised (you have to write 50,000 words in one month) and as an added bonus, you get to make contacts with fellow writers both on line and physically - which can always come in handy should you decide to publish your NaNoWriMo produced book. I've got a fellow writer who did this and she was very pleased with the result.

Another good idea is to write more than one book at a time. Actually, I suspect that's something most writers do. I know I do: for example, I'm working on my novella I WILL NOT LEAVE YOU BEHIND, I'm putting the finishing touches on my BB novel A HOOK IN THE SKY (BB stands for Baby Boomers - the novel's main protagonist is a recently retired Baby Boomer), I'm translating Fear of the Past back into Italian with the help of an Italian editor, Giuseppe Bonanno di Linguaglossa who's curating it and has given it a smashing new title: IL VOLO DELLA FENICE ( the Flight of the Phoenix), love it! And he plans to release it in the form of a trilogy this fall. Then RICH, FAT AND BORED, a novel set in Tunisia needs a profound rewrite so that it takes in the events of the Arab Spring. And I've got a couple of non-fiction titles in the works as well: about the United Nations (having worked 25 years for the UN, I really know it from the inside) and the biography of Lievin Bauwens, Napoleon's favorite entrepreneur...

Will all this add up over time to some 50 titles or more? I doubt it. And it's certainly NOT my goal. I'll write just what comes to me naturally and following my interests and instincts. To try and produce a set number of books per year sounds so...mechanical. I know I couldn't do it and I'm not even interested. Because one thing is certain: if I don't enjoy what I'm writing, if I'm forcing myself to produce 5,000 words/day, then it's no good. Oh, sure, if a novel has got suspense or sex it might be fun to read, but it won't be literature.

Bottom line, it depends on your writing goal in life. If you want to be a successful genre writer and make money, it is true that you have to produce several titles a year, the more the better. If you're not a genre writer (my case), then you needn't worry. Write as much or as little as you like and feel comfortable doing.

In short: don't despair! This is one race you don't need to get into!

I know I won't. I can't possibly produce more than a couple of books/year, and probably only one book a year (if that) once I will have finished releasing my backlog. I'm totally, completely convinced that a high number of books produced does not equal a high quality of literature. 

Indeed, even among the classics, I don't think there's more than two or three titles per author that matter - I mean books that are really worthwhile and memorable and will stay on as beacons in the History of Literature. Even a giant in world literature like Tolstoy is only associated with a couple of novels, War and Peace and Anna Karenina and perhaps the novella Death of Ivan Ilyich. Yet he's written a lot more...How many of his other books have you read or do you plan to read?

Because there's another consideration: how many readers are there out there who can absorb so many books? If you've got one million writers (the probably number in the English language), can one expect the market to absorb 200 million books over the next fifty years? 
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