Sheep run to the slaughterhouse, silent and hopeless, but at least sheep never vote for the butcher who kills them or the people who devour them. More beastly than any beast, more sheepish than any sheep, the voter names his own executioner and chooses his own devourer, and for this precious "right" a revolution was fought.” - Octave Mirbeau

Only a few links this week, because of a hectic work schedule before the Chinese New Year and other obligations. We may have to scale back the size of both content and editorials in the future as it becomes increasingly difficult to manage various commitments and the production of quality content. I need to spend an average of 1 hour a day on this blog to be able to publish good posts. Instead, I will now focus on the publication of book reviews, which provide the framework for our analysis as well as deeper insight in our areas of interest. Last year, we focused on World War I, and this year we would like to dig further in economics.

The link below are focused on Germany and China, both regional powers growing fast and asserting themselves even when their weaknesses are becoming increasingly apparent. A must read is of course Michael Pettis’ “Syriza and the French indemnity of 1871-73“, which delivers a (long) but incredibly interesting framework.

We wish you all a Happy New Year of the Goat !

History & Geopolitics

A Brief History of Inequality – “To put it more precisely, different economic systems function best with different levels of inequality, creating selective pressures that reward groups moving toward the most effective level and punish those moving away from it. It is also clear that transitions between systems can be particularly traumatic, and it is possible that we are on the verge of such a transition now.

Germany Emerges – “The European financial crisis, now seven years old, has long ceased being primarily an economic problem and is now a political one. The Ukrainian crisis places Germany in the extraordinarily uncomfortable position of playing a leading role in keeping a political problem from turning into a military one.

Ukraine is only part of Putin’s game plan – (Hat tip tip Lao Ho) – “A collapsing oil price and the impact of sanctions have made him more dangerous: without oil and gas revenues, his domestic support now rests on his capacity to mobilise nationalist anger against the alleged attempt by Nato and the EU to subjugate “mother Russia”.

China’s strange fear of a colour revolution – (Hat tip tip Lao Ho) – “It may be that Mr Xi is so perfectly in control of the political system that he can afford to take on powerful interest groups. But well-connected people in Beijing now speculate openly about the possibility of an attempt to remove the president. Some note that previous bouts of popular unrest in China, for example in 1989, coincided with divisions at the top of the Communist party.

Finance & Economics

Syriza and the French indemnity of 1871-73 – Michael Pettis. “Put differently, there is no national virtue or national vice here, and there is no reason for the European crisis to devolve into right-wing, nationalist extremism. The financial crisis in Europe, like all financial crises, is ultimately a struggle about how the costs of the adjustment will be allocated, either to workers and middle class savers or to bankers, owners of real and financial assets, and the business elite.

Devaluation by China is the next great risk for a deflationary world – “The IMF says China’s fiscal deficit is nearly 10pc of GDP once land sales are stripped out and all spending included, far higher than generally supposed. It warned two years ago that Beijing was running out of room and could ultimately face “a severe credit crunch”.

China depreciation risk: You do the math – “#10. CNY depreciation contravenes China’s longer-run goal of economic rebalancing away from export-intensive SOEs, heavy-polluting industries and investment and towards inward focussed private enterprises, services industries and consumption.

Picture of the day: Globe photos of the month, January 2015



About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi