10/09/2012

Dutch elections 2012: finally we have our Dutch spring

This fall, the Dutch elections will provide us with something we have all been waiting for: a true Dutch spring. While in the past years our country became a mock of a democracy with too much populist talk and too little true cooperation, we can see that there is change in the air. And I'll try to explain the sequence of events for you: the non-Dutch public.

From Fortuyn to Wilders: enter the populists...
As you know, ten years ago, we had a politician, Fortuyn, who sensed an enormous amount of dissatisfaction of the public with standard-politics and politicians. And he used this intelligently to mobilize the electorate to support his party. For many politicians, his strong emergence came out of nowhere and it was in fact the dawn of a different style of politics. More direct, more populistic and seeking the populist consensus rather than an optimal solution for all the public.

In a twist of history, Fortuyn was murdered. But PM Wilders had been looking closely and chose to emulate Fortuyn with clear and simple statements about Islam, mass-immigration. Essentially he played the classroom-bully for regular politicians, who found it hard to counteract his verbal agility. And in doing so he gained a lot of support. He also found it a good tactic to do some hate-speeching with respect to Islam/moslims but wasn't found guilty. Events in Norway later proved the effect of his hate-speech, but Wilder of course didn't want to take responsibility for infecting a young man's brain with nonsense.

As the 'Freedom Party' of Wilders grew quite big, he could enter into a construction where he helped a minority government rule the country for the past two years. But his party started to crumble from the inside, with some members leaving and explaining the inner workings of the party (Wilders rule is the one and only law). Given that there was no mass immigration of moslims he chose Europe as the new enemy to be used in campaigning. And he set up a notification-site to complain about Eastern European workers. But essentially the paint of his party started to fade and lose its effect.

At the same time, on the far left side, the Socialist Party adopted many of the stylistic elements of Wilders. In true populist style they banged similar drums on issues as Europe (no good), health care (don't touch it) and so on. Given that our Labour party was having too much internal debate due to a too decent leader (Cohen), this far left wing gained a lot of support in polls. The grand power party of the past, the Christian Democrats found themselves being punished once again and discovered that they alienated their constituency considerably by cooperating with Wilders in government.

Wilders breaks up the coalition
This spring, Wilders had to negotiate with the minority government on reforms to ensure that the Netherlands would remain within the 3% deficit criterium. After seven weeks, in which he dropped many of his previous populistic important demands, he suddenly stepped out. And thus, we were heading for new elections. And it is only through the responsible behaviour of five other parties (VVD, CDA, D66, GroenLinks and ChristenUnie) that we managed -in one week - to design and agree on a reform package that would keep us within the 3%

Since then it appeared we would see all the parties banging a populistic drum. Because that is what happened here in the Netherlands. In the last ten years our political debate became quite uncivilized, with name-calling and all kinds of unpoliteness. As such it may have been a reflection of a more general trend in society. Then again, when looking at the deepest desire of the Dutch (we have a government agency doing hefty research into this..: SCP), there was a loud and clear appeal for: less individualism, more respect, more collectivity, more honesty.

Meanwhile, our minority government had grown the habit of not listening to the representative organisations of the citizens. They didn't listen to their formally appointed Counsels of Advice. And they even ignored the negative advice of our Council of State (Raad van State) on legal proposals that were just unfit, undoable or unconstitutional. And thus, over on my Dutch blog, in february this year I wrote a longer blog-posting: Time for a Dutch spring.

The blog post outlines that the Dutch both need and desire a revolt in politics, just as badly as those in other countries of the world (even if we don't think we need it). I pleaded for more balance and more nuance in the political debate. And I hoped for a society where media don't go for the hype and the incident. In sum, the blog outlined that the true Dutch spring is within reach if we all, individually, act resposibly towards each other without letting the economic mantra's getting too much in the way.

Developments in the Dutch election campaign: we respond to decency and honesty !
The essence of what happened here in the Dutch election campaign is that the old populist talk didn't work any more. Citizend could see Wilders doing his usual kinds of populistic stuff, but in the back of our minds they all thought that his previous tough talk turned out to be nothing but a charade. And the same line of thinking was applied to the Socialist Party, at the other end of the politicial spectrum. So far right and far left were losing in the polls.

And while everyone had believed all the debat would be between Socialist Party leader Roemer and Liberal Party leader (and prime Minister) Rutte, a change was happening. Labour Party Leader Samsom chose to not sweet-talk the citizens. He outlined clearly the tough choices to be made (including possible help for a 3rd rescue package for Greece) rather than pretend that no more support would be given. And it is this, more true, nuanced approach that started to resonate. Within a time frame of weeks Samsom suddenly started making up to become just as big as the Labour Party (in the polls).

Rutte, the prime-Minister, made some errors in his campaign, resorting to verbalities rather than seriously answering legitimate questions. In an effort to steer his success he even tried to avoid sitting at the same table in a talk show, with a famous Dutch comedian: Freek de Jonge. The net result was negative however, because the one comedian filling in for Freek, was quite outspoken and well able to counter the verbalities of Rutte with spirited arguments.

Will we have a Dutch spring?
What I think (or perhaps hope) is that the Labour Party has rightly assessed that the public is fed up with the populist talk and scamming that all politicans were resorting to. They chose to position themselves differently than others and chose for honesty and nuance. And it looks as if that approach will get them the majority of votes and the chance to be in the lead for the formation of a new cabinet.

If indeed the PvdA turns out to become the biggest party, then we can rightly state that our election day: September 12, will have marked the beginning of a Dutch spring.


04/06/2012

Eurozone troubles.... all originate in a wish to get back to normal?

In the recent days I've read a book by J. Beyen called: 'het spel en de knikkers'. It's a Dutch autobiography describing the life and career of a banker, central banker, former President of the BIS, Executive Director at the IMF, Minister of Foreign Affairs and so on. Beyen was for example one of the important Dutch delegates at the Bretton Woods conference. And his book - in particular the episode on the golden standard - is fascinating.

Golden Standard as the solution or the problem?

Until the First World War, the golden standard had become the de facto monetary norm for governments/countries. It consisted of a set of fixed exchange rates, which meant that local economies sometimes had to suffer, as devaluation was impossible. On the other hand, it allowed for a lot of international trade and stability and was thus praised and adopted. Until the First World War changed a lot and the golden standard was abandoned.

In his book, Beyen describes the major sentiment of policy makers after the First World War. And he calls it the desire to go 'back to normal'. A central theme in this desire was the re-establishment of the Golden Standard. Beyen also describes that monetary thinking at that time wasn't as advanced as in 1968 (when he wrote the book) He sketches that the system of fixed exchange rates in itself burdened the European economies, but policy makers weren't able to see this at the time: obsessed with getting back to normal.

Current flaws in Euroland thinking: still seeking a back to normal?
The musings and discussions all around Europe these days, in particular the new plans on a banking union, fascinate me enormously. The singlemindedness with which politicians now move forward into more Europe, more joint policy, more deposit guarantee may be variations on a similar desire: back to normal. Back to the Europe from before the crisis, using the same policy tools and concepts that we used before the financial and sovereign crisis broke out.

As a result, we are now witnessing policy makers, fully caught up in their goal to save Europe by designing futher institutions and policies.  But, essentially, our politicians and civil servants fail to recognize that the European car doesn't respond any more to twists of the steering wheel. The only thing that has helped (only temporarily) is throwing money at the problem.

Are we missing something here?
While our monetary thinking may evolved quite a bit since the 1930s, our knowledge of policy and strategy making is not as widely and heavily discussed and modeled. In theory we could all be aware of mechanisms such as groupthink, tunnel vision, decision complexity, resource complexity etcetera. But in practice we fail to properly recognize and address the fundamental errors in policy making.

Having read the autobiography of Beyen, I tend to believe that we are now learning new lessons in the Eurozone. And the lessons are not so much related to monetary theories but to international policy making under stress. I therefore hereby propose the concept of policy illusion to be better recognized in the future. It is the understandable tendency of policy makers to continue doing what you were doing all the time, even when the world fundamentally required a different way of looking.

And so we can now see our policy makers making policy by looking so intensely at the rear-view mirror that they will miss the fork in the road ahead.

22/04/2012

Dutch magazine finds out that preview of Wilders' book is inaccurate...

Now that Geert Wilders has side-stepped in Dutch politics to become an opposition party, he has more time to promote his upcoming book, which will be published in the US. And it will of course be full of his ideology: how the islam is terrorising the West, how he is the victim and what we all should do about it. And a Dutch magazine has been allowed a read through of the book.

The interesting thing that occured is that the Magazine started fact-checking the book. Because somewhere near page 140 (in the Chapter Conquest) Wilders describes how he is being robbed by three Arab youth in his neighbourhood: Canal Island.

The true story however unfolds now in HP Magazine, which checked other books and sources (among which his own brother) to find out that:
- Wilders was attacked from behind and he has never ever seen the attackers,
- he was not in the Canal Island borough when being attacked but a well-to-do neighbourhood.

It's yet another example of how keen he is on living and portraying the world according to his truth.

21/04/2012

Wilders stops his support for minority-government of the Netherlands...

The breaking news here in the Netherlands is that Geert Wilders has left the building. And 'the building' is the so-called Catshuis, the seat of our prime-Minister. It is here that, during the past 7 weeks, the VVD (liberals) and CDA (christian-democrats) have negotiated with the PVV (Freedom Party) to agree on further austerity measures. And our prime-Minister Mark Rutte has just explained to the public that the Freedom Party has stopped the negotiations and was no longer willing to take its responsibility for the measures. CDA-delegate Verhagen has mirrored this remark so we can see that the blame-game has now started.

It is interesting to note that this step of Wilders occured only 12 hours after the group was provided with the data of the Dutch Planning Agency that had calculated the impact of the jointly agreed draft austerity-measures. And our foreign readers should also note that Wilders is increasingly losing momentum. Hero Brinkman has left the PVV, a couple of weeks ago. And the quite unelegant bashing of the Queen as well as Turkish official Gül last week, didn't win him a lot of supporters either (he immediately lost 2 seats in the polls).

So now we find ourselves in a tricky situation in the Netherlands: we need austerity measures and we need our government to act. But the support-construction with the Freedom Party have turned the past 2 years into a standstill with no serious economic reforms and lots of symbolic regulatory measures to please the public (and the PVV-voter).  So while everyone in the Netherlands understands the need to reform, it is also clear that it is now time for new elections. The experiment with PVV has failed to work.

Our Prime Minister has of course phoned the Queen but has not resigned yet. He stated that the situation is so serious that he wants to discuss further steps with Parliament. And he leaves open the possibility that there will first be an agreement on government finances and afterwards elections. While some parties will want to follow this pragmatic route, it remains to be seen if the big opposition parties such as the left wing Socialistische Partij and the Partij van de Arbeid are willing to cooperate.

Geert Wilders has also given a press conference, just now, and he specifically blames Europe. He had outlined that he has stepped away, that he no longer supports the minority-government. And he stated that especially the cuts for elderly pensioners formed a serious issue for him.In the press-talk afterwards he repeatedly outlined that he did not wish to comply with the 3% rule of Brussel. So he started blaming Brussels and he started the election game.

It is clear to me that for Wilders, the duration of his cooperation with the minority-government was long enough to gain creditibility as a true states-man. And as he is losing support among the public, as his party starts to crumble, he must have decided that if ever, now is the time to capitalize on his popularity and to try his jump to become the biggest party in the Netherlands. In doing so he demonstrates once more that his major quality does not pertain to leading a party or a state, but is one of walking away from the debate and challenges that are really relevant to the nation.

14/02/2012

Silly Geert Wilders seeks attention with anti-eastern European website

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.

23/01/2012

France and Germany wish to soften the Basel rules...

It's about a year ago that I outlined in this blog that the European politicians had a choice to either continue the introduction of planned bank regulations (leading to no growth in the future and Europa as an open air museum) or to postpone them. Today we can read in the Financial Times that France and Germany indeed wish to slow down the introduction of Basel 3 rules.

While I think that this is indeed the better way forward, things did change in the last year. We have become aware that our governments in Europe are quite unable to tackle the serious issues at hand. It took Merkel and Sarkozy a year to discover that their Deauville agreement with Private Sector Involvement was a shot in their own foot. And similarly they needed quite some time to discover that there was some merit in the banks' arguments on the timing and impact of Basel 3.

But why, why does it have to take a year before this sort of insights sink in?