Comments
Transcript
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TWKeynesian, globalist, central banker, chicken little climate alarmist nonsense. Some commentators here say it's good to hear how the entrenched 'elite" think. I KNOW how they think. I hear it in their official diktats. I see it being played out in their insane actions day after day. It's no mystery. To give a platform to this kind of claptrap is to become what you sought to displace in the media marketplace. VERY disappointing.
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DNI found this interesting, but that is because like Japan, everything in Europe (and I lived there for 5 years) bores me to freaking tears and I am thinking about big picture issues as we head into 2020 and I keep hearing about how Europe is stabilizing, but the structural/political dissonance never ceases. What we need in Europe is much more dynamism and vibrancy. That is extremely hard, if not impossible to accomplish, although there are some segments (broadband, airlines, telecom) that are superior to the US in terms of service/price. Even if German expands fiscally, how much would they do and what long term competitive advantage would it create for the EZ overall? So, the medium term question isn’t whether the US and Europe will ultimately converge, but in which direction and over what time frame.
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woclimate change....new religion
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STTypical few of established academic professor who never lived life in real world. Lower intrest rate helps if you of course, didn't work your entire life with hope, that one day you retire and your savings support your life. She is sitting on Cadillac pension so screwed everybody else. It's really funny how those people think. As long as system is in place millions baby boomers can just sell their assets and peacefully die.
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WMIt was not as bad an interview as I thought it would be from the comments below, however the last 10 minutes turned me off somewhat. Ms Reichlin obviously does not see much of an issue with negative interest rates nor is concerned with the Lawyer Lagarde taking over the ECB. If a fiscally trained professional like Draghi can get it wrong (total FAIL regarding interest rate management) how on earth do they expect Lagarde with her lack of business understanding and poor judgement (the influence "bribery" case she was found guilty on in France) to be a better option. My big beef was Reichlins comment near the start about her positive view on the future of the EU. I fear this was just a platitude to folks using her company since the EU is clearly in a crisis which is going to get worse. The Brexit issue plus the ill fated Euro fragility combined with Deutchebank problem (close to collapse) and several EU members grossly over promised social benefits systems means that in the coming EU recession government expenditures will soar along with debts and further worsen the EU position. It appears to me that there is no way out and indeed UNLESS the Germans substantially boost fiscal spending soon there will be a crisis to match 2011/12 almost immediately. Only this time avoiding another GFC may be a less than 50/50 option as the Fed Reserve in the US is already grossly more overextended than in 2008. I can see no case for optimism here, unless you are an ostrich....
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TSSo true in the part they talks about how to change the bank Balkanisation regime. Europe should develop its capital market, companies should invest and also Europeans have to spend, if European economy is to be saved.
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FANothing more than bankrupt Keynesian drivel. Constantly pulling forward demand with debt is a losing proposition and a road to poverty. We've already pulled near 40 years of future demand forward......the game is ending from its own dynamics. I don't care where your degree is from that's just plain insane....
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SSI like her accent more than her politics.
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M.Guys and gals, let's keep it civil in here. Let's debate and post mature comments like we did when we had Bannon or Farage on. We can do better than what I just read.
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JRI have to be honest, I have now swayed to the comments section to catch the synopsis when the polling numbers on thumbs up or down are pretty much split. It certainly helps manage my time to see if I want to invest 40 minutes listening to drivel or elucidate my mind with different perspectives. Time is after all the most precious resource that we be own. I have come to value the RV subscribers comments as much as the content in some cases.
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DDI used to cringe when someone said "ivory tower", but this phrase was stuck in my mind while I kept listening to this lady. The patient is pretty much on life support, but sure, medicine will definitely work if only you give him enough of it. Central bankers' lack of self-awareness is truly stupefying.
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RTThis is actually the only person I’ve seen who can interview people on RV based on 4/5 I’ve watched. Apologies if I’m probably being unfair to others I’ve not seen yet.
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VSFor someone that has so many strong credentials i found virtually nothing i agreed with her on . May i suggest the real vision ask people who promote global warming aka climate change that they tell you WHAT PERCENT OF THE ATMOSPHERIC GASES ARE CO2 AND METHANE ? IT IS A TRACE ⁉️ CONCLUSION CLIMATE CHANGE IS A CREATED POLITICAL ISSUE TO RAISE TAXES ie THE BIG LIE.
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AMuseful perspective
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BJ"No problems with the Euro"... "Government, especially German one, must spend more in a Keynesian spirit"... "We must sink the economy to placate climate alarmists"... etc Basically: Everything is fine, just throw more of the same and ignore the warnings.
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RNReichlin refers to her model indicating "trending down". Viewers might be interested to compare with Dr Tim Morgan's Surplus Energy Economics Model. His article published yesterday just happens to be titled "Trending Down". https://surplusenergyeconomics.wordpress.com/ He points at some European countries and uses the example of Ireland. "According to official statistics, the Irish economy has grown by an implausible 62% since 2008, adding €124bn to GDP, and, incidentally, giving the average Irish citizen a per capita GDP of €66,300, far higher than that of France (€36,360), Germany (€40,340) or the Netherlands (€45,050)." Reichlin refers to Italian GDP but for Ireland Morgan states the "53% overstatement of economic output has dramatic implications for risk, driving Ireland’s debt/GDP ratio up from 297% to 454%, and increasing an already-ludicrous ratio of financial assets to output up from 1900% to a mind-boggling 2890%." It would be great if Realvision could arrange an interview with Dr Morgan.
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PJExcellent interview by Ed. Good to get an insider’s perspective on the eurozone, although Lucrezia’s views seem to be almost wholly aligned to the Euro Establishment. I don’t understand where her optimism comes from re the eurozone, as they have had 10 years to get the banking tools she talks about in place and they are no nearer implementation now than then. The assumption that fiscal will replace the failed monetary policy seems somewhat dubious when you see what happened to the CDU and SPD in last weeks Thuringia elections. There is a significant political risk to the eurozone consensus even without Germany attempting bail out of the eurozone via fiscal, if it does undertake fiscal I only see that political risk increasing from the German quarter. This is all without accounting for politics in Italy, France and the Brexit sideshow. It seems to be openly accepted that Lagarde is a politician not a banker and that she is a necessary change to Draghi. Really, is a politician actually going to run a CB any better!! I don’t see it. All that said to reiterate I do want more of these alternative view points , good interview.
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RTThis is a very thoughtful, highly respected, and rigorous economist so you won’t get a sensationalist interview out of her. Old school for some. Better to be taken seriously by the serious and ignored by the ignorant than the other way round. This interviewer unlike many others here actually does some background research before showing up... unlike many others we’ve seen. He’s not quite fully grasped the concepts but he’s able to just ask questions and get on with it and I commend him for that.
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JWI thought this was a good review of basic policy issues in the Euro zone, and an excellent job by Ed in bringing those forward.
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RMPuzzled by the negative reaction to this video. It is important to hear views from all sides and many of her comments, which many here appear to feel are to liberal or government supported, are her analysis of what politicians may do policy wise in Europe in the future. It is important to hear these views though one may disagree with the proposed policies as they may be implemented and impact markets in the future. Taking the US as an example, I am having to learn to divorce my feelings about the Federal Reserve and their misguided policies with rates and accept they may keep driving them to zero and adjust my investments appropriately.
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API should keep an open mind and watch this, but I'll never get those 41 minutes back. And what could someone who has been at the heart of the very monetary policy that has set us up for a monumental fall have to say about a solution? The problem is that we even have Monetary policy or Trade Policy and that Fiscal policy is such a dominant component of investment.
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SMWaist of time...
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GRAppears to be a huge incongruity between her optimistic outlook and the underlying conditions of Europe which she later outlined in the discussion. Hinging optimism on the presence of social backstops greater than other external nations does not appear to be a sound economic absolute but rather a subjective social comparative. In the later discussion, the portrayal of monumental potential structural changes in EU fiscal policy governance in return for greater member risk is a massive understatement and misrepresentation. Member countries have already expressed high resistance to further mandated EU control of sovereign policy & governance. In example, Germany will not go willingly in handing over fiscal policy management to a body equally controlled by non fiscally responsible members...Italy in particular. This is one of the catalysts that led to Merkel's ousting. Posing these proposed changes as easily achievable is disingenuous at a minimum. Lastly, the globalist overtone of force the "savers" to "spend more & take more risk" is the equivalent to Draghi's "do whatever it takes" statement to try and save a broken or failing system. Without it sounding overly harsh, the outspoken advocates of "whatever it takes" are the same cohorts that constructed the current model.
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TCAbsoloute rubbish and poor interviewing as well. Ms Reichlin could be representing the ECB and or Italy with her socialist (just increase NIRP, increase tax) and get Germany to bail out the excesses of Italy. Hopefully her approach to macro is a thing of the past, destroying normal peoples wealth to compensate for her lack. She also divulged nothing about her reasearch, her methods - just a smug approach to increase neg rates, increase taxes and let share out the Italian debt ! - dream on
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HMThought provoking discussion but the fact the interview was almost 3 weeks ago killed any value for me. It appears RV is posting more outdated material of late. Please be mindful of this as many of us viewers respect the investment value of RV.
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JSThought we buried Keynesians some decades ago :) Imagine being a hedge fund manager and hiring her services.
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WGThere's a lot to chew on in this interview. I'm struck by a former central banker twice remarking that there's more than just GDP; I think she remarked about income distribution, safety net, gini coefficients. There's a hot mess of dissonance on display there, coming from this former European bureaucrat. Central bankers/planners have managed over the decades to transform their roles from lender of last resort to planners of the economy, and managing GDP, goosing that aggregate demand, is their reason for being. Unless after 10 years of failed intervention the metric doesn't look so good, and I guess in that case, you can stretch credibility to claim some other virtues. I'd like to have her explain those virtues to some Greeks or Cypriots or average, and especially young, citizens from any of the PIIGS. Mish Shedlock often comments on the Atlanta and NY Feds' nowcast GDP models and their predictions. He loves to show their volatility and errors in prediction. Ms. Reichlin has developed her own. Now you can't even get something like that off the ground without being expert in the relevant predictive variables, statistics, modeling, etc., and especially without judging precisely how to address "under-specification" in the model, or the imperfectness of prediction of each and all of your variables. What goes in, how's it weighted, and how do scale the resulting prediction? How do you deal with regression to the mean, or address the priors, if you prefer? So this former central banker isn't just a bureaucrat, she deeply understands the limits of her craft--the complexity of the domain. Yet a central planner she apparently remains. It helps me sometimes when listening to any unapologetic central bankers to remember that such people are first and foremost, bankers. Their game is fractional reserve lending. They loan money into existence, at interest. Fractional reserve banking is fundamentally fraudulent and fundamentally unstable. Central bankers once existed as a backstop to accidents from this fraud. Now, whether planned or not, they exist to perpetuate all sorts of other frauds too. Ms. Reichlin was careful to note that the support of citizens was required for various fiscal schemes and debt mutualization. (I think this was when she acknowledged the ole 2% inflation canard was wearing thin-- not that any honest scholar hasn't known that that central bank game is fraudulent too). I wonder if it ever occurs to her that citizens real political voice, one that could stop a wayward government, or central bank for that matter, in its tracks, could be restored with sound money and prohibition of fractional reserve lending. The virtuous Buffet, Howard, wrote a great piece on the principle 70 years ago. I thought the interview was good, despite my distaste for some of the views expressed and implied. Thanks RV.
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wjLets set power to 100 euro pr kw and we can create debt to pay for it. Solars windmills are a joke. Germany spent 40b euro power prices have gone up and thier co2 em are flat. Looks to me the germans are lying about green energy agian.
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SJGovernment is the answer for everything. Sadly she is lost in socialism and big government. Total waste of time.
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EYMs. Reichlin's brass mug stand should be shifted about 6 inches towards the center in order to be achieve the level of symmetry I've come to expect from Real Vision.
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wjRemember gdp growth in eu includes estimated prostitution and drugs sales. Enough said
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ATLet's spend more and do more fiscal intervention and make government omnipresent in the economy, because it's worked so well so far. Also, people trust a lot the EU and the euro so much, just look at how big Brexit, jillet jaunes, Catalonian independentists, AfD and Salvini are losing elections.
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MPNice insight into the keynesian cargo-cult way of thinking. I'm sure the "climate change fiscal policy stimulus" will be amazing for the economy, it will totally not compound more inefficiency in the market at the cost of pedestrian savers. Good job, comrades.
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MTSome points that stood out for me, in particular she said "the likelihood ... of a European recession.." Likelihood, as in it could/might happen??? A European recession is with us right now, it smacks you in the face everwhere you look ...... and then we get "...there is a case for more public intervention..." ".....If we want to push the economy, then we need more public guarantees....." Rant over, I now need to go sit down in a quiet corner, try to relax for the rest of day and forget I ever read this transcript.
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ddpeople like her are destroying the EU economy
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SPThis mans the political risk expert!
LUCREZIA REICHLAN: The revisions were always in one direction so I think you can learn a lot from how you revise. In Europe, what we have had the is slowdown of trend growth, what the economies called potential growth. At least since the great crisis, the recovery has never really been very decisive. GDP is not the only metric. We have less skewed income distribution, a much more balanced society.
ED HARRISON: Lucrezia Reichlan, it's very good to talk to you here on Real Vision. We are, I think, at a critical moment in Europe right now in terms of policy. I want to talk to you about what's going on in Europe but also about what you've been doing in terms of forecasting policy or actually the economy in general, and then what that means in terms of what you see going forward in Europe.
LUCREZIA REICHLAN: Okay, Europe. You say we are at a critical point in Europe but I would say we are at a critical point, not all in Europe, but also in the US. If I have to look at the broad picture, I would say that actually, Europe, relatively speaking, looks quite good. If I have to see the rest of the world, it doesn't look as bad. I'm a little bit more optimistic on the broad picture on Europe.
Now, if I have to look at the economic data there, I'm a little bit more pessimistic. My business, which is called Now-Casting, it's about reading the pulse of the economy on a real time basis. We analyze through the lenses of a model the data flow, through the publications of different data every day, something gets published, the model eats it up and produces a series of updates on the economy. We do that for all the main economy in the world. If I look at the European data, in what the data flow has been telling us, is that basically since the end of 2017. we have seen a very persistent softening of the data of the real economy.
ED HARRISON: That precedes the whole China-US trade war.
LUCREZIA REICHLAN: It does, it does. I think it's not just related to that. In fact, there are different views in Europe about especially on the German economy, which is the main economy, the engine of the European economy, and we have seen this slowdown, particularly in Germany. If you talk to the Germans, a lot of them say this is temporary. it depends on the trade uncertainty and so on. I just don't believe that story. I think this has been too persistent to make the stories believable.
There is something else going on, which is probably related to structural crisis of the automobile sector. The general slowdown of the economy that you see that the IMF has review, also the forecasts downward for all the economies. Now, we have the lowest growth since the great crisis. Now, Now-Casting had detected that at an early stage. Actually, I remember talking in a big meeting here in New York, the beginning of 2018 and the market just didn't believe us, but we turned out to be, I think.
Now, is this a catastrophic event? I don't think so. We are not necessarily seeing like a deep recession. I think this quarter, the German economy will be more or less a zero. There is a difference between a recession, consecutive quarters of negative growth and just very, very low growth in a persistent way for a protracted period of time. I think we are more in the latter category. That, I think is trend growth that has slowed down, and this has to be understood. I can't give you a number of conjectures, but I think it's more like we're becoming like Japan. This is what we have to worry about also from the policy perspective.
ED HARRISON: There are two ways I could pivot off of that. One is go deeper into that, but actually, before I do, I want to go back to-- because you talked about 2018 the beginning and Now-Casting, it makes me think about tell us what is Now-Casting exactly? How can you use it for an economy? How far out can you go in terms of your projections?
LUCREZIA REICHLAN: Well, the philosophy of Now-Casting it is that we are forecasting a present and a very, very short future, short-term future.
ED HARRISON: In the short term future is?
LUCREZIA REICHLAN: One, two quarters ahead. The present is already a big deal, because GDP is published only one month and a half after the end of the quarter, one month of data depending on the country, it gets very much revised and so you need to have a tool for forecasting the present. Well, I designed these tools like years ago, so that was a very natural academic research, building up models that could be appropriate for that problem.
ED HARRISON: I heard that you are a pioneer in Now-Casting, that's right?
LUCREZIA REICHLAN: That's right. Yeah. Basically, I did it. At the beginning, well, that was the product of academic research, but was also trying to adapt the academic research to the problem of central bankers where facing-- not facing, which is you see all these data, you're bombarded by data, but then at the end of the story, you have to form a view about where are we now. This is very important to set interest rate. Of course, you have to set a view about where the economy is going in the next couple of years. If you don't know where you are now, your forecast for the longer horizon are about to be wrong.
ED HARRISON: It's not just for central banks. My understanding is you have a client base that is in the markets in particular who also think understanding that is important.
LUCREZIA REICHLAN: That's right. Well, that was my background, I was more academic then, and then I was a central banker for a while and then I was a consultant for many central banks. Now actually, I am not doing this for central banks anymore, I have my own company and we sell the Now-Casting for basically all the economies of the G20 for investors. Our clients are basically hedge funds or sovereign funds or pension funds. A lot of our clients are actually systematic traders. They use our input. At the end, what we are selling is a string of data. It's a Now-Cast that we move all the time. Now-Casting the same thing, but we update our view in relation to the data flows.
If you want, you can say that this is a signal about the pulse of the economy, a signal about the macro economy and we know the macro, the macro signal is very important also for financial markets, more than maybe what was taught in the past. That's what we're doing. Now, we are also trying to combine this with financial information to try to see whether the disconnect between risk appetite and the macro signals provides a signal that can be exploited in investing.
ED HARRISON: Now, it sounds like trend data or the data and the trend of that data is very important in terms of what your assessment was from the beginning of 2018 to now, meaning that the ECB as an example was saying, actually, things are going to be fine. You were saying at the beginning of 2018, the trend is not in that direction. The trend is going slowly down.
LUCREZIA REICHLAN: Well, more than the trend. Okay, I also use other models, but the Now-Casting model was saying that there was a-- the time, at the beginning of 2018, the we signal that the fact that the data were signaling negative seen. Now, two years later, I can see that the revisions were always in one direction. I think you can learn a lot from how you revise. We kept revising downwards. We do that on almost on a continuous time. That's a very interesting signal, I think, for investors.
Now, institutions like Central Bank, the EMF, the ECB, they revise whenever they produce their forecast for the market and then if you look at it, a lot of their revisions have always been downer rubbish. Now, I also use other model, especially for forecasting inflation which look more at the underlying trend like you were saying and if you use those tools then you can see and that actually, you just observe GDP employment but you could actually also try to decompose the observations into some movements which are more high frequency, something like goes up and now and something which is more low frequency that move very, very slowly, that's what I would call the trend.
Now, if you extract that trend, so of course, it's controversial how you're going to do it but if you do it and that you have a number of ways to verify your techniques for doing this, then you can say that in Europe, we have had a slowdown of trend growth, what the economies called potential growth at least since the great crisis. The scar that the great crisis put in, in our economy has been quite severe. In Europe, like the US, we had two crises [indiscernible], 2008 plus 2011, related to the debt crisis. We had like, two recessions so the legacy is quite heavy. I don't know, I don't think that it has been digested yet but this has affected the long term trend and this is what we're seeing now that we are-- the recovery has never really been very decisive.
ED HARRISON: Going back to what you were talking about at the outset then, you're relatively optimistic about Europe at this particular juncture, that is relative to other economies. When you talk about the trend being down, how do you reconcile those two?
LUCREZIA REICHLAN: No. Okay, in terms of economic number, the trend growth in the US is slightly higher. There are different reasons for that, including demographic. In terms of what that means for the European citizens, GDP is not the only metric for [indiscernible]. We have less skewed income distribution, a much more balanced society, much more protection for people in terms of social security and some. No matter how much our divisions of course, also in Europe, we have lots of issues, but I think that our society is more cohesive.
ED HARRISON: That is interesting, because now, we're moving into the political economy realm because that is big topic here in terms of when I said that Europe is facing a crossroad so to speak, it does seem like the very recent period has seen a coming together on a political economy front within the Eurozone. If you look at, for instance, data on the citizens of Europe and what they think about the Euro since the crisis, the sovereign debt crisis, people are much more positive about the euro. It seems like there is that cohesiveness, and the question is, is how does that play out in terms of likely Eurozone reformation that's necessary to help the economy going forward?
LUCREZIA REICHLAN: Yeah, you're right. Definitely, there is much more trust now in the common currency than there used to be a while ago. Of course, we need to reform the economic governance of the monetary union. I think that is difficult for Americans maybe to understand what are the issues, what are the problems of having a common currency but not having a common federal state, so that all the fiscal decisions are decentralized at the level of the national state.
ED HARRISON: What are those problems? What is it that are the most salient problems in the way that the Euro architecture is now?
LUCREZIA REICHLAN: Well, let me just give you some example. Central banks during the crisis, and they have expanded a lot their scope of action, everywhere in all jurisdiction, the balance sheet have expanded, they have implemented policies, which were quite innovative and I think that was the right thing to do. They have a very important function in avoiding a total meltdown of the Economy, especially in 2009, but also going later on. The more they expanded their scope of their action, the more they had an effect on distributions and this distribution effect in Europe means that some countries gain more than others and some sectors of society gains more than others.
This has created some tensions and we have-- because there are national interests that are not-- there are still different national interests even if we have the same money, of course there is a big divide between the debtors and the creditors for example. We now have negative interest rate and the bankers are not happy with negative interest rate, insurance companies are not happy with negative interest rate, but where there is debt, those guys are happy. This creates tension.
Countries are divided among countries which are creditors and countries which are debtors, it's not a very clean division because there are also division within countries, but clearly, Italy for example, my country, has a public debt which is above 130% GDP. Clearly, the low interest rate policy of the ECB is giving it a big boost, and the Germans are worried that this will create moral hazard which means incentives for the Italians to misbehave and to overspend and so on. Then if these would lead to a debt crisis in Italy, this will have consequences also for the Germans and the rest of the Europeans.
This is the discussion that has paralyzed in the past. Now, the German economy is also slowing down, and everybody's pushing the Germans to expand their fiscal policy because monetary policy cannot be the only game in town. They have the so-called fiscal space to do it because their debt level is very low, but they don't want to do it because the Germans don't like that.
ED HARRISON: If they don't do it, then who will? Because we were talking about this in the telephone earlier, I think that the German point of view-- and I'm dialed into the German point of view, is that look, 60% debt to GDP and 3% deficit. Those are the numbers that are enshrined in the treaty. If we're not the ones who are saying these