Jacob Christensen

Or something. Here is a snapshot of the queue outside of Merlin’s store on Vestergade in Odense yesterday. Needless to say, local media reported this as “chaos on the high street”. Today, Sterling Airways ceased operations.

It is always interesting to watch the effects of an international crisis close up. In my case, I had the opportunity to see the massive (well, 150 persons according to media) queue waiting outside of the Merlin branch on Vestergade here in Odense. Merlin – a consumer electronics chain owned by … you’ve guessed it … an Icelandic investment group – stopped its payments due to insolvency on Monday but was taken over by a Danish chain. So today saw a fire sale in the Merlin shops.

Meanwhile, Iceland is now being helped by the other Nordic countries in a working group led by Sweden.

PS: I have a picture of the queue but my internet connections are a bit erratic.

Out of pure spite, I just did a check on my earlier mentioned savings scheme. As you may recall, I originally placed 75.000 SEK in early 2002 and after peaking at 90.000-something, its value had fallen to 63.000 SEK on 6 October and 57.000 SEK on 10 October. The latest reading was 54.775 SEK – I suspect that Friday’s bloodbath isn’t included in this – to which we should add that the Swedish krona has taken a bit of a hammering because the krona, unlike the Danish krone, isn’t pegged to the Euro.

Anyway, if a serious economist reads this, I have a question: I’m not an economic historian, but I recall reading somewhere – Galbaith’s “The Great Crash”? – that dramatic fluctuations (including big rises in stock indexes) are part of the kind of crisis we are in – this was why I didn’t put too big an interest in the triumphant reports of stock market resurgences in later weeks. Am I right? And: What exactly causes these bust-and-boom-and-bust movements?

Okay, that was two questions.

PS: Just for the record: These are not my only savings. Besides pensions schemes, I have some 100.000s tucked away in other schemes. And I live in a rented apartment.

Paul Krugman thinks so:

The IMF ministers have endorsed the G7 plan — but there isn’t any plan.

(In case you have no idea what I’m referring to)

McClatchy looks at something called data (yes, data!) instead:

Federal Reserve Board data show that:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

The “turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007,” the President’s Working Group on Financial Markets reported Friday.

Tyler Cowen has not given up hope (no, really!):

We need a new banking system. A new banking system takes years to build. We will be in an economic downturn for years and because this crisis is global it will not be better than Japan in the 1990s. It is hard to build a new banking system through the current, old, nearly insolvent banking system.

A new banking system, restructuring of state-finance relations (possibly even temporary or long-term nationalisations), recreating an international banking regime, realignments between the US, Europe and China: Political scientists and economists who are into institutional analysis will have a field decade in the coming years trying to sort all of this out.

PS: Here’s Helmut Schmidt (in German) on the financial crisis a couple of weeks ago.

The 75000 SEK which had fallen to 63000 SEK a couple of days ago, are now down to 57000 SEK.

Fascinating.

I’ll just steal this quote from Messrs Eichengreen and Baldwin and note that this crisis really ought to provide political scientists who are into studying the development (or lack thereof) of inter-state political coordination with lots of work in years to come:

Global economic and financial leaders are convening this weekend in Washington DC for the annual meetings of the IMF and World Bank. G7/8 finance ministers will meet Friday on the sidelines of the Fund/Bank meetings to craft their response. The global financial community will assemble the next day at IMF headquarters. This is a golden opportunity for agreeing a coordinated plan.

The authors of the thirteen essays do not agree on every point (there was little or no coordination among them as this initiative was launched on mid-morning of 8 October). Nevertheless, there is a remarkable degree of consensus on what must be done.

Policy makers must move boldly to stabilise the financial system. The basic elements are:

* A quick bank recapitalisation with global coordination
* A guarantee of deposits and/or loans with global coordination
* Further, coordinated macroeconomic stimulus.

Paul Krugman on the Euro, nominal wages and Polish plumbers.

The Danish Economic Council published its twice-annual report today. The report has some numbers and figures on savings quotes and private savings.

This one is not too surprising:

And this one – which tracks the dramatic increases in house prices since the late 1990s – not really, either.