Debts of nations are due and payable.
Once more there is trouble in the Balkans.
Germany looks to be trying again to form a European empire.
Prussia has not learned the English way of divide and rule.
http://www.nakedcapitalism.com/2012/06/links-6312.html
Sunday, June 3, 2012
Links 6/3/12
Queen to lead giant jubilee flotilla in London Reuters
Royal mashup of the Queen’s hats Brisbane Times
Egyptians March in Outrage Over Former Ruler Mubarak’s Life Sentence ABC
Protests grow in Tahrir after Mubarak verdict Al Jazeera English
History Offers an Ugly Precedent for a Greek Euro Exit Bloomberg (SW)
HSBC Tests Cash Machines in Athens for Drachmas Greek Reporter. (The lead says “has tested.” No date, “banking sources.” Manipulation? Genuine slip(s)?)
Food Shortage in Peloponnesian Prisons Due to State Budget Cuts Greek Reporter
Analysis: Greeks count mental health cost of a country in crisis Reuters
Spain calls for new euro fiscal authority Reuters
Paul Vallely: Spain – too big to fail, not too big to bail Independent
Spain’s Game of Chicken Atlantic
Spain could see us out of both Euros Irish Independent
Florida Versus Spain Times Krugman
World’s Richest Lose $24 Billion as Adelson Fortune Drops Bloomberg
Remarks at the Festival of Economics, Trento Italy GeorgeSoros
The Three Issues in the European Crisis Brad DeLong
One scenario for the eurozone Marginal Revolution
Quickstep to restarting reactors Japan Times. Based on “stress tests.”
Fracking Fatalities In These Times
Photo of ‘napalm girl” from Vietnam War turns 40 AP
Reputational Sanctions in an Age of Internet Manipulation? Credit Slips
The Simplicity Solution Times Nocera
Sweep the Sleaze Information Architects. Share buttons.
A Competent CTO Can Say No Another Word For it
Tea Party and Occupy activists rub shoulders at Bilderberg protest Guardian
Here’s The Chart That Will Get Obama Fired… Henry Blodget
Lib Dems suffer plunge in party membership Independent
Climate Change Causing Hummingbird Missed Connections LiveScience
Supervolcanoes that could destroy humanity ‘may explode sooner than scientists thought’ Independent
The Brokers with Hands on Their Faces Blog. Time to revive the classic?
Antidote du jour (hat tip Valley Girl)
Royal mashup of the Queen’s hats Brisbane Times
Egyptians March in Outrage Over Former Ruler Mubarak’s Life Sentence ABC
Protests grow in Tahrir after Mubarak verdict Al Jazeera English
History Offers an Ugly Precedent for a Greek Euro Exit Bloomberg (SW)
HSBC Tests Cash Machines in Athens for Drachmas Greek Reporter. (The lead says “has tested.” No date, “banking sources.” Manipulation? Genuine slip(s)?)
Food Shortage in Peloponnesian Prisons Due to State Budget Cuts Greek Reporter
Analysis: Greeks count mental health cost of a country in crisis Reuters
Spain calls for new euro fiscal authority Reuters
Paul Vallely: Spain – too big to fail, not too big to bail Independent
Spain’s Game of Chicken Atlantic
Spain could see us out of both Euros Irish Independent
Florida Versus Spain Times Krugman
World’s Richest Lose $24 Billion as Adelson Fortune Drops Bloomberg
Remarks at the Festival of Economics, Trento Italy George
The Three Issues in the European Crisis Brad DeLong
One scenario for the eurozone Marginal Revolution
Quickstep to restarting reactors Japan Times. Based on “stress tests.”
Fracking Fatalities In These Times
Photo of ‘napalm girl” from Vietnam War turns 40 AP
Reputational Sanctions in an Age of Internet Manipulation? Credit Slips
The Simplicity Solution Times Nocera
Sweep the Sleaze Information Architects. Share buttons.
A Competent CTO Can Say No Another Word For it
Tea Party and Occupy activists rub shoulders at Bilderberg protest Guardian
Here’s The Chart That Will Get Obama Fired… Henry Blodget
Lib Dems suffer plunge in party membership Independent
Climate Change Causing Hummingbird Missed Connections LiveScience
Supervolcanoes that could destroy humanity ‘may explode sooner than scientists thought’ Independent
The Brokers with Hands on Their Faces Blog. Time to revive the classic?
Antidote du jour (hat tip Valley Girl)
http://www.zerohedge.com/news/fat-lady-clearing-her-throat
"Submitted by Mark Grant, author of Out of the Box
A Loss of Credibility
Once at a social gathering, Gladstone said to Disraeli:
"I predict, Sir; that you will die either by hanging or of some vile disease".Disraeli replied,
"That all depends, sir, upon whether I embrace your principles or your mistress."We have reached a point where the shepherd has shouted “wolf” one too many times, where the theatre goer has shouted “fire” one too many times and the crowd no longer believes the jargon and is standing pat. From one politician to the next in Europe the words are strikingly the same; “bold actions, courageous decisions, decisive plans” which are meant to stoke the propaganda machine and assure the world that all is well. We have had the bank stress tests; the first pockmarked by inaccurate data checked by no one and the second humiliated by an inaccurate construct which discredited it by its own shameless manipulation. We face a world where contingent liabilities, promises to pay and guarantees of debts are NOT counted and where asset guarantees, illusionary firewalls and unfunded rescue programs ARE counted and in some cases counted more than once. Europe has, in fact, provided a complex system of hoaxes, inaccurate data and false financial reports that have been for the most part believed but that belief system is now crumbling as every quarter presents new data that proves the inaccuracy of what we have been told.
“In my youth, I, too, entertained some illusions; but I soon recovered from them. The great orators who rule the assemblies by the brilliancy of their eloquence are in general men of the most mediocre political talents: they should not be opposed in their own way; for they have always more noisy words at command than you. Their eloquence should be opposed by a serious and logical argument; their strength lies in vagueness; they should be brought back to the reality of facts; practical arguments destroy them. In the council, there were men possessed of much more eloquence than I was: I always defeated them by this simple argument; two and two make four.”In America we are also suffering from a hoax; just one of a different variation. The notion that the United States, myopic in its vision, will escape the quite real recession in Europe and that there will be a decoupling of some sort is the same fantasy to be found in Cinderella and here comes the Prince to whisk you off to the castle. There is no fairy godmother coming to save us and I am afraid we are bound to labor for our wages just like everyone else. There is always variance between markets of different nations and regions but the last historical decoupling probably took place sometime before World War I and has not and will not be seen again in anyone’s lifetime. The world fought with rifles once and then tanks and now there are nuclear bombs and just get on with it because there is no way back. Recession in Europe will bring recession to China, will bring recession to America and just get it through your heads and plan accordingly.
-Napoleon Bonaparte
The American jobs data on Friday shocked everyone; there was not one call from any corner that provided an accurate reflection of the result and yet what did anyone expect? Every country in Europe is in a recession except Germany and I can virtually guarantee you that Germany will be in one soon as they cannot avoid the contagion any more than America can. Germany and the United States, best of class in their own way, will be the last to suffer the slings and woes of misfortune but we will suffer from them in the end. The past monetary easing by the Fed and the ECB helped to delay it all but we are at a point now where any new easing won’t do much. This is because of our interest rates being at almost zero and where do you think we are going; citizens and institutions paying the government to hold our money? No, I don’t think so and this, coupled with plenty of liquidity now in the world so that any new injection of liquidity will provide only a very momentary buoyancy so that easing, any type of easing, will do very little to stop a decline in equities, a widening of credit spreads, a rise in Treasury prices and all of the other things that one finds in a recession which will be more severe than predicted by most and so the world, along with Europe, is meeting reality and will find it a quite unpleasant experience.
Looking Backwards
If the American experience taught us anything it should be first that ”best of class” will sink right along with the “rest of class” and that looking backward, when facing a financial decline has about the same benefit as dipping your body in the Ganges river and hoping for salvation. In a recession what was will not be and all of your attention has to be shoved forward to look at what will come and not what has come.
Percentage Increase, 1922-29
Industrial Production: +70%
Gross National Product: +40%
Per Capita Income: +30%
Output per factory man hour: +75%
Corporate Profits: +62% (1923-1929)
"Financial storm definitely passed."Greece has hit the wall and its financial engine lies in tatters. Spain has hit the wall and just not made the announcement yet. Portugal has hit the wall and will bang it again for good measure. Ireland has hit the wall and is bathing in its national self-pity. Germany is staring at the wall, declared “no Eurobonds under any circumstances” over the weekend while Monti says Eurobonds “will come” and so we are about to have a re-do of the Battle of Verdun. France is warming up to the wall and wants to spend even more to climb the damn thing. America is in self-denial that there is any wall at all. China is about to hit the wall and is adjusting its parachute.
-Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
Treasuries are the needle on the speedometer and if there is one clear indication of very serious trouble ahead you can read it there.
The fat lady is about to sing. If you don’t wish to listen then don’t show up later and say I didn’t warn you."
H.G. Wells wrote a story about this kind of situation:
When the Sleeper Wakes
http://www.amazon.com/s?ie=UTF8&tag=mozilla-20&index=blended&link_code=qs&field-keywords=when%20the%20sleeper%20wakes&sourceid=Mozilla-search
Start reading When the Sleeper Wakes on your Kindle in under a minute. Don't have a Kindle? Get your Kindle here.
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http://www.gutenberg.org/files/12163/12163-8.txt
CONTENTS
I. INSOMNIA
II. THE TRANCE
III. THE AWAKENING
IV. THE SOUND OF A TUMULT
V. THE MOVING WAYS
VI. THE HALL OF THE ATLAS
VII. IN THE SILENT ROOMS
VIII. THE ROOF SPACES
IX. THE PEOPLE MARCH
X. THE BATTLE OF THE DARKNESS
XI. THE OLD MAN WHO KNEW EVERYTHING
XII. OSTROG
XIII. THE END OF THE OLD ORDER
XIV. FROM THE CROW'S NEST
XV. PROMINENT PEOPLE
XVI. THE MONOPLANE
XVII. THREE DAYS
XVIII. GRAHAM REMEMBERS
XIX. OSTROG'S POINT OF VIEW
XX. IN THE CITY WAYS
XXI. THE UNDER-SIDE
XXII. THE STRUGGLE IN THE COUNCIL HOUSE
XXIII. GRAHAM SPEAKS HIS WORD
XXIV. WHILE THE AEROPLANES WERE COMING
XXV. THE COMING OF THE AEROPLANES
I remembered this as a tale of compound interest.
It looks as though I abandoned it about half way through.
All I can say is I was a new reader.http://www.bloomberg.com/news/2012-06-01/history-offers-ugly-precedent-for-greek-euro-exit.html
History Offers an Ugly Precedent for a Greek Euro Exit
Eleftherios Venizelos, who lost the "battle for the drachma," ca. 1915. Source: Library of Congress Prints and Photographs Division
Delivered by Prime Minister Eleftherios Venizelos on April 15, 1932, less than two weeks before his nation would suspend loan repayments and exit the gold standard, the prescient remark and the trials that followed offer urgent lessons for the current Greek crisis.
Before the euro bound the continent’s disparate economies into one monetary system, European governments relied on the gold standard to direct international monetary flows. This promised stability, but also required the vigorous coordination of each country’s central-bank policy. The turmoil of World War I disrupted the international order, pushing Greece and the rest of Europe off the standard, a blow from which the monetary system would never fully recover.
Modern State
Nevertheless, in the absence of alternatives, gold remained the standard for much of the rest of the developed world, and Greece made the drachma convertible to gold in 1928 under the leadership of Venizelos’s Liberal Party. A centerpiece of the government’s reform agenda, the return to gold, combined with vigorous economic development and large-scale public works, promised to turn Greece into a “synchronon kratos,” or modern state. Further, re-gilding the drachma offered pride to a Greek nation that had recently suffered prolonged inflation and political turmoil.This triumphant return was not only desired from within Greece, but imposed from without. Venizelos’s project was largely dependent on foreign financing, both in the form of government loans and direct foreign investment. The drachma’s convertibility was thus also meant to appease investors. So too was the regime’s simultaneous creation of the Bank of Greece, the country’s first true central bank, which replaced the privately owned National Bank of Greece as the issuer of the drachma.
The Great Depression, though, came at an inopportune time for the fledgling Greek financial system. When the world economy began to decline in 1929, Greek exports dwindled, creating an acute imbalance -- more foreign currency left Greece through the purchase of imports than came in through the sale of exports, draining the currency reserves of the Bank of Greece. This situation was exacerbated by the country’s foreign debts, which also had to be repaid in foreign currencies, such as the U.K. pound and the French franc. As effectively gold equivalents, these monies undergirded the drachma; as they left Greece, each successive loan payment made defending the currency more difficult.
To make matters worse, the country’s commercial banks began speculating against the drachma. Led by the recently displaced National Bank of Greece, these institutions purchased Greek national bonds, securities denominated in pounds and francs, on foreign exchanges -- securities that would be worth more if the drachma was devalued.
Spreading Contagion
Yet while Greece’s development had been financed by foreign borrowing, the government could hardly be accused of profligacy. As Greece’s exchange crisis increased during the late 1920s and into 1931, Venizelos’s government still managed a budget surplus, and relative to other nations the Greek economy suffered less from the global depression. Nevertheless, as economists such as Barry Eichengreen have conclusively shown, the gold standard, like the euro in recent years, spread economic contagion.The Venizelos government searched for a solution. In the first salvo of the “battle for the drachma,” the Greek parliament considered a regulatory package aimed at strengthening the Bank of Greece’s control over the country’s commercial-banking sector. But the National Bank of Greece and its allies intervened, so weakening the bill as to make it virtually ineffectual.
As the crisis deepened, the government sought international assistance, turning next to the Europe-dominated League of Nations Finance Committee. The fight for the drachma was quickly draining Greece’s financial resources, and the government’s 1931 surplus flipped to a sharp deficit in 1932. To meet this shortfall, to keep up its bond payments and to retain the gold standard, Greece needed an injection of foreign capital. In a familiar tune, most recently sung in a German accent, Europe’s financial leaders demanded austerity as the price for assistance. The French delegate advocated closing schools and cutting the salaries of public employees by 20 percent.
These were harsh terms, and Venizelos feared that the sacrifices demanded by the guardians of the international monetary system would doom his liberal regime and perhaps democracy in Greece. To build national unity, he reached out to the opposition Populist Party, hoping to form a coalition and share the burden of leadership. The party’s leader, Panayis Tsaldaris, curtly refused.
By April 1932, Greece was out of options. Without substantive foreign intervention, the combined pressures of foreign debt service and hemorrhaging currency reserves finally forced Greece off the gold standard and into default. By tying his regime to the integrity of the drachma, Venizelos also ensured his fall from power, while the subsequent decline of his centrist Liberal Party shattered the Greek political system.
Coup, Fascism
After default the Greek economy actually began a steady recovery as the nation turned its efforts toward self- sufficiency outside the global market. But in this case, the inward-looking recovery was a false friend, and the political instability that followed the drachma’s devaluation paved the way for a successful coup by General Ioannis Metaxas. Whether his regime was a fascist one or merely conservative- authoritarian is an academic debate that accepts a simple fact: It wasn’t democratic.It is unlikely, whatever the outcome of Greece’s present currency crisis, that fascism lies in the nation’s future. Venizelos believed that liberal democracy couldn’t withstand the burdens imposed by the international monetary system, and his solution was to exit that system, with unfortunate results. Although to date Greek leaders have made different choices, a black future may still await Venizelos’s country -- and Europe - - if Greece and similar small states are left without assistance.
(Sean Vanatta is a graduate student in history at Princeton University. The opinions expressed are his own.) Read more Echoes columns online.
To contact the writer of this post: Sean Vanatta at svanatta@princeton.edu.
To contact the editor responsible for this post: Timothy Lavin at tlavin1@bloomberg.net."
http://delong.typepad.com/sdj/2012/06/the-three-issues-of-the-greek-crisis.html
The Three Issues in the European Crisis
"There are three issues in today's European crisis. They should be dealt with separately and independently, for they are different problems amenable to different kinds of solutions. Instead, they are mashed together. And that is the major reason that the crisis is intractable.
The first issue is that Northern European bankers and investors loaned Greek politicians money when the Greek politicians did not have a mandate to raise taxes to pay that money back. The bankers and investors were betting on rapid growth that would produce a sufficient fiscal dividend that Greek taxpayers would not notice. Failing that, they were betting on being bailed out by somebody. It was a risky growth-or-moral-hazard play. It has gone wrong. The bankers and investors cannot collect on the "growth" portion. If they want to collect on the "moral hazard" portion, they should apply to the ECB and the German government. This issue seems to me to have very little to do with Greece: it should be settled in Northern Europe.
The second issue is how Greece is going to balance its government expenditures and government revenues going forward, for nobody--or at least nobody sane--will lend the Greek government more money for a long time to come. This, it seems to me, is an issue for the Greek political system and the Greek political system alone: it should be settled by the Greeks.
The third issue is how is Greece as a country is--and the other countries of southern Europe that also received enormous capital inflows that pushed up their nominal wage and price levels are--going to balance its exports and imports going forward without suffering a decade-long depression. The Friedmanite monetarist solution would be to let the foreign exchange market do the job: abandon the euro, and let the drachma find the level at which imports balance exports. The alternative is structural adjustment--an increase in the level of nominal wages in euros in Northern Europe and increased efficiencies and stable nominal wages in euros in Greece and Italy and Spain and Portugal and Ireland. This structural adjustment strategy preserves the euro, but it calls for adjustment on both sides: structural reform in Greece, etc, and also higher inflation in Germany.
Northern Europe wants to restore confidence in the stability of the euro. Greece and the rest of the European periphery wants to avoid a decade-long depression. There is a deal that can be struck here that gets both what they need and want, but only if both sides of the deal focus on what their real fundamental interests are. And only if both sides recognize that structural adjustment has to take place in both surplus and deficit countries.
UPDATE: And Paul Krugman drops the hammer: It ain't happening! Run for your lives!
The first issue is that Northern European bankers and investors loaned Greek politicians money when the Greek politicians did not have a mandate to raise taxes to pay that money back. The bankers and investors were betting on rapid growth that would produce a sufficient fiscal dividend that Greek taxpayers would not notice. Failing that, they were betting on being bailed out by somebody. It was a risky growth-or-moral-hazard play. It has gone wrong. The bankers and investors cannot collect on the "growth" portion. If they want to collect on the "moral hazard" portion, they should apply to the ECB and the German government. This issue seems to me to have very little to do with Greece: it should be settled in Northern Europe.
The second issue is how Greece is going to balance its government expenditures and government revenues going forward, for nobody--or at least nobody sane--will lend the Greek government more money for a long time to come. This, it seems to me, is an issue for the Greek political system and the Greek political system alone: it should be settled by the Greeks.
The third issue is how is Greece as a country is--and the other countries of southern Europe that also received enormous capital inflows that pushed up their nominal wage and price levels are--going to balance its exports and imports going forward without suffering a decade-long depression. The Friedmanite monetarist solution would be to let the foreign exchange market do the job: abandon the euro, and let the drachma find the level at which imports balance exports. The alternative is structural adjustment--an increase in the level of nominal wages in euros in Northern Europe and increased efficiencies and stable nominal wages in euros in Greece and Italy and Spain and Portugal and Ireland. This structural adjustment strategy preserves the euro, but it calls for adjustment on both sides: structural reform in Greece, etc, and also higher inflation in Germany.
Northern Europe wants to restore confidence in the stability of the euro. Greece and the rest of the European periphery wants to avoid a decade-long depression. There is a deal that can be struck here that gets both what they need and want, but only if both sides of the deal focus on what their real fundamental interests are. And only if both sides recognize that structural adjustment has to take place in both surplus and deficit countries.
UPDATE: And Paul Krugman drops the hammer: It ain't happening! Run for your lives!
The Breakeven Point (Wonkish But Terrifying): A number of us have been saying for some time that the euro crisis is, at its root, a balance of payments problem. During the careless years, capital flooded from the core to the periphery, leading to big trade deficits and overvalued real exchange rates; now, all that needs to be reversed. Yet “internal devaluation” via deflation in southern Europe is basically impossible; if this is going to have any chance of working, we need a real devaluation in Spain mainly via German inflation rather than Spanish deflation. 4 percent German inflation plus zero in Spain might work; 2 and minus 2 can’t. And this in turn means that overall eurozone inflation must be sufficiently high. That’s a necessary but not sufficient condition for salvation…. One indicator I like to look at is the German “breakeven”…. I’ve been arguing for a long time that it really needs to be above 2 for there to be real hope.
So what’s happening? Oh, boy! I’m not sure this really means that investors expect only 0.7 percent inflation over the next 5 years; it’s probably also reflecting a collapse of liquidity, which drives down prices in the relatively thin markets for index bonds (which happened after Lehman too). But that’s just another kind of disaster. This chart shows a euro on the verge of imploding. If the ECB can’t change this perception very, very soon — and I think it really is up to them — this goose is cooked."
If you read the comments American insularity is apparent.
I thought this went up hours ago.
.
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