Back in the heady days of 2006, some 30,000 cranes, roughly a quarter of total global capacity, were busy whirring away in Dubai. Today most of these devices have either left to find service in other parts of the globe, or lie silent, unused and unloved.

In what is only the latest sign of the ongoing property snarl-up affecting the emirate, Nakheel, Dubai World’s property developer subsidiary, asked on Wednesday for a delay in their next debt payment. The move was widely seen by investors as a technical default, raising concerns about investment in risky assets across the globe. So, while their company slogan may well be that the sun never sets over Dubai World, the fact is that Dubai World’s sun not only no longer shines, it is suffering from something more like a total eclipse.

"Cutting rates by 50 basis points here and there is not going really diminish the appeal of the ruble,” said Manik Narain, an emerging markets strategist at Standard Chartered Bank Plc in London. “In terms of nominal interest rates Russia (at 9% as of 24 November) is still offering the highest yields in the emerging market space and in an environment where oil prices are remaining relatively well supported we think that the ruble will continue to be seen as an attractive way to position for global recovery."

Sorry, and I apologize in advance: in this post I'm going to be a nit-picker. The question in hand is the Eurozone third quarter growth rate, and the story is all about differences (between countries) and these differences in the key cases (France and Germany) are in many ways all about inventories. So maybe I should have titled the post "all about inventories", following Pedro Almodovar's cinematographic lead in cycling and recycling that old "all about Eve" metaphor - necessity is the mother of invention, and movements in inventories are progenitors of both growth, and of that notorious double dip difficulty. So just which one of these is it that we have on our hands here?

Indeed, the fact that the devil, as always, lies in the details should not really surprise us since economics isn't that different from other sciences, and isn't such a difficult subject to work with - even if some journalists and lot of bank analysts are able to make it look like it is by managing so frequently to make a dogs dinner out of what should really been an ever so plain, ordinary, and simple vanilla-flavored ice cream. Let me explain.

Nouriel Roubini is not a man who is known for mincing his words. “We have the mother of all carry trades,” he tells us, “Everybody’s playing the same game and this game is becoming dangerous.” There is a “wall of liquidity” sweeping the planet, pushing asset prices ever higher in one country after another. I wholeheartedly agree.

Investors across the globe are taking advantage of the ultra low interest rates on offer at the US Federal Reserve to borrow in dollars in order to buy assets like government debt, equities and commodities, in the process, as Nouriel says, fueling “substantial” booms that if not checked in time may sow the seeds of yet another financial crisis. This is a classic example of the so called “carry trade” in which investors borrow in countries with low interest rates to invest in higher-yielding assets.

Well, if John Lennon had still been around today, he would undoubtedly have entitled his song Norwegian oil, but whatever way you want to put it Norway is back in the news, and this time not because of adolescents who find themselves with no alternative to sleeping overnight in the bath-tub, but rather because its central bank has been put in a position where it has little alternative but to raise interest rates, even if in fact it would be more comfortable for it not to do so. So, not being in the habit of looking for a quiet life, decision makers over at the Norges Bank decided last week to put themselves in the hot seat by lifting the banks main rate by 25 basis points to 1.5 per cent and in this inauspicious and modest way entered the history books as the first European central bank to raise interest rates since the financial crisis started to ease.

As I say, in doing so the bank put itself straight into the cockpit, since by raising interest rates it became a leading target of interest for that curious but ever growing band of enthusiasts who practice what has come to be known as the “carry trade” whereby investors borrow in countries with low interest rates to invest in higher-yielding assets.

Well, it is not as if I relish rubbing salt into old wounds, but this quote from the latest piece by Ben Hall in Paris and Ralph Atkins in today's Financial Times is just too good to resist.

French manufacturing output rose at its fastest rate for nine years, according to a survey on Monday, confirming that France has become the economic powerhouse of continental Europe. Purchasing managers’ indices for manufacturing showed France performing significantly better than the continent’s other main economies – thanks to robust domestic demand.

A specter is haunting Europe, but this time it is not the specter of revolt by the popular masses, or even one of yet another wave of bank bailouts. No, the specter which is currently stalking the corridors of Europe's most prestigious institutions is one of a Spanish economy which stays on a flatline while Europe's other economies, one by one, start to struggle back to life.

And the main reason that this particular ghostly image is giving everyone so many sleepless nights is because Europe's current institutional structures, and especially the monetary policy tools available at the ECB, are scarcely prepared for such a nightmare eventuality.

Finland, we have recently been told, is the world's most prosperous nation, and it is deemed to be prosperous not only in monetary and financial terms, but also in terms of the implicit wealth of its democracy and governance. This striking assessment is to be found in the latest edition of what is known as the "Prosperity Index", an initiative launched by the Legatum Institute, a London-based think-tank. In fact Finland took first prize - up from third last year - and was closely followed by Switzerland and the other Scandinavian countries (Sweden, Denmark and Norway - also see Doug Muir's "debunk" of all this brouhaha here).

Finland was also notable for its recent second-place showing in the latest edition of the Tech-competitiveness index released by the Economist Intelligence Unit. The Index, which is commissioned by the Business Software Alliance, analyzes data on 66 countries around the world in an attempt to determine which of them have the most competitive information technology sectors. The study, now in its third year, examines variables like the overall business climate, the pervasiveness of the tech infrastructure, the strength and transparency of its legal system,and the availability of a well-educated and technologically literate workforce. As I say, Finland came in second to the United States, displacing last year's runner-up, Taiwan.

Can't you just see it?

According to Eurostat in both the euro area (EA16) and the EU27, the seasonally adjusted household saving rate continued to increase and the household investment rate to decrease n the second quarter of 2009. In both regions the fall in business investment rates and profit shares continued, though at a lower rate. In the second quarter of 2009, the seasonally adjusted gross saving rate of households was 14.4% in the EU27 compared with 13.5% in the first quarter of 2009. In the euro area, the household savings rate was 16.5% in the second quarter of 2009, compared with 16.0% in the previous quarter. In both cases these were the highest rates recorded since the start of the time series in the first quarter of 1999.

Whoever would have thought that some people once called economics the most dismal of sciences? Certainly, as the current crisis goes on and on, those of us who consider ourselves to be economists scarcely are able to find the time to squeeze in a dull moment, even here and there. But even at a broader level, interest in that most dismal of dismal topics - the theory and practice of central banking - seems now to fire up levels of enthusiasm here in Spain that make even the appetizing prospect of a forthcoming Real Madrid-Barça football match pale in intensity. Even if it is the case, I have to admit, that the everyday Johnny (or Jill) come lately sitting in the bar still - truth be told - prefers the sports columns of the daily newspapers, or the lascivious details of the latest romantic adventure of one of the rich and famous to a careful perusal of the detailed minutes of the last policy rate setting meeting over at the central bank.

The reason for the sudden and unexpected upsurge in interest should, I would have thought, be obvious - since with 85% of Spanish mortgages being variable (and thus determined by the ECB policy rate), and Spain's economy sinking into an ever deeper pit, the impact of the coming decisions (or even the hints at possible future decisions) have entered peoples lives like never before. And this is doubly the case in an environment where - as Bloomberg inform us this morning - central bankers from across the global, from Washington, to Sydney, to Oslo are likely to take increasing account of future accelerations in asset prices in an attempt to avoid repeating policy mistakes that are presumed to have inflated two speculative bubbles in a decade, culminating in the worst financial crisis since the Great Depression.

Well, I never thought I would have to wait very long to get some confirmation of my last post on things that could go bump in the night in France, but even I wasn't expecting confirmation of what I was trying to get at so quickly. Now, according to Frank Atkins in The Financial Times this morning:

The eurozone has reported the first year-on-year fall in bank lending to the private sector, strengthening the case for the European Central Bank to maintain its ultra-loose interest rate policy. The latest eurozone credit statistics indicated lending had been scaled back at an unprecedented pace, even though signs have become stronger that the 16-country region’s economy has stabilised.

Well here's the first big news from yesterday's global manufacturing PMI reports: Spain's manufacturing contraction accelerated in September. Of course, how could it be otherwise? But I do wish all those people who are still in denial on what is now an all too evident reality would finally come out of the woodwork and do something. If Spain really goes down, it will drag the rest of the Eurozone with it, like Moby Dick, taking Ahab Trichet and his crew sinking down to the murky bottom with him. Brussels, Frankfurt, you need to react. Zapatero has to go, and he has to go now. Spain needs a set of rational policies to deal with the crisis, before things really get out of hand.

Spain's September PMI

German voters gave Chancellor Angela Merkel the green light for a second term on Sunday, along with a clear mandate to form a new government with the liberal Free Democrat Party (FDP). But just what exactly is the new government likely to do? Merlek has been quick to pour cold water on any idea of early tax cuts, “I expect we’ll agree very quickly on tax policy, especially when you look at the leeway we have with the budget," she is quoted as saying.

Angela Merkel's room for maneuver is limited by the fact that Germany has been steadily racking up debt to tackle the crisis. Only today the Federal Statistical Office have said that the deficit in the overall public budget increased to euro 57.2 billion in the first six months of this year from euro 6.9 billion a year earlier as spending rose sharply (8.1%) and revenue declined (1.7%). No figure was given as a proportion of gross domestic product, but it seems to be around 4.89% of the GDP registered in the first six months (unadjusted GDP was reported by the Federal Statistics Office as €1,168 billion over the same period).

With the timing of the latest G20 meeting set to coincide with the run-in to the German elections, acrimonious debate has not been absent. But even as the passions generated by the arrival of voting day subside, it is clear that just beneath the surface their lie some simmering problems which simply will not go away. Despite the fact that nothing is really on the table that will make that much difference in the short run, I think the structural transformation that they are carrying out at G20 level is going to be very important in the longer term in finding eventual solutions.

According to Bertrand Benoit in the Financial Times the G20: "will endorse a report from the Financial Stability Board that calls for bonuses to be linked to the long-term success of financial companies and not excessive risk taking." Well this of course sounds absolutely fine. I have absolutely no objection, but we need to understand that from a macro economic point of view it is virtually irrelevant, with the added detail that the implications are that a recovery in growth will be slower yet less risky. Evidently the issue of why there has been so much liquidity floating around (and this has been the heart of the problem) has little to do with bank bonuses and salaries.

Hungary's economic correction still fails to convince. Indeed I am not the only one who remains unconvined by the viability of what is currently taking place it seems, since according to the opposition supporting local daily newspaper Magyar Hírlap, none other than the Hungarian Prime Minister himself may be having doubts, as he is reportedly thinking of leaving the helm of the struggling ship placed under his charge before the next general election, which is scheduled to take place sometime early next year.

If this version of events is ultimately confirmed it will only add to the IMFs growing problems out East, since events in Latvia are not going at all according to their liking - see FT Alphaville's Izabella Kaminska's "Another Latvian wobble" of last Friday - and indeed Latvia’s government rapidly cobbled together another 275 million lati ($575.6 million) in spending cuts for 2010 yesterday after EU Economic and Monetary Affairs Commissioner Joaquin Almunia called on Latvia on Friday to “renew a national consensus”, and Prime Minister Valdis Dombrovskis paid a flying vist to Brussels, following a parliamentary vote against sending a real-estate tax bill through to the committee stage, implicitly rejecting part of an agreement with the IMF and EU. How many times this year does that now make it that the national consensus has had to be urgently renewed under directives from either Washington or Brussels, could someone please remind me?

The looming problem of what will happen as and when some of the other Eurozone economies eventually start to recover while the Spanish one languishes in decline is finally starting to make the columns of the global financial press. Yesterday Thomas Catan had an article in the Wall Street Journal entitled Spain's Struggles Illustrate Pitfalls of Europe's Common Currency while Emma Ross-Thomas and Gabi Thesing also had a similar sort of piece in Bloomberg, under the heading Europe’s Two-Speed Economy Complicates ECB Rate Plans.

So the difficulty Spain could represent for the rest of the Eurozone is now it seems becoming the "Topic du Jour".

China’s economy showed new signs this week that it continues to maintain momentum with the announcement that investment, industrial output and credit all expanded more rapidly in August.

Output and investment increases both came in ahead of analysts’ forecasts and came on the back of a string of July data that had suggested the recovery might be weakening. The one notable exception was, however, on the trade front, where the decline in exports and imports compared to August 2008 was sharper than expected.

'As far as I am concerned, this is ... the most complex crisis we've ever seen due to the number of factors in play'
Spanish Economy Minister Pedro Solbes speaking to the Spanish radio station Punto Radio September 2008

“‘The global imbalances have to add up to zero and so, if the US is going to be less the consumer importer of last resort, then other countries are going to need to be in different positions as well."
Director of the US president’s National Economic Council Larry Summers, speaking over lunch with the FT’s Chrystia Freeland.

As far as I am concerned, this is ... the most complex crisis we've ever seen due to the number of factors in play.
-Spanish Economy Minister Pedro Solbes speaking to the Spanish radio station Punto Radio September 2008

The global imbalances have to add up to zero and so, if the US is going to be less the consumer importer of last resort, then other countries are going to need to be in different positions as well.
-Director of the US president’s National Economic Council Larry Summers, speaking over lunch with the FT’s Chrystia Freeland.

Global factory business activity expanded in August for the first time since May 2008 in a broad-based revival, witnessed especially in the United States and Japan, according to the global PMI index, produced by JP Morgan. The index rose to a 26-month high of 53.1 in August.

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