Bertie's legacy

By: Alan Ahearne, Bruegel and NUI Galway

As Bertie Ahern's ten-year tenure comes to an end, so does Ireland's extraordinary economic boom.

Is US inflation at 8%?

By: Wolfgang Münchau

Some estimates suggest that we are consistently underestimating the rate of US inflation. While I am largely agnostic on this particular issue, I strongly believe that we need a debate about how we measure prices. (Note to readers: The guestbook entries are working again.)

A TARP for Europe or How not to solve a financial crisis

Nicholas Sarkozy jumps on the TARP bandwagon, and proposes we imitate the US; German finance minister expresses reservations, “to put it mildly”; US Senate approves bailout package; European Commission proposes very strange banking regulation; Moody’s cuts Iceland’s credit rating on the grounds that Iceland bailed out a bank (just imagine that); a group of well-known European economists, meanwhile, has written an open letter to EU leaders, calling for a systemic response to the crisis.

Global money markets have effectively collapsed

ECB follows Fed with massive liquidity injections as money market conditions deteriorated sharply yesterday; banks are now hoarding their money at low interest rates at the ECB – a sign of sheer desperation; there is growing nervous about forthcoming credit default swap auction in October; Sarkozy proposes change in accounting rules for banks; Hypo Real Estate shareholders are likely to lose everything; unemployment, meanwhile, is still falling fast in Germany, while it is rising in France.

A fine mess

Congress throws out rescue plan, and triggers an almost 10% fall in stock prices; after the bailout of Fortis, Belgian authorities were last night trying to rescue Dexia, the country’s second largest bank; more European banks are presently on the rope; Fed injects massive amounts of new liquidity into the system, as money markets are now effectively dry; the market for Pfandbriefe, or covered bonds; has also effectively collapsed despite the rescue of Hypo Real Estate; France is demanding a new Bretton Woods; this threatens to become the worst financial crisis in history.

Banking crisis reaches eurozone

Benelux government bails out Fortis, Hypo Real Estate gets a last-minute credit facility from a banking consortium, and the UK government is bailing out Bradford & Bingley; US Congress passes the TARP bill, with reverse auctions, equity warrants, payback arrangement, and curtailments on executive pay; Bavaria’s CSU loses absolute majority; in Austria, meanwhile, the Social Democrats win the elections, but the two far parties get 28% of the vote.

The money markets on the verge of a nervous breakdown

Money market spreads reach new historic records; there is also opposition to the Paulson from inside the Fed; Germany plans draconian financial regulation; Steinbruck says US is finished as a global economic superpower; Papademous effectively rules out rate cuts; Ireland is now officially in recession; Nicholas Sarkozy, meanwhile, is calling for fundamental reforms of EMU economic governance.