Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
I have avoided writing about Greece whenever possible using its tiny economy – significantly smaller than the U.S. state of Louisiana – as an excuse. The real reason, however, is that I want no part of the cesspool of economic moralizing that surrounds the discussion. The debate is divided into two camps; the "Greece and its economy is an irredeemable, non-taxpaying clownshow that will never repay debts" squad and the "Greece is a glorious martyr to the evil mustache-twiddling German creditors" team.
An online debate between two economists I respect highly – George Mason University economics professor Tyler Cowen and the influential Steve Randy Waldman – underscores the unsolvable nature of the rhetorical battle. Mr. Waldman is clearly arguing the "evil creditors" case, and recently wrote regarding the EU's mishandling of Greece in 2012 (language warning for those that click through – Mr. Waldman was clearly emotional):
"It is difficult to overstate how deeply Europe's leaders betrayed the ideals of European integration in their handing of the Greek crisis. The first and most fundamental goal of European integration was to blur the lines of national feeling and interest through commerce and interdependence, in order to prevent the fractures along ethnonational lines that made a charnel house of the continent, twice…. [But] what had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent or, when the people with their savings in just-rescued banks decide to be generous), a petulant misbehaving child…"
Prof. Cowen responds:
"[Waldman] has an interesting but quite wrong post on how to think about Greece…anger fills in for the required substance as to why Germany and others should allow this. 'Your government is making things much worse. If you want to borrow so much more from us, you have to play by the rules and also stop spitting in our face and calling us Nazis and terrorists while negotiating' is more relevant – and yes relevant is the right word here – than any point he makes."
I find both arguments persuasive, which leaves me nowhere.
"Greece" – Waldman, Interfluidity
"Greece and Syriza lost the public relations battle" – Cowen, Marginal Revolution
"JPMorgan-Barclays Cut Greek Exit Odds as Goldman-Citi Hold" – Bloomberg
In China, the government's efforts to stem the bleeding in equity markets showed some success during Monday's session. The Shanghai composite equity benchmark was extremely volatile overnight but an extensive selection of government measures – including a 120-billion yuan fund raised by brokerages for the purpose of buying stocks – managed to push the market higher by three per cent. Gains, however, were limited to the largest market cap stocks and the majority of equities declined for the session.
For Canadian investors, the Chinese equity market has rarely mattered – only economic activity and resource demand did. But the Chinese government appears so desperate to prop up equity markets that Canadian investors should likely pay far more attention. Many global investors have remained confident in China with the belief that the state-controlled economy could grow at whatever speed leaders wanted. But the problems with equity markets are putting that theory to a severe test.
"China and the delusion of control, redux" – Keohane, FT alphaville
"How Do You Say 'Whatever it Takes' in Mandarin?" – Bloomberg
"Hong Kong Shares Take the Plunge as China Stabilizes" – Wall Street Journal
The West Texas Intermediate Crude price is down sharply this morning – more than four per cent at the time of writing – on expectations that a diplomatic deal between Iran and the United States was imminent. The end of economic sanctions on Iran would see Iranian oil hit the global market, providing new supply in an oil market that has looked increasingly "glutty" over the past two weeks.
"Iran Deal Seen Imminent After Atomic Agency Breakthrough" – Bloomberg
"Kerry Tempers Iran-Deal Optimism as Foreign Ministers Return" – Bloomberg
"Increase in U.S. crude inventories signals a worsening oil glut" – Barlow, Report on Business
Tweet of the Day: "@BTabrum If I was Syriza, the day's worst development is the way rest of periphery has sailed through this."
Diversion: "Neko Case: 'I have to battle with myself' Singer Neko Case was at the top of her game when she was struck silent by depression." – Guardian
Scott Barlow