This blog is to update and inform the foreign readers about the current status of things here in the Netherlands. And in particular with respect to our narcistic party leader Wilders of the PVV. He has set up a website where complaints can be filed about neighbours from Eastern Europe, when they make too much noise. According to the Freedom Party PVV, the site is a great succes, with 14000 complaints filed on the first day and 40.000 after a week.
It is interesting to note the subsequent debate in the Netherlands (and rest of Europe). First of all, it appears that no one recalculates the data of the PVV. So the silly claim of 14000 in one day (meaning 10 complaints per minute, during 24 hours) goes unchallenged. And the same goes for the claim of 40.000 in one week (4 complaints a minute, during 7 days of non stop operation). Even if the PVV would themselves be filling in the forms on their website (which they did in a previous incident, about traffic incidents in The Hague), they would have a hard time typing it all.
Second, we had this bureau of discrimination, stating quickly that the site of Wilders would not constitute discrimination. Well, it seems to me clear that the site is discriminatory. But foreign readers should note that here in the Netherlands we lost our ability to value and protect human rights. We have had judges here that outlined that Wilders was not doing hatespeech (only to be corrected one month later when Breivik demonstrated that the effect even crossed our borders). And some maintain the fiction that this site is not discriminatory. In doing so, we completely forget our historic heritage (liberty of religion, as stated in the Union of Utrecht in the 16th century) as well as the relevant international guidances on human rights. So our Prime Minister turns a blind eye to the issue.
The reasons for doing so are not illogical by the way. Our Prime-Minister essentially chooses to ignore most of the stupid actions of the Freedom Party and its narcist leader. And in psychological terms that is indeed a correct approach which clearly works. The Freedom party is losing a lot of traction in voting polls with the Socialist Party (SP) gaining a lot. And the effect is so strong that Wilders himself starts showing up in interviews and tv programs. And that is new: he would normally just tweet and never give interviews. So he feels the heat and now seeks to regain influence.
But then again, when the subject involves discrimination, one may think twice when turning the blind eye. Fortunatety we have a lot of creative Dutch people that quickly set up all kinds of websites to hug the Polish, to report all scary PVV-MP's and so on. So foreigner shouldn't take this stuff to seriously; it's certainly isn't the common opinion. See also how our Dutch Commissioner Kroes aptly responded: why not create a website to complain about blonded hair? So the thing that our Prime-Minister should do is to inform and advise all foreign nations to use a similar approach: just ignore Wilders on this one.
And while I'm tempted to do the same, I figured it might be good to explain this to the foreign readers. So do note that this whole charade is the proverbial 'cornered cat that jumps strangely' (as we say here in the Netherlands).
03/02/2012
Bernankes blunder or Bernankes brilliance ?
About one year ago, the FED-President Bernanke started giving press conferences to explain the policy decisions of the Federal Open Markets Committee. I was pleasantly surprised then, but I was also a bit wary of the continued low interest rates. With the risk of being hilariously wrong I think his recent choice to state that the FED will keep the interest rate low for a number of years, is a horrible mistake that will cost us significantly.
One thing to remember of course, is that monetary policy at low interest rates is really Bernanke's cup of tea and expertise. In this research paper of 2003, he essentially describes all the possible policy measures of the FED:
- committing to low interest rates for a longer time frame (thus shaping expectations),
- changing the composition of the balance sheet (for example buying treasuries or swapping maturities),
- changing the size of the FED-balance sheet.
And in hindsight we can see that this is precisely the road map that the FED has been following the last years.
So why do I think this long period of low interest rates is wrong?
My main argument is quite simple. For markets to function properly, there must be uncertainty with respect to the real economy but also with respect to the behaviour of monetary authorities. This uncertainty by definition leads to a distribution of market expectations with some being more bearish and others more bullish. Thus, uncertainty is helpful as it creates the maximum liquidity in a market and maintains an overall balance with respect to divergence of expectations of the future.
Following this line of thought, the announcement of future low interest rate (for a long period) by the FED is the equivalent of giving a serious prolongued committment. And while this is done on purpose, with the aim to help out financial markets, I think it reduces uncertainty too much. Market participants will expect the FED to behave this way and the market will be robbed of an important uncertain factor. Thus, the market will become flawed and market expectations will not be balanced or evenly distributed any more. As a consequene the FED only stands to lose now, if for some sudden reason the market circumstances require a reversion of the outspoken low interest course.
I think that right now we are already seeing the effect of the FED behaviour. The effect of the low interest rate now leads some players in the US to desire negative interest rates on bonds. And in my view this is only the beginning. And therefore I am now officially going on record stating that Bernanke - brilliant as he may be - has blundered into a serious misstake here.
One thing to remember of course, is that monetary policy at low interest rates is really Bernanke's cup of tea and expertise. In this research paper of 2003, he essentially describes all the possible policy measures of the FED:
- committing to low interest rates for a longer time frame (thus shaping expectations),
- changing the composition of the balance sheet (for example buying treasuries or swapping maturities),
- changing the size of the FED-balance sheet.
And in hindsight we can see that this is precisely the road map that the FED has been following the last years.
So why do I think this long period of low interest rates is wrong?
My main argument is quite simple. For markets to function properly, there must be uncertainty with respect to the real economy but also with respect to the behaviour of monetary authorities. This uncertainty by definition leads to a distribution of market expectations with some being more bearish and others more bullish. Thus, uncertainty is helpful as it creates the maximum liquidity in a market and maintains an overall balance with respect to divergence of expectations of the future.
Following this line of thought, the announcement of future low interest rate (for a long period) by the FED is the equivalent of giving a serious prolongued committment. And while this is done on purpose, with the aim to help out financial markets, I think it reduces uncertainty too much. Market participants will expect the FED to behave this way and the market will be robbed of an important uncertain factor. Thus, the market will become flawed and market expectations will not be balanced or evenly distributed any more. As a consequene the FED only stands to lose now, if for some sudden reason the market circumstances require a reversion of the outspoken low interest course.
I think that right now we are already seeing the effect of the FED behaviour. The effect of the low interest rate now leads some players in the US to desire negative interest rates on bonds. And in my view this is only the beginning. And therefore I am now officially going on record stating that Bernanke - brilliant as he may be - has blundered into a serious misstake here.
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