Saturday, December 31, 2011

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The Austerity Delusion
 
As Finances Tighten, Furloughs Give Way to Pay Cuts
The New York Times
October 31, 2010    




Vote.  Vote your interest.      Congress hears only the loudest voices.

http://krugman.blogs.nytimes.com/?s=austerity

December 21, 2011, 4:48 pm

Olivier Blanchard Isn’t Very Serious

And that’s a very good thing.
December 19, 2011, 10:31 am

Hungary’s Constitutional Revolution

The details explained.
December 19, 2011, 9:36 am

Keynesophobia

Refusing to take yes for an answer.
December 19, 2011, 9:20 am

Irish Competitiveness (Wonkish)

About those unit labor costs.
December 18, 2011, 1:45 pm

Twice-Told Irish Tales

Not one but two premature declarations of success.
December 17, 2011, 9:05 am

They Have Made A Desert, Ireland Edition

About that recovery.
December 14, 2011, 8:41 am

Mario and the Confidence Fairy

“Technocratic” = delusional.
December 13, 2011, 8:41 am

Receding Inflation In Britain

As predicted.
December 12, 2011, 9:10 am

No Draghi Ex Machina

The ECB is not coming.
December 10, 2011, 6:00 pm

Lessons From Europe

Still a Keynesian world.
December 10, 2011, 11:32 am

The Long And The Short Of It

Snowed in on budgets.
December 9, 2011, 8:41 am

The Summit To End All Summits

Did they just kill the euro?
December 8, 2011, 9:05 am

Still Fiscalizing

Germany still won’t face reality.
December 7, 2011, 9:12 am

They Have Made A Desert, And Called It Adjustment

It’s all fine, except for the economy and the people.
December 6, 2011, 8:55 am

Irish Pfizer Smiling

Of GDP, GNP, and austerity.

December 5, 2011, 11:01 am

Lake Wobegon, Europe

Where are the trade balances are above average.
December 1, 2011, 10:11 am

The Summer Of Confidence

Do you believe in fairies?
November 30, 2011, 10:24 am

Bleeding Britain

The bleeding will continue until the patient recovers.
November 30, 2011, 8:49 am

Questions Of Confidence

Of the ECB and the confidence fairy.
November 28, 2011, 8:23 am

Oh? ECD

VSPs warn about the mess they made.
November 27, 2011, 10:10 am

Hedge Fund Ireland

Debt without deficits?
November 26, 2011, 12:09 pm

Mysterious Europe

What’s the plan? What’s the story?
November 25, 2011, 10:59 am

Death By Hawkery

Deficit and inflation hawks are killing the world economy.
November 25, 2011, 8:50 am

Death By Accounting Identity

Arithmetic has a well-known, well, you know.
November 22, 2011, 4:15 pm

The Big Drag

Austerity, we does it.
November 21, 2011, 6:47 pm

Real Austrian Economics Updated

Why the widening spread?
November 21, 2011, 2:15 pm

Looking For Insight In All The Wrong Places

Why do inflationistas have such a hold?
November 14, 2011, 9:42 am

The 1% Across Space And Time

This time is different.
November 14, 2011, 9:14 am

Austerity Then And Now

Not the same, at all.
November 11, 2011, 3:20 am

Crat Me No Techno, Continued

Pretend wise men versus democracy?

November 7, 2011, 8:53 am

Wishful Thinking And The Road To Eurogeddon

Fallacies wrapped in fallacies, and disaster.
November 5, 2011, 1:05 pm

Roubini On Internal Devaluation

Grim but good.
November 1, 2011, 9:01 am

Eurodämmerung

Eek. And I mean that.
October 31, 2011, 10:17 am

Cameron’s Fantasy

That was no fairy, it was the Lesser Depression.
October 30, 2011, 5:38 pm

European Doom Loop

Still looping.
October 26, 2011, 6:26 am

The Amnesiac Economy

Forgetting can hurt you, badly.
October 25, 2011, 9:02 am

Very Serious Americans

Slash spending now, or we may be forced into austerity!
October 23, 2011, 4:22 pm

More Grim Euro Thoughts

Of expansionary austerity and super-AIGs.
October 22, 2011, 11:05 am

There’s A Hole In The Bucket

Europe goes in circles.
October 21, 2011, 11:08 am

Trying To Unwarp The Debate

Of demonstrators and the austerity class.
October 18, 2011, 10:22 am

Levels And Changes

Misinformation from Investors Business Daily.
October 18, 2011, 9:55 am

Surprise Anti-Austerians

Bankers for stimulus.
October 17, 2011, 8:14 am

European Spillovers

Are they why it has gone so wrong?
October 14, 2011, 7:49 pm

The Critics Of Modern Macro Are Wrong

It’s much, much worse.
October 13, 2011, 9:01 am

Low Rates As A Sign Of Failure

Cameron’s delusions.

There are 210 results.






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@12:30, 12/31/11 8

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  • TimesPeople recommended a user:
    Dec 30, 2011
    greensense
  • TimesPeople recommended a user:
    Dec 30, 2011
    Craig Simon, Ph.D.
    • Craig Simon, Ph.D. posted to Twitter an article:
      Mar 25, 2011
      The Austerity Delusion
      “Great Krugman NYT article on phantom risks and confidence fairies. The Austerity Delusion - http://nyti.ms/f5cxxy” 

      " Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.
      Fred R. Conrad/The New York Times
      What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.
      It’s too bad, then, that these days you’re not considered serious in Washington unless you profess allegiance to the same doctrine that’s failing so dismally in Europe.
      It was not always thus. Two years ago, faced with soaring unemployment and large budget deficits — both the consequences of a severe financial crisis — most advanced-country leaders seemingly understood that the problems had to be tackled in sequence, with an immediate focus on creating jobs combined with a long-run strategy of deficit reduction.
      Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.
      So jobs now, deficits later was and is the right strategy. Unfortunately, it’s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we’re constantly told that if we don’t slash spending immediately we’ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we’re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.
      How’s that story working out so far?
      Self-styled deficit hawks have been crying wolf over U.S. interest rates more or less continuously since the financial crisis began to ease, taking every uptick in rates as a sign that markets were turning on America. But the truth is that rates have fluctuated, not with debt fears, but with rising and falling hope for economic recovery. And with full recovery still seeming very distant, rates are lower now than they were two years ago.
      But couldn’t America still end up like Greece? Yes, of course. If investors decide that we’re a banana republic whose politicians can’t or won’t come to grips with long-term problems, they will indeed stop buying our debt. But that’s not a prospect that hinges, one way or another, on whether we punish ourselves with short-run spending cuts.
      Just ask the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery.
      That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent.
      And then there’s the British experience. Like America, Britain is still perceived as solvent by financial markets, giving it room to pursue a strategy of jobs first, deficits later. But the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback. As I like to put it, the Cameron plan was based on belief that the confidence fairy would make everything all right.
      But she hasn’t: British growth has stalled, and the government has marked up its deficit projections as a result.
      Which brings me back to what passes for budget debate in Washington these days.
      A serious fiscal plan for America would address the long-run drivers of spending, above all health care costs, and it would almost certainly include some kind of tax increase. But we’re not serious: any talk of using Medicare funds effectively is met with shrieks of “death panels,” and the official G.O.P. position — barely challenged by Democrats — appears to be that nobody should ever pay higher taxes. Instead, all the talk is about short-run spending cuts.
      In short, we have a political climate in which self-styled deficit hawks want to punish the unemployed even as they oppose any action that would address our long-run budget problems. And here’s what we know from experience abroad: The confidence fairy won’t save us from the consequences of our folly."
      There has been no positive change.

      http://krugman.blogs.nytimes.com/2011/12/31/us-net-investment-income/

      http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html?ref=opinion

      " “The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as F.D.R. was about to prove him right by trying to balance the budget too soon, sending the United States economy — which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.
      Fred R. Conrad/The New York Times
      Paul Krugman
      Go to Columnist Page »
      Blog: The Conscience of a Liberal

      Readers’ Comments

      Readers shared their thoughts on this article.
      Unfortunately, in late 2010 and early 2011, politicians and policy makers in much of the Western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again.
      In declaring Keynesian economics vindicated I am, of course, at odds with conventional wisdom. In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can’t create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump. And we also predicted the resulting political backlash.
      So the real test of Keynesian economics hasn’t come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans — and have suffered Depression-level economic slumps, with real G.D.P. in both countries down by double digits.
      This wasn’t supposed to happen, according to the ideology that dominates much of our political discourse. In March 2011, the Republican staff of Congress’s Joint Economic Committee released a report titled “Spend Less, Owe Less, Grow the Economy.” It ridiculed concerns that cutting spending in a slump would worsen that slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster, not slower, growth.
      They should have known better even at the time: the alleged historical examples of “expansionary austerity” they used to make their case had already been thoroughly debunked. And there was also the embarrassing fact that many on the right had prematurely declared Ireland a success story, demonstrating the virtues of spending cuts, in mid-2010, only to see the Irish slump deepen and whatever confidence investors might have felt evaporate.
      Amazingly, by the way, it happened all over again this year. There were widespread proclamations that Ireland had turned the corner, proving that austerity works — and then the numbers came in, and they were as dismal as before.
      Yet the insistence on immediate spending cuts continued to dominate the political landscape, with malign effects on the U.S. economy. True, there weren’t major new austerity measures at the federal level, but there was a lot of “passive” austerity as the Obama stimulus faded out and cash-strapped state and local governments continued to cut.
      Now, you could argue that Greece and Ireland had no choice about imposing austerity, or, at any rate, no choices other than defaulting on their debts and leaving the euro. But another lesson of 2011 was that America did and does have a choice; Washington may be obsessed with the deficit, but financial markets are, if anything, signaling that we should borrow more.
      Again, this wasn’t supposed to happen. We entered 2011 amid dire warnings about a Greek-style debt crisis that would happen as soon as the Federal Reserve stopped buying bonds, or the rating agencies ended our triple-A status, or the superdupercommittee failed to reach a deal, or something. But the Fed ended its bond-purchase program in June; Standard & Poor’s downgraded America in August; the supercommittee deadlocked in November; and U.S. borrowing costs just kept falling. In fact, at this point, inflation-protected U.S. bonds pay negative interest: investors are willing to pay America to hold their money.
      The bottom line is that 2011 was a year in which our political elite obsessed over short-term deficits that aren’t actually a problem and, in the process, made the real problem — a depressed economy and mass unemployment — worse.
      The good news, such as it is, is that President Obama has finally gone back to fighting against premature austerity — and he seems to be winning the political battle. And one of these years we might actually end up taking Keynes’s advice, which is every bit as valid now as it was 75 years ago."
  • TimesPeople recommended a user:
    Dec 30, 2011
    Bill Appledorf

A concise representation of the situation.








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Posted by at No comments:

09:00 12/31/11

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Everyone is on holiday.  The world will restart tomorrow or the day after.

At the moment there is money and it has value.  
The secret police have not been ordered out to cleanup.  
Iran and Turkey are not at war.  
The theocrats of Israel have not bombed all of Islam.  
The Messiah has not appeared on earth that we know of.   

Happy New Year



http://www.nakedcapitalism.com/

Links New Year’s Eve

Diseased Alaska seals tested for radiation have abnormal brain growths, undersized lymph nodes — Environmental cause indicated — Also found in Russia, Canada — Bacteria becoming blood borne — White spots on liver — Walruses next? ENENews (hat tip reader MK) :-(
Carleton Watkins and the photographs that saved Yosemite Guardian (hat tip reader Buzz Potamkin)
Organic Agriculture May Be Outgrowing Its Ideals New York Times
Hospice Turns Months-to-Live Patient Into Addict Bloomberg (hat tip Buzz Potamkin)
Verizon Drops Plan for New $2 Fee Wall Street Journal. Yeah! Score one for customers! Now if we could only get banks on the run about servicer-driven foreclosures.
U.S. court upholds telecom immunity for surveillance Reuters (hat tip Buzz Potamkin)
A History of Wall Street’s Women: Echoes Bloomberg (hat tip reader Steve Milm)
Sweden’s citizen-run Twitter account Aljazeera
Demonstrators brave violence in Syria Financial Times
The EU And IMF Watch In Horror As Everything Goes To Hell In Hungary Clusterstock
Occupy Beijing? Diplomat
China manufacturing activity falls again Financial Times
Lure of Chinese Tuition Squeezes Out Asian-American Students Bloomberg
OOPS! 9 Monster Mistakes That Almost Broke The Whole Damn Financial System In 2011 (BAC, RIMM) Clusterstock
Occupy activists prepare to take message to Rose Parade McClatchy (hat tip Lambert Strether)
$6.3tn wiped off markets in 2011 Financial Times
Occupied Media: Interview With Dean Baker Plutocracy Files (hat tip reader rjs)
Community encouraged to participate in Federal Foreclosure Review and Claims process Stamford Plus. Headline of e-mail message from reader Deontos:
Noooooooo I am not making this up. It is enough to make me THROW UP. A State AG herding his constituents (with the help of a State Banking Comm.) into the Independent Foreclosure Review Slaughter A REAL PIGS-ASS
The Unraveling of MF Global Wall Street Journal
Final 2011 Thoughts: Homeowners Drowning, Banks Soaring Michael Hirsh
Antidote du jour:





http://www.telegraph.co.uk/finance/financialcrisis/

My review of the year (and a few predictions for 2012)

Headline newsmakers: clockwise from far left; Pippa Middleton; a masked London youth; Muammar Gaddafi; the euro; and Steve Jobs - Matthew Norman’s review of the year (and a few predictions for 2012)  
2011 was crammed with a decade’s worth of news, says Matthew Norman.
30 Dec 2011
| 3 Comments

'Euro will be stable' claim is ridiculed

Wolfgang Schäuble  
Germany's finance minister has been accused of groundless optimism after he claimed that Europe's leaders will have "banished the dangers" of the euro crisis within 12 months.
30 Dec 2011
| 220 Comments

FTSE 100 loses £90bn of its value in 2011

 
The FTSE 100 has ended 2011 down after a turbulent year that has seen around £90bn wiped off the value of the index, but despite the fall shares in London have fared much better than those in Frankfurt and Paris.
30 Dec 2011
| 43 Comments

Spain plans €8.9bn of cuts but warns on deficit

Spain unveils €8.9bn of cuts but warns deficit will rise  
New government to cut public spending by €8.9bn in 2012 but warned the country's deficit would be higher than expected.
30 Dec 2011
| 7 Comments

Italy seeks boost to bail-out fund

 
Mario Monti has pleaded for the eurozone to expand its "big bazooka" bail-out fund as an expensive Italian bond auction suggested that even last week's flood of cheap loans from the ECB has failed to stem the crisis.
30 Dec 2011
| 193 Comments

Spain to unveil multi-billion euro austerity cuts

Spain's centre-right government will announce billions of euros in savings measures on Friday, using its first decrees since sweeping to power at November elections to give the nation a foretaste of tougher austerity to come.
30 Dec 2011
| 90 Comments

Euro crisis will be solved in 2012 - Schaeuble

Germany's finance minister Wolfgang Schaeuble says he's confident that Europe's politicians will manage to stabilize the eurozone in 2012 and keep the continent's common currency together.
30 Dec 2011
| 82 Comments

CBI: Business investment and exports, the only way forward

Next year, 2012, must be the year the UK finally stops agonising about rebalancing its economy and actually does so, said the head of the CBI in his new year message.
30 Dec 2011
| 8 Comments

Spain's economy worsening, says central bank

The Bank of Spain has warned that the economy has worsened, rattling investor confidence in Europe's fourth biggest economy just as recently installed prime minister Mariano Rajoy prepares to unveil his immediate budget plans.
29 Dec 2011
| 83 Comments

Credit crunch fears as money supply contracts

Europe is at mounting risk of a fresh credit crunch after the eurozone money supply contracted for a second month in November and the volume of private loans began to shrink.
29 Dec 2011
| 294 Comments

http://hat4uk.wordpress.com/


"EU CRISIS: Spain falling into gory nightmare as Merkel dreams of glory.

Wolfman Schauble has the future in his grasp
Spain’s centre-right government has fessed up (belatedly) to this year’s budget deficit being likely to reach 8% of gdp. The overshoot is €20bn above the target agreed with Brussels, but Deputy PM Soraya Sáenz de Santamaría declared that the government would “face the problem head-on” by raising 9bn euros in taxes, and a further 6bn euros in savings. She didn’t explain how Madrid would fund the 5bn euros gap that would still be left.
Meanwhile, as the year ends and financial sites try to put 2011 into perspective, the euro’s architects remain steadfast in their desire to blame everyone and everything but the fundamental idea itself.
Former French President Valery Giscard d’Estaing said in an interview this week that a key factor in the EU debt crisis was the enlargement in 2004, when 10 countries – mostly former East Bloc nations – joined the European Union. “By the time the euro was introduced, the group was no longer homogeneous,” he opined. Hmm. Never knew that Spain, Italy, Portugal, Ireland and Greece used to be in the USSR, but then it’s all a long time ago and Val D’Oonican is getting on a bit.
“One thing was evident to me from the beginning,” says Guy Verhofstadt, Belgian prime minister from 1999 to 2008, and one of Europe’s most federalist politicians. “A state can exist without a currency, but a currency cannot exist without a state.” Nice sound-bite, but Guy maintains that the national politicians undermined the unelected Commission. Ah, so that’s where it all went wrong. Er, but if you thought that ‘from the beginning’ Guy, then why did you go ahead old fruit?
Still, these old woodentops need not fear, for the new crop of eurozealots are continuing in the same vein. Berlin clearly means to go into 2012 force-feeding the EU with more of the Brussels bollocks that landed everyone with the euro.
Wolfie Schauble yesterday predicted confidently that that crisis will be over by the end of the year, which served only to attract a storm of ridicule during the day. If the markets were going to believe Schaublespeak, they’d have started to do so by now. But at least the old fox is being notably silent these days on the inevitability of Britain joining the euro; perhaps even he recognise a soundbite too far. On the whole, however, the German finance minister seems to me to be a student of sub-atomic physics, and thus beleefs he can change ze kvantum future by ze triumph of ze vill.
Brunhilde Merkel will tell the German people (in a New Year’s address tomorrow) that more cooperation will one day make the whole of Europe just like Germany, at which point all will be well.
“A common currency can only really be successful if we in Europe cooperate more than we have done,” Geli will say, “Europe is growing together in the crisis. The path to overcoming this remains long and won’t be free from setbacks, but at the end of it, Europe will emerge stronger from the crisis than it went into it.”
Yes, well – jolly good show. Keep right on to the end of the road….and over the cliff. I loff to go a wanderung, alonk ze mountain track, und ass I go I loff to sink mit Italians on my back….val der ree, val der raaaaaarg."

http://www.guardian.co.uk/business/debt-crisis



No matter how black things are painted it has not fallen down yet.

http://www.zerohedge.com/


Open Thread: 2011 Closes....Down

Submitted by Tyler Durden on 12/30/2011 - 16:24 Copper CRB France Gilts High Yield Implied Correlation Investment Grade United Kingdom Volatility YTD Performance
With the S&P 500 cash index closing 2011 down for the year (admittedly down 0.003181% is just 0.003181%, but it is also down),having traveled a remarkable 3240 total points from close-to-close over the course of the year, we look across asset classes and notable markets as we reflect on an increasingly intervention-driven and gap-heavy uber-correlated global investing framework. UK Gilts, 10Y Treasuries, Gold, and Oil outperformed (rebased to USD terms) while Greek bonds, Copper, Emerging Market stocks, and Asia Ex-Japan stocks underperformed. The Dollar closed almost 1% higher on the year, the EUR down 2.6% versus the USD as the CRB Commodity Index closed -6.67% for the year. Japanese stocks and bonds had a tough year. US investment grade bonds outperformed high yield bonds. There is much to discuss and we open the thread for any and all discussions...



  • Comments: 424

  • Reads: 12,034

    • Tyler Durden's picture

    Guest Post: 2011 - Catch-22 Year In Review

    Submitted by Tyler Durden on 12/30/2011 - 18:55 Alt-A Bear Stearns Ben Bernanke Ben Bernanke BLS Budget Deficit Bureau of Labor Statistics China Cohen Corruption CPI CRAP Crude Debt Ceiling European Central Bank European Union Fail Federal Reserve Financial Accounting Standards Board Foreclosures Free Money Goldman Sachs goldman sachs Government Stimulus Greece Gross Domestic Product Guest Post Housing Market Illinois Iraq Ireland Italy Jamie Dimon Jeremy Grantham John Hussman John Williams Lehman Lehman Brothers Mortgage Backed Securities Mortgage Loans NASDAQ National Debt Portugal Quantitative Easing Reality Recession recovery Robert Shiller Ron Paul Russell 2000 Savings Rate Tax Revenue Unemployment Unemployment Benefits Wall Street Journal
    The Wall Street mantra of stocks for the long run is beginning to get a little stale. If Abbey Joseph Cohen had been right for the last twelve years, the S&P 500 would be 4,000. For this level of accuracy, she is paid millions. Her 2011 prediction of 1,500 only missed by16%. The S&P 500 began the year at 1,258 and hasn’t budged. The lowest prediction from the Wall Street shysters at the outset of the year was 1,333, with the majority between 1,400 and 1,500. The same Wall Street clowns are now being quoted in the mainstream media predicting a 10% to 15% increase in stock prices in 2012, despite the fact we are headed back into recession, China’s property bubble has burst, and Europe teeters on the brink of dissolution. They lie on behalf of their Too Big To Tell the Truth employers by declaring stocks undervalued, when honest analysts such as Jeremy Grantham, John Hussman and Robert Shiller truthfully report that stocks are overvalued and will provide pitiful returns over the next year and the next decade.



  • Comments: 93

  • Reads: 6,344

    • Tyler Durden's picture

    As '11 Ends, 11 Charts Of 11 Disturbing 11 Year Trends

    Submitted by Tyler Durden on 12/30/2011 - 15:07 Mean Reversion As we pop the corks of our proverbial champagne this weekend with an eye to a better year ahead, perhaps it is worth thinking about these 11 incredible trends that have evolved in a rather disturbing manner over the last 11 years. As John Lohman points out, the 21st century has not been pretty for ongoing centrally planned attempts to defer the 30 year overdue mean reversion.



  • Comments: 187

  • Reads: 14,069

    • Tyler Durden's picture

    Friday Humor: Unspinning The "€100 Bill" Or How The European Bailout REALLY 'Works'

    Submitted by Tyler Durden on 12/30/2011 - 14:44 Fractional Reserve Banking By now everyone has heard the parable explaining how the entire European bailout, courtesy of near-infinite fractional reserve banking, can be taken care of using one €100 bill. Or so the yet again flawed economist thinking went. Unfortunately, this was just a parable, and a massively flawed one at that. As the below interaction between a ZH reader and his broker elucidates, here is what this idealized story would look like in the real world, that as we explained before, is drowning in about $21.2 trillion in excess debt.



  • Comments: 67

  • Reads: 7,924

    • Tyler Durden's picture

    Weekly Bull/Bear Recap: December 26-30, 2011

    Submitted by Tyler Durden on 12/30/2011 - 14:38 Budget Deficit China Conference Board Consumer Confidence European Central Bank Eurozone Exchange Traded Fund Failed Auction Goldman Sachs goldman sachs Housing Market Hungary International Monetary Fund Italy Japan Reality Recession recovery Unemployment Yen Concise summary of this holiday-shortened, liquidity-restrained week's bullish and bearish headlines and events.



  • Comments: 8

  • Reads: 1,701

    • Tyler Durden's picture

    Guest Post: New Asian Union Means The Fall Of The Dollar

    Submitted by Tyler Durden on 12/30/2011 - 13:42 Bond China Federal Reserve Global Economy Guest Post India Japan Meltdown Quantitative Easing Reality Reserve Currency Reuters Totalitarianism Trade Deficit Trade War Yen Yuan
    The genius of globalization is not in how it “works”, but in how it DOESN’T work. Globalization chains mismatched cultures together through circumstance and throws us into the deep end of the pool. If one sinks, we all sink, enslaving us with interdependency. The question one must ask, then, is if all sovereign economies are currently tied together in the same way? The answer is no, not anymore. Certain countries have moved to insulate themselves from the domino effect of debt implosion, one of the primary examples being China. Since at least 2005, China has been taking the exact steps required to counter the brunt of a global debt collapse; not enough to make it untouchable, but enough that its infrastructure will survive. One could even surmise that China’s actions indicate a foreknowledge of the events that would eventually escalate in 2008. How they knew is hard to say, but if the available evidence causes you to lean towards collapse as a Hegelian creation (and it should if you are paying any attention), then China’s activity begins to make perfect sense. If a globalist insider told you that in a few short years the two most powerful financial empires in the world were going to topple like bowling pins under the weight of their own liabilities, what would you do? Probably separate yourself as much as possible from the diseased dynamic and construct your own replacement system. This is what China has done…



  • Comments: 198

  • Reads: 13,386

    • Tyler Durden's picture

    Complete European Sovereign Issuance Calendar

    Submitted by Tyler Durden on 12/30/2011 - 13:27 Bond France Italy Morgan Stanley Sovereigns Earlier in the week, we discussed at length the funding gaps that various European sovereign nations face as the gap between supply and coupon/redemptions can't be assumed to be rolled away (and Europe faces EUR43.5bn of net cash-flow surplus from sovereigns into the 'market'). In order to better comprehend the timeline, Morgan Stanley has published both the complete issuance calendar for European bonds and bills over the next five weeks as well as a breakdown of the flows that are dominated by next week and the first week of February. It seems the market this week is starting to reprice for this risk in Italy and France not being able to roll so easily (and perhaps front-run that 'cash-flow' into US Treasuries as a haven) as the latter faces a considerable supply and flow on Thursday January 5th.



  • Comments: 19

  • Reads: 4,862

    • Tyler Durden's picture

    The Real Tragedy Of The Euro

    Submitted by Tyler Durden on 12/30/2011 - 12:15 Eurozone Mises Institute Sovereign Debt The realization that the European debacle is much more an issue of political harmonization and Empire-building than one of pure economic band-aid provision should be clear to any- and every-one who has followed the words and deeds of the various European factions for the past year or two. Yesterday, we discussed the dithering and competing camps but what is really critical is to understand how we got here and what the underlying social and political wills are among all of the players. There is no better summation of the formation, driving forces, and tensions among European leaders and central bankers than Phillip Bagus' 'Tragedy Of The Euro'. From the simple divergence of the dual visions of Europe with northern libertarians and southern socialists to the Bundesbank's fearsome reputation for showing up weak governments, Bagus offers a clear perspective on why the EMU is a 'self-destroying' and 'conflict-aggregating' system but counters that with some views on what the outcome will be and how French governmental pressure remains the cornerstone of the establishment of a European Empire for better or more likely for worse. As we enter a new year with the first quarter dominated by action-forcing events, perhaps there has never been a more important time to understand the political and economic vices and virtues of the European nations.




    http://www.bbc.co.uk/news/business/

    30 December 2011 Last updated at 19:41 ET

    Spain sets out new spending cutsSpain's new conservative Prime Minister Mariano Rajoy

    Spain's new conservative government announces 8.9bn euros in austerity measures in order to lower the country's borrowing.

    Stock marketGlobal markets finish a wild 2011

    World stock markets finish one of the most dramatic years for the global economy, with most well down for the year.

    Euro remains near lows for 2011

    The euro is near its low for the year following a tumultuous 12 months in which its existence has been questioned.


    http://www.spiegel.de/international/topic/euro_crisis/



    DPA

    Endangered Currency

    First Greece -- then Ireland, Italy, Spain and Portugal: The European common currency has come under pressure from large national debts and the effects of the global financial crisis, ultimately requiring a rescue package close to a trillion euros.
    Delusions of the Euro Zone: The Lies that Europe's Politicians Tell Themselves

    Delusions of the Euro Zone

    The Lies that Europe's Politicians Tell Themselves

    SPIEGEL ONLINE - December 30, 2011 Since its inception, the euro zone has been built on lies, the most grievous of which is the idea that the common currency could work without political union. But Europe's politicians are currently suffering under a different but equally fatal delusion -- that they have all the time in the world to fix the crisis. A Commentary by Armin Mahler more... [ Forum ]
    Former Deutsche Bank CEO Hilmar Kopper: 'Money Needs Laws'

    Former Deutsche Bank CEO Hilmar Kopper

    'Money Needs Laws'

    SPIEGEL ONLINE - December 29, 2011 As the former head of Deutsche Bank, Hilmar Kopper was once the most powerful banker in Germany. In an interview with SPIEGEL, the 76-year-old takes stock of his career and the current crisis shaking Europe. The three main constants he has seen in the world, he says, are "money, avarice and greed." more... [ Forum ]
    SPIEGEL Interview with Ex-German High Court Justice: 'It Is a Mistake To Pursue a United States of Europe'

    SPIEGEL Interview with Ex-German High Court Justice

    'It Is a Mistake To Pursue a United States of Europe'

    SPIEGEL ONLINE - December 28, 2011 In an interview conducted as he heads into retirement, German Constitutional Court Judge Udo Di Fabio explains why he believes the high court's recent decisions on the European Union will not necessarily hinder further European integration and how he believes debates over possible changes to Germany's constitution to strip power from Karlsruhe are "phoney."  more... [ Forum ]
    Deeply Divided  : New Greek Government Runs Out of Steam

    Deeply Divided  

    New Greek Government Runs Out of Steam

    SPIEGEL ONLINE - December 28, 2011 Six weeks after forming a transitional government to overcome its crisis, Greece is still failing to deliver its promised reforms. The cabinet of Prime Minister Lucas Papademos is deeply divided and has lost the public's confidence. Even the most urgent measures have ground to a halt. By Ferry Batzoglou in Athens more...
    Measure of Fear: Banks Bunker Hundreds of Billions in Deposits at ECB

    Measure of Fear

    Banks Bunker Hundreds of Billions in Deposits at ECB

    SPIEGEL ONLINE - December 27, 2011 Just before Christmas, the European Central Bank flooded the financial markets with 500 billion euros -- a move that may not ultimately have the desired effect of stabilizing banks. Instead of passing that money on in loans to businesses to spur the economy, European banks have redeposited the money with the ECB at low interest rates. more...
    Defying the Euro Crisis: Will German Growth Stall in 2012?

    Defying the Euro Crisis

    Will German Growth Stall in 2012?

    SPIEGEL ONLINE - December 27, 2011 The global economy is at risk from all sides, with the European debt crisis, a weak US economy and a slowdown in China. But most German companies are still doing well, and executives are optimistic about 2012. Experts wonder, however, how long the export-driven German economy will be able to elude the gathering storm. By SPIEGEL Staff more... [ Forum ]
    The 'German Premier': Task Force Leader Cleans House in Greece

    The 'German Premier'

    Task Force Leader Cleans House in Greece

    SPIEGEL ONLINE - December 21, 2011 Armed with 45 experts and 30 years of experience, Horst Reichenbach is in Athens to help the Greeks economize and institute reforms. His conclusions about their situation are sobering, but he also reports a new sense of determination for tackling the debt crisis there. By Julia Amalia Heyer more...
    Massive Lending Operation: ECB's Risky Plan to Flood Banks with Cash

    Massive Lending Operation

    ECB's Risky Plan to Flood Banks with Cash

    SPIEGEL ONLINE - December 21, 2011 The European Central Bank has launched the biggest lending operation in its history, and banks pounced on the offer on Wednesday, borrowing almost a half-billion euros for three years at a low interest rate. Governments hope the banks will use the cash to buy sovereign bonds, but critics warn the ECB's strategy is risky and could stoke inflation. By Stefan Kaiser more...
    What Crisis? German Economy Defying European Gloom

    What Crisis?

    German Economy Defying European Gloom

    SPIEGEL ONLINE - December 20, 2011 German companies and consumers are upbeat about the future, according to economic surveys released on Tuesday. They show that Europe's largest economy has remained resilient in the face of the euro crisis despite expectations that the common currency zone is headed for recession. more...
    Resistance in London: Britain Refuses to Boost IMF Aid for Euro Crisis

    Resistance in London

    Britain Refuses to Boost IMF Aid for Euro Crisis

    SPIEGEL ONLINE - December 20, 2011 EU finance ministers wanted to raise 200 billion euros to boost the International Monetary Fund's firepower in the euro crisis, but they only raised 150 billion on Monday, largely due to resistance from Britain. Germany, meanwhile, will have to rework its 2012 budget to help finance the new permanent euro rescue fund. more...
    A Currency Crisis Debate: 'The Euro-Zone Bailout Programs Must Be Stopped'

    A Currency Crisis Debate

    'The Euro-Zone Bailout Programs Must Be Stopped'

    SPIEGEL ONLINE - December 20, 2011 How to save the euro? Some believe that the European Central Bank is the key to any solution. Others think that the euro zone should be contracted and the weak members squeezed out. SPIEGEL spoke with two leading German economists about the currency's future. Their one area of agreement? Something must be done quickly. more... [ Forum ]


    http://krugman.blogs.nytimes.com/2011/12/31/a-thought-on-debt-history/


    Keynes Was Right
    By PAUL KRUGMAN
    Once again, when politicians and policy makers decided to focus on deficits, not jobs, they proved Keynes right about a slump being the wrong time for austerity.
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