from the hip

When Saul A. Kripke published his thought in Naming and Necessity everybody was either furious, or exhilarated, or thoroughly perplexed (see also The New Theory of Reference - Kripke, Marcus, and Its Origins (Synthese Library) ). Naming and Necessity laid out a new way of thinking about the relation between language and the world. Kripke proposed the theory of direct reference, where a name “rigidly designates” its referent. That is, a name is a “tag” attached to its referent, with no descriptive content. Kripke also proposed an alternative theory for how names are transmitted, the causal theory of names.

It is somewhat interesting to view the words (names or tags) that are used on the current international crisis from such a perspective. Doing that, is becomes remarkable how the names used to denote this beast have changed over time.

It started out as the US sub-prime mortgage crisis. Then as is spread, it became simply the mortgage crisis, as it was now international. Then the credit crisis and the credit crunch. Then that changed into the banking crisis, and to underscore the fact that it is indeed international, the international banking crisis. Then, as other types of international financial institutions, eg. AIG, started to feel its impact visibly, it became the financial crisis.

Now, the naming used implies it has become an even more general crisis, affecting even more sectors of the economy. Thus, now we call it the recession. Some have even started to use the word depression, and started to build connotations linking it phenomenologically to the great depression.

It goes on and on - the financial crisis. Now Bank of England slashes interest rates to a 53-year low. The Independent writes:

Interest rates were today slashed to a 53-year low to fight off recession - but fears were growing that hard-pressed homeowners would fail to reap the benefit.

The shock 1.5 per cent cut by the Bank of England’s Monetary Policy Committee (MPC) is the biggest move since March 1981 and brings rates to 3 per cent - last seen in 1955.

Stock markets were stunned by the size of the cut and experts predicted rates could reach an all-time low of 1.5 per cent by mid-2009 as the Bank desperately bids to ward off a prolonged slump.

Also, the European Central Bank cut interest rates by 50 basis points today and signaled another reduction was possible later this year. In Germany the no. 2 bank has decided to tap into the government rescue plan, and the government will propose tax breaks on car purchases to stimulate spending!

The bottom still seems distant.

See also:

• New York Times: European Banks Reduce Rates, Some Sharply
• Guardian: Shock as Bank of England slashes rates to 3%
• New York Times: Bleak Reports Keep Markets in Free Fall
• Guardian: Wall Street and London shares plunge

The international financial crisis has lead to a spur of initiatives world wide. And now we have had the US rescue plan, with 700 billion USD. In an unprecedented move, the German government has unveiled a €500 billion ($679 billion) rescue plan to shore up the banking system after Sunday’s emergency summit of euro zones nations, where leaders agreed to guarantee new bank debt and inject capital to unfreeze money markets and restore confidence in the financial system. Der Spiegel reports:

The German Finance Ministry said Berlin’s plan includes a €400 billion financial market stabilization fund to guarantee loans and €80 billion to recapitalize the banking sector through the government taking stakes in banks.

An additional sum of €20 billion is also being set aside as a provision to cover losses, according to a statement from the Finance Ministry.

“We’re taking rigorous action to ensure that what we have experienced doesn’t get repeated,” Chancellor Angela Merkel told a news conference.

This is, of course, great news. The German packet is alone almost as large as the US packet. And that begs the question: Is the US packet big enough?

See also:

• New York Times: U.S. Investing $250 Billion in Banks
• Times: President Bush poised to follow UK with $250bn seizure of bank stakes
• New York Times: Stock Slump Imperils Putin’s Effort to Pump Up Russian Wealth, and His Legacy

While the economic downswing is still making itself felt in the US, it is now also hitting several European countries hard. And inflation is soaring, and hit a record high of 4.1 percent last month.

“There’s no obvious trigger for strong economic growth in Europe until the end of 2009,” says David Owen, chief European economist at Dresdner Kleinwort in London. “Massive [financial] imbalances need to be worked out, and the corporate sectors in many countries remain in a substantial deficit.”

Consumer confidence for the euro area has fallen to negative 29.7, the lowest it has been since 1993. And the news about the plunge in factory orders in Germany, led to the following comment, reported in the New York Times:

“It now looks likely that the euro zone will be the first major economy to fall into recession,” Jonathan Loynes, the chief European economist for Capital Economics, wrote after the report of sagging orders in Germany.

Great Britain

Royal Bank of Scotland, Britain’s second-largest bank, recently posted its first loss in 40 years after taking a £5.9bn hit from the credit crunch. And Barclays, the third-biggest bank, took a fresh £2.8bn write-down. Also, the price of houses are dropping rapidly, according to Guardian

the Halifax said house prices last month were 11% down on a year earlier - the first double-digit decline since its monthly healthcheck of the market was first published 25 years ago.

House prices back to 2006 and still falling, says Times. And new housing orders are down 33%. And, of course, home repossessions surge.

Business groups and City analysts warned that deep and rapid cuts in the cost of borrowing would be needed next year to pull Britain out of its first recession in more than 15 years. House prices are falling more rapidly than they were in the property crash of the late 1980s and early 1990s

It would seem a possible recovery in Britain will not be aided by increased consumer spending in the short term!

Recession in Germany?

Spiegel online writes that the German economy may have shrunk in the second quarter, according to early reports, and that the outlook for industrial production isn’t lively. Germany could slide into recession, and the German economy may have shrunk by around one percent. They also note that:

German factory orders were down by 2.9 percent in June from May, and orders from abroad for German goods plunged by 5.1 percent. Production at German factories rose by 0.2 percent in June — less than expected

Spain in deep trouble

Portugal, Italy, Greece, and Spain all face severe challenges. In Spain, the imploding domestic housing market has pushed the unemployment rate to 10.7 percent. The number of bankruptcies in the building sector is exploding, and one third of the job losses stems from the construction sector. As well, the housing market is stalling. The inflation is about 5 per cent.

The US

The credit cruch is still being felt, and so is the reversal of the wealth effect and high oil prices. In addition to bad news from the banking sector, Fannie Mae, Freddie Mac, Indy Mac, and so, in the latest sign of the deepening troubles, G.M. recently reported a second-quarter loss of $15.5 billionfollowing a loss of $8.7 billion reported earlier by Ford. Car sales are dropping, especially sales of American cars.

Guardian notes that:

The US mortgage finance empire Freddie Mac yesterday predicted the worst housing slump since the Great Depression as it set aside $2.5bn (£1.28bn) to cover credit liabilities caused by delinquent loans and foreclosures.

And in New York Times, Peter S. Goodman recently wrote (August 1) that “More Arrows Seen Pointing to a Recession”.

Overall

Pretty gloomy still. The most positive piece of news is the slight drop in oil prices. But still serious signals of a slowdown of growth and possibly recession both in Europe and the US.

There has been inrest between the two “independent” republics in Georgia - Abkhazia and South Ossetia - for some time.  The conflict, says New York Times, has tensed considerably recently:

The recent violence has been the worst in the region since June 2004, shortly after President Mikheil Saakashvili of Georgia came to power vowing to reassert the country’s control over South Ossetia and another rebel region, Abkhazia.

Also a part of the bigger context of this conflict is that Georgia has expressed a wish to become a part of NATO. A move that is not very popular in Russia and it’s premier, Putin.

Now Russia has sent troops and dozens of tanks and armoured vehicles into the breakaway Georgian province of South Ossetia. Also, Russian fighter jets have been shot down by Georgia. Russia is claiming that it is protecting its citizens. However, Tbilisi’s pro-Western Government describes it as an act of war.

More than 1.000 people have so far been killed. This is a very serious conflict. The US is currently sending an envoy to the area. Der Spiegel writes:

European diplomats have been trying to maintain peace in Georgia with financial incentives and promises of partnership. But now that bombs have started to fall, no one in Brussels, Berlin or Paris quite knows what to do.

The Georigian President calls it a perfectly timed attack, and refers to the fact that the eyes of the world are on Beijing and the Olympic Games.

I have a bad taste in my mouth about this. To some extent it reminds me of Hitler’s Germany attacking Poland and excusing the attack with reference to unrest in the border area and transgressions by Poland. I guess we will shortly learn more about what exactly Putin’s reorientation of Russia entails.

I hope the continuation will not be the case as it was in the case of the Germany-Poland conflict!

See also:

• Der Spiegel: Is this the First War between Russia and a Former Soviet State?
• Times (London): Georgia says Russian tanks mean ‘war’ in South Ossetia
• Guardian: Georgia accuses Russia after jets bomb South Ossetia border area
• Der Spiegel: How the Caucasus Erupted
• Politiken (Danmark): En frossen konflikt

Power is the ability to get things done. Viewed from such a perspective it is a magic wand that can be used to make wonderful things happen. Viewed from a somewhat different angle, power is a good that can be traded or sold.

A German professor of law used his power this way:

A court in Germany sentenced a law professor to three years in prison for giving students better marks in exchange for sex and money.

The 53-year-old from the central city of Hanover admitted accepting 156,000 ($318,300) euros in total for awarding doctorates to students who failed to make the grade.

The man also told the court in nearby Hildesheim he had given female students better marks in return for sex.

The academic, whom the court on Wednesday convicted on 68 counts of corruption, said he had resorted to taking bribes because he was having financial difficulties.

His net monthly salary of nearly 5000 euros had not been sufficient to pay off his debts, the court heard.

I am not sure why the court didn’t ask the obvious question: How did sex from female students improve his financial situation?

The American subprime crisis has consequences in a large numner of countries around the world. The German newspaper Der Spiegel recently reported that German banks could lose as much as 70 billion Euros (about 110 billion US dollars):

German Banks Could Hemorrhage 70 Billion Euros

The fallout in Germany from exposure to America’s subprime crisis may turn out to be far bigger than previously feared. One major newspaper is putting estimated losses at a whopping 70 billion euros, while a prominent politician warns that the US recession has already arrived in Germany.

German banking executives fear the current financial crisis (more…) is quickly shaping up to be the worst since 1929. In its Friday edition, mass-circulation daily Bild newspaper cites banking insiders who predict that total losses at German banks from the American subprime mortgage loan crisis could hit the €70-billion ($111 billion) mark.

A number of large German banks, Deutche Bank, UBS, WestLB, Bayern LB are writing down billions of euros. Several of the banks have received government injections of money to keep them floating. The German banking system is shaky and losing customer confidence.