Keep cool, in between an avoidable GREXITragedy and related over-pessimism

“Expecting SYRIZA to fight the good fight against austerity and for a more prosperous Europe is a bit like asking Al Gore to front an advert for 4x4s.” (B. O’Neill)

GREXIT without regret? Not exactly.

But, 1st of all: fuckoff pessimism.

A couple of interesting Credit Suisse research reports: from today and April 13.

In this  post:

  1. populists & socialists united for growth against austerity? Come on: how does it fit with the IDEOLOGICAL, BOBO FASHIONABLE antigrowth sentiments of Greek SYRIZA and Italian M5S? Hollande is alone.
  2. Credit Suisse summary 1: “the € cannot be saved by austerity alone. Or by abandoning it altogether”.
  3. IDEM Summary 2: “In contrast to the large output gap evident in the North Atlantic, at a global level economic activity has returned to the long-run trend”. Therefore, primary markets will heat during 2012.

The Media are becoming, from just noise, an unbearable Gutenberg complex just telling nonsense, even a possible katastrophè catalyser, as far as they disseminate disinformation, lack of any analysis (all available, mostly free, as we show in this post) and terror –  in front of quite ordinary change factors and challenges. Adding cognitive dissonance and further uncertainty, to its structural and policies-induced components.

Yes, there is too much emphasis (and “terror”, fearful extrapolations) about scarcely effective elections: Sarkozy committed suicide, so what? This is recently typical of the FRENCH RIGHT, and no merit to the ABnormal Socialist ENArques. At the moment Angela is well alive, and how would you command the Greek people not to commit a collective suicide if they want to? Allez y. But we’ll not allow you to destabilise the entire European economy, and procrastinate the #GreatOEC∆epression (#GOD) for, e.g., another 5 years (2007- 2017). No Grexit, if possible: but the populist take on Greek voters is a problem.

The supposed populist turn (ALMOST nothing at all, until now) would revive “growth” (note 1) versus the aust(e)rian oppression upon bobo élites and the mass-bourgeoisie (Ortega y Gasset, Tronti)?  Well, this does not fit such a  fashionable anti-growth anti-Marxist anti-Reason anti-Technical Change Greeny “neo-commies” (???) spreading in the #GOD turbulence undergrounds (Dostojevsky). Like the forthcoming Greek Premier (after a 2nd election) from SYRIZA. Brendan O’Neill, Sorry, but SYRIZA won’t save Europe (today):

Expecting SYRIZA to fight the good fight against austerity and for a more prosperous Europe is a bit like asking Al Gore to front an advert for 4x4s.

As for the silly pseudo-growth versus austerity dialectics, here are useful lines from a Credit Suisse summary report:

Not by Austerity Alone

Europe is always complicated and never quite what it seems. Which is why investors are so easily infected by fears of euro zone disaster or break-up. It’s starting to happen again but one should always distrust the press hype.

Viewed more calmly, last weekend’s election results simply reinforce a message that was already developing beforehand: namely, that the euro cannot be saved by austerity alone. Or indeed by abandoning it altogether.

So the new European debate was already about how, not whether, to combine some form of growth agenda with medium-term and enforceable fiscal discipline. And naturally enough, there are plenty of different visions to reconcile and haggle over before real progress can be made.

Obviously, Europe remains a key element in the wider story of global growth and risk appetite. Less obviously, improving production momentum in Europe (and China) could provide the main upside surprises to our global industrial production (IP) forecast going forward. Indeed, provided that aggregate demand in the euro zone (including export demand) remains only roughly stable, Europe might be the main driver of faster global IP growth in the second half.

As we see it, more “risk off” now will likely set up an even bigger rebound later (in Q3?), featuring outperformance by European equities relative to the US, as well as Spanish and Italian bonds, and probably equities as well. We think G3 bonds can rally a bit further but offer no long-run value. In the bigger scheme of things, risk appetite and global IP are still tracking past deep panic recoveries.

Source: Credit Suisse, quoted by Paul Murhpy in  http://discussions.ft.com/longroom/tables/equity-strategy/credit-suisse-not-by-austerity-alone

This is coherent with the 183 pp. also somehow “bullish” 2012 commodities scenario (Commodities Forecast Update: The Pause that Refreshes … ) that Credit Suisse analysts produced one month ago, on April 13: no Chinese hard landing but, instead, a global rebound (although WITHOUT MOST OF EUROPE, OF COURSE) hitting more and more against scarcity walls. With a consequent selective, fundamentals-driven re-heating of primary markets in 12S2, under certain average macro-scenario facts and assumptions (namely: “In contrast to the large output gap evident in the North Atlantic, at a global level economic activity has returned to the long-run trend”). Summary again:

Will China give the West space to recover?

After the turmoil of 2011, the first few months of this year have been relatively uneventful, with global growth proving more resilient than many had feared – it is now clear that the slowdown in H2 2011 was minor, and that Q4 was the low point in the cycle. As predicted (“From Fear Flows Opportunity”), as the tail risks have faded, the prices of many risk assets have rebounded, with the next big move in prices likely to be more dependent on individual commodity
“fundamentals” than has been the case for much of the past year.
 
Despite the market obsession with the prospects for QE etc, we note that prices in early Q2 are consistent with the LEVEL of global demand, which is much higher than many realize. In contrast to the large output gap evident in the North Atlantic, at a global level economic activity has returned to the long-run trend, with the EM countries having effectively “borrowed” the spare capacity released
by the West during the “Great Recession.”
 
With global growth likely to move above average over coming months, we think that markets will tighten further over the course of 2012, with the rebound led by the US and China. Rather than a Chinese “hard landing,” to us the
greater risk is that Chinese growth rebounds more than currently anticipated. That would see markets tighten substantially (given the limited spare capacity the world needs below average Chinese growth to allow the US to close its output gap) and lead to another significant bout of commodity price inflation – commodities are currently the effective speed limit for global growth.
 
After rallying significantly over recent months, we believe the price of Brent oil is likely to creep up further in H2, with the risks firmly to the upside (supply disruptions). Many industrial metals are also likely to continue to rally over the
course of the year, with palladium having the largest upside potential. Gold should continue to trend higher for a time, but may start to peak around the middle of 2013.

Source: quoted CS report for clients,  http://www.credit-suisse.com/researchandanalytics.

NOTE (1)

Namely, popu-socia-list growth is currently interpreted by its proposers mainly and regrettably as a mix of:

  1. further violence to the already brutalised Lord Keynes body (ohh, poor!);
  2. and violence to the citizens. That is, a top-down Power exercise; but everyone is informed,  knows that the exact Hayek – Schumpeterian opposite is true: at least as far as development is concerned.

Growth alone (without some good mix of:  choice, free competition,  culture and arts, true democracy, economic and human development, education in a meaningful sense, individual-centered dynamics, informal knowledge richness, innovation, justice, knowledge diffusion, variety, etc. and other tangible or intangible welfare factors relevant for citizens) is an aggregate ambiguous – dubious  – spurious – statistical – sometimes just artificial phenomenon typical of latecomer countries. E.g., Cristina Kirchner the populist Casa Rosada tyrant is hiding the current 9% infation rate (imf est.), therefore their growth is in large part just undeclared inflation. And Mercantilism often rules: the Far East might have slightly inflated their bubble growth in the pre-China age, but certainly not in the  proportion Paul Krugman told us in the 1990s. The Nobel laureate was  just expressing an extreme wing of the Washington consensus, when denying their insolent growth rates, with no supporting research.

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One Response

  1. […] continue on yesterday’s line of reasoning against fear on Grexit yes or […]

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