The summit will fail.
Then what? Europe does not close.
Greece will shortly begin issuing a new currency. They have no choice.
Greek bonds will become very cheap. Dealings with the Greek governments will have to be in the new currency. This will support the exchange rate for a time. The Europe wide operations will close for lack of customers. The price of motor fuel will spike up. Car dealers will go broke if they have not. The ECB will take a big hit.
There are probably not many Greek Sovereign bonds in private hands.
The bond interest rates of debtor nations will spike up.
Credit default swaps will be unobtainable for new debt.
The Spanish and Italian loans may hang longer.
Cypress will default. The Russians will not be happy.
The pressure for Germany to leave the Euro will build.
German foreign trade will tank.
The US markets may spike up.
At this point I am guessing.
Paul Krugman has published a paper at the Financial Times.
OPINION 8:32pm
A manifesto for economic sense
Western policy makers are inflicting suffering on their peoples, write Paul Krugman and Richard Layard
Pay walled.http://www.telegraph.co.uk/finance/financialcrisis/
Banks face billions of dollars of claims after Barclays settles
27 Jun 2012
| 3 Comments Merkel dismisses Spain and Italy's pleas for aid
27 Jun 2012
| 358 Comments Debt crisis: as it happened - June 27, 2012
27 Jun 2012
| 736 Comments Angela Merkel isn't bluffing; like everyone else in Europe, she's defending national sovereignty
27 Jun 2012
| 107 Comments David Cameron under pressure to veto EU power grab
27 Jun 2012
| 35 Comments Spain cannot finance itself for long, says PM Mariano Rajoy
Spain's prime minister warned that his country cannot continue to finance itself and he called for Europe to move urgently to reduce unsustainably high interest rates.27 Jun 2012
| 16 Comments EU Summit: schedule
The EU Summit begins on Thursday amid growing concerns over the financial health of Greece, Spain and Italy. Here is the schedule for the two-day event.27 Jun 2012
| 4 Comments EU Summit: invitation letter
The EU Summit begins on Thursday amid growing concerns over the financial health of Greece, Spain and Italy. Here is the invitational letter to the event, written by European Council President Herman Van Rompuy.27 Jun 2012
| 1 Comment Homeless charity 'swamped' by eurozone migrants
Charity calls on Government to restrict immigration after being "swamped" with destitute people fleeing eurozone.27 Jun 2012
Trader Jerome Kerviel faces five years in prison
Prosecutor in the re-trial of French trader Jerome Kerviel, who's appealing his conviction for covering up billions of euros in losses, asks for a new guilty verdict and a five-year prison term.27 Jun 2012
Angela Merkel: No quick and easy solution to debt crisis
German Chancellor Angela Merkel has insisted that there is no quick and easy solution to the eurozone debt crisis.27 Jun 2012
| 11 Comments Microsoft headquarters in Greece attacked
Assailants attacked the offices of online giant in Athens, driving a van through the front doors and setting off an incendiary device.27 Jun 2012
Middle-income families hit hardest by recession
Families faced biggest squeeze on household incomes since the 1930s.27 Jun 2012
| 140 Comments The benefits of selective eurozone default
There is a consensus in the corridors of power that if any eurozone member defaults or leaves, contagion and collapse are assured. This is a fairy tale designed to frighten voters into submission to bizarre government policies. It also ignores two historical lessons.27 Jun 2012
| 43 Comments "The benefits of selective eurozone default
5:45AM BST 27 Jun 2012
43 Comments One is that sovereign default is normal, especially after major banking crises. Only 13 of the G20 countries (the world's wealthiest nations) existed a century ago.
Of these, only two have not defaulted. Many have repeatedly reneged. The other is that default can be beneficial. Markets already expect several EU countries to 'restructure', hence Greek and Portuguese 10-year government bonds are now worth 16pc and 65pc of their face value; but discussion remains a political heresy because the eurozone has some aspects of a religious cult. The result is an absence of analysis on how to manage the cyclical inevitability of default, or to reap the benefits.
It is also worth noting that for many countries default is their normal condition. Spain is the winner, officially defaulting 18 times since 1550. Greece has done so five times since its re-creation in the 1820s, and has been barred international borrowing for 110 years out of the last 190.
The architects of the euro created an interdependent economic area so that never again could there be a war across Europe. They knew a single currency before political union carried risks so built in financial controls. The breakdown occurred when France and Germany waived the budget deficit rules in 2003 fearing the electoral consequences. From then on, a crisis was inevitable.
Elections across Europe now show an anti-EU trend because of its new association with financial pain: previously voters signed up for the money - low interest rates, unimaginably easy credit, rising income and house prices. The Poles and Czechs never conceived they would be asked to pay in; the Mediterranean periphery never expected to repay overseas donations. The risk/reward for these nations has tilted towards leaving, the more so given the potential benefits.
The economies of all five 'PIIGS' [Portugal, Italy, Ireland, Greece and Spain] are contracting. The longer they remain within the eurozone, the more local deposits, foreign investors and industry will flee. Soaring unemployment, mass emigration, deflation and social unrest are guaranteed. Recovery post-default is always driven by a reversal of previous capital flows: deposits return into the system; foreign businesses see the opportunity of cheap wages and a weak currency; governments are keen to smooth their path so regulations are waived. Investors suddenly become interested in building factories and buying assets. Tourists find the exchange rate compelling and arrive in droves. Service companies (which can be based anywhere) find the case for relocation compelling.
Currently the PIIGS are aid junkies. The cure for addiction is not to increase the dose as it prevents necessary structural changes. Default will be painful yet this should be brief as it allows reform to take place. The precedents are good, one suffices. 2012 marks the 15th anniversary of Asia's bone-jarring economic collapse; most countries bordering the Pacific underwent some form of default, even China at the provincial level. The problems were artificially high exchange rates and excessive debt. In 1997, it was inconceivable that within 15 years Asia would account for four-fifths of the world's foreign exchange reserves, or 60pc of commodity imports. Rightly so as it only took ten - because there was simultaneous reform. In contrast, Argentina has defaulted three times since 1982 but has never restructured because of its strange Peronist legacy. The world's sixth richest country on a per capita basis in 1914, today its fails to make the top 50.
There are major opportunities in crises and defaults, such as the collapse of the Berlin Wall in 1989 which effectively doubled the number of global consumers overnight and resulted in a fifteen-year equity bull market and high growth in real income. Asia's financial crash in 1997 proved another. Today Greece's entire stock market is capitalised at $20bn, less than 5pc the value and 0.5pc of a single day's turnover in Apple. Italian opportunities are potentially greater. It is premature to place bets on the PIIGS today because of the EU's amazing record of dither and delay. Yet decision making has already passed to voters; the priority for national politicians is re-election so rapid changes are imminent. The result should be long overdue reform and economic renaissance, provided the dead hands of government incompetence are temporarily severed.
Jonathan Compton, Managing Director, Bedlam Asset Management."
Currently the PIIGS are aid junkies. The cure for addiction is not to increase the dose as it prevents necessary structural changes. Default will be painful yet this should be brief as it allows reform to take place. The precedents are good, one suffices. 2012 marks the 15th anniversary of Asia's bone-jarring economic collapse; most countries bordering the Pacific underwent some form of default, even China at the provincial level. The problems were artificially high exchange rates and excessive debt. In 1997, it was inconceivable that within 15 years Asia would account for four-fifths of the world's foreign exchange reserves, or 60pc of commodity imports. Rightly so as it only took ten - because there was simultaneous reform. In contrast, Argentina has defaulted three times since 1982 but has never restructured because of its strange Peronist legacy. The world's sixth richest country on a per capita basis in 1914, today its fails to make the top 50.
There are major opportunities in crises and defaults, such as the collapse of the Berlin Wall in 1989 which effectively doubled the number of global consumers overnight and resulted in a fifteen-year equity bull market and high growth in real income. Asia's financial crash in 1997 proved another. Today Greece's entire stock market is capitalised at $20bn, less than 5pc the value and 0.5pc of a single day's turnover in Apple. Italian opportunities are potentially greater. It is premature to place bets on the PIIGS today because of the EU's amazing record of dither and delay. Yet decision making has already passed to voters; the priority for national politicians is re-election so rapid changes are imminent. The result should be long overdue reform and economic renaissance, provided the dead hands of government incompetence are temporarily severed.
Jonathan Compton, Managing Director, Bedlam Asset Management."
Very conservative but not wrong if the pain can be tolerated.
http://www.guardian.co.uk/business/debt-crisis
- 28 Jun 2012: Angela Merkel made it clear she will not yield to pressure for the common issuance of eurozone debt in the form of eurobonds
- 27 Jun 2012: Vernon Bogdanor: Only the gold standard and the winter of discontent have caused similar convulsions in Britain's 20th century history
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27 Jun 2012: Software firm's Athens headquarters badly damaged and Italian statisticians stage sit-in pay protest as austerity demonstrations continue
http://www.spiegel.de/international/topic/debt_crisis
Passing The Trash - Again
All of the big global banks followed Citi’s direction. It was one big party. All the bankers were headed to Brazil, Mexico and Argentina. They all had checks ready to sign. Of course, the countries were more than willing to take on more debt.
It was in 1980 that the thinking was forced to change inside Citi. The sovereign loan portfolio was getting too big too fast. The bank had internal country limits and those limits were filling up fast. The worst thing that can happen to a banker is to reach a lending ceiling. The real return for lending to these countries was not the Libor+1 pricing, it was the front end fees from new loans that fed the bonus pools.
The solution was simple. Sell the loans that were already on the books to make room for the new ones (and the related origination fees). Who did we sell the loans to? Anyone we could, but we created demand from smaller, US regional banks.We sold them sub-participations in sovereign loans.
In August of 1982 the lights went out. All the big sovereign customers of Citi went bust in the course of a few months. The losses at Citi damn near shuttered the bank (many of the big banks were in the same condition). There were no more big fees coming in, and the losses were mounting. What was once a great place to work, became a terrible place, so I left and joined Drexel in 1985.
I spent the next five years buying back the loans that I had sold to the regional banks. At Citi, I had sold the loans at par to regional banks, at Drexel I bought them back from those same banks at 20 cents on the dollar.
This story is important because it is happening again today. Money Center banks are reducing their holdings of risky loans. The regional banks are increasing exposure.Note: During this period I was not a “decider”. A “cog in a wheel”, is a better description of my role in this story. There were thousands of “cogs”, together we produced a crisis that cost hundreds of billions, wrecked a good number of banks and produced what is now called, “The Lost Decade”.
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It’s not just the big US money center banks that are selling. The EU banks are having a fire sale:
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Once again, the trash is headed downhill. It won't end any differently this time. I looked at my old Rolodex of banks that I both sold and bought bad loans from. Very few of them are alive today. Nothing has changed. Surprised?
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http://www.nakedcapitalism.com/2012/06/links-62712.html
Links 6/27/12
Dear readers, our Matt Stoller is a writing for and performing in (as a straight man, natch) a new comedy show on FX starring Russell Brand. It’s called Brand X and starts June 28th at 11 PM Eastern. Although I’m not privy to details, I believe it will push the bounds of discourse beyond the acceptable (as in barely left) margin defined by Paul Krugman and Jon Stewart. Be sure to catch it!
Condors threatened by ‘epidemic’ lead poisoning from hunters’ bullets Christian Science Monitor
South Korea to ban catching of dolphins for shows PhysOrg
The amazing iguana which can stay underwater for half an hour – to feed from the bottom of the ocean Daily Mail (May S)
Google team: Self-teaching computers recognize cats PhysOrg (Robert M)
Roman coin hoard found BBC (John M)
Healing Spirits Lapham’s Quarterly (Aquifer)
Drug War is Fueling the Global HIV Pandemic Alternet (furzy mouse)
5 Ways Email Can Completely Ruin Your Life Alternet
Facebook changed your e-mail address, here’s how you can change it back CNET (furzy mouse). Haha, no Facebook here!
Manic Nation: Why Americans Are Anxious, Stressed, Depressed and Fat (And What We Can Do About It) Alternet (Aquifer)
Chart: What Killed Us, Then and Now Atlantic (Carol B)
Death by suburban sprawl: better urban planning will combat sedentary lifestyles The Conversation (May S)
As Congress looks away, U.S. tiptoes toward exporting a gas bounty Reuters
‘Supreme leader’ is fascist Tehelka (May S). And in case you think the headline is over the top: Hindu Nationalist’s Historical Links to Nazism and Fascism International Business Times
China’s, ahem, “stabilising trade” MacroBusiness
Tax scandal reaches No.10 as it’s revealed Cameron’s spin doctor helped run ‘avoidance’ scheme for BBC presenter wife Daily Mail (May S). Fact set is so bad DM can get away with a straightforward and relatively short headline.
Will European Peripheral Sovereigns be Monetized? Russ Winter
Monti lashes out at Germany ahead of summit Financial Times
Robert Mundell, evil genius of the euro Greg Palast, Guardian (Aquifer)
Look beyond summits for euro salvation Martin Wolf, Financial Times
Spanish Officials Hailed Banks as Crisis Built New York Times
US home prices rise for third month Financial Times versus Home Prices In U.S. Cities Fall At Slowest Pace Since ’10 Bloomberg
The Mixed Economy Manifesto: Part 1 New Economic Perspectives. Not a bad program, but the tone is defensive, which is understandable given how neoclassical economics dominates academia and the MSM. IMHO, the opponents need a more direct line of attack. Maybe the simplest is that neoclassical economics assumes no actor has any power (they acknowledge but then largely ignore monopolists and oligopolists). Since both buyers and sellers have varying degrees of power, this means neoclassical economics is flat out irrelevant.
Breaking Up Big Banks Hard To Do As Market Forces Fail Bloomberg. This is not hard to understand. Bank CEO pay is highly correlated with size of balance sheet.
Yes, there is an alternative to capitalism: Mondragon shows the way Guardian (Aquifer)
Pro-business and pro-markets are different MacroBusiness
Condors threatened by ‘epidemic’ lead poisoning from hunters’ bullets Christian Science Monitor
South Korea to ban catching of dolphins for shows PhysOrg
The amazing iguana which can stay underwater for half an hour – to feed from the bottom of the ocean Daily Mail (May S)
Google team: Self-teaching computers recognize cats PhysOrg (Robert M)
Roman coin hoard found BBC (John M)
Healing Spirits Lapham’s Quarterly (Aquifer)
Drug War is Fueling the Global HIV Pandemic Alternet (furzy mouse)
5 Ways Email Can Completely Ruin Your Life Alternet
Facebook changed your e-mail address, here’s how you can change it back CNET (furzy mouse). Haha, no Facebook here!
Manic Nation: Why Americans Are Anxious, Stressed, Depressed and Fat (And What We Can Do About It) Alternet (Aquifer)
Chart: What Killed Us, Then and Now Atlantic (Carol B)
Death by suburban sprawl: better urban planning will combat sedentary lifestyles The Conversation (May S)
As Congress looks away, U.S. tiptoes toward exporting a gas bounty Reuters
‘Supreme leader’ is fascist Tehelka (May S). And in case you think the headline is over the top: Hindu Nationalist’s Historical Links to Nazism and Fascism International Business Times
China’s, ahem, “stabilising trade” MacroBusiness
Tax scandal reaches No.10 as it’s revealed Cameron’s spin doctor helped run ‘avoidance’ scheme for BBC presenter wife Daily Mail (May S). Fact set is so bad DM can get away with a straightforward and relatively short headline.
Will European Peripheral Sovereigns be Monetized? Russ Winter
Monti lashes out at Germany ahead of summit Financial Times
Robert Mundell, evil genius of the euro Greg Palast, Guardian (Aquifer)
Look beyond summits for euro salvation Martin Wolf, Financial Times
Spanish Officials Hailed Banks as Crisis Built New York Times
US home prices rise for third month Financial Times versus Home Prices In U.S. Cities Fall At Slowest Pace Since ’10 Bloomberg
The Mixed Economy Manifesto: Part 1 New Economic Perspectives. Not a bad program, but the tone is defensive, which is understandable given how neoclassical economics dominates academia and the MSM. IMHO, the opponents need a more direct line of attack. Maybe the simplest is that neoclassical economics assumes no actor has any power (they acknowledge but then largely ignore monopolists and oligopolists). Since both buyers and sellers have varying degrees of power, this means neoclassical economics is flat out irrelevant.
Breaking Up Big Banks Hard To Do As Market Forces Fail Bloomberg. This is not hard to understand. Bank CEO pay is highly correlated with size of balance sheet.
Yes, there is an alternative to capitalism: Mondragon shows the way Guardian (Aquifer)
Pro-business and pro-markets are different MacroBusiness
http://opinionator.blogs.nytimes.com/2012/06/27/d-day/?ref=opinion
The most useful way to read a Supreme Court decision, I figured out years ago, is to start with the dissents. That way, you can proceed to the majority opinion as a better informed reader, with the full range of possibilities in view: What arguments did the majority reject? Which did it respond to, and which did it not even bother to acknowledge? Most important, what was the disagreement really about?
Taking that approach to the Arizona immigration decision the court issued on Monday, it is pellucidly clear from the dissenting opinions of Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. that Arizona lost big and that the decision amounted not to the split decision of early news reports but a major reaffirmation of federal authority. There has been considerable attention to Justice Scalia’s political rant – which he delivered from the bench as well as on paper — against President Obama’s immigration policies. It was a cringe-making screed for sure, even if not altogether surprising given that Justice Scalia had actually stooped to invoking the broccoli threat during the health care argument.
But aside from his self-indulgent posturing, what was most revealing about Justice Scalia’s dissenting opinion was what passed for actual legal analysis, his charge that Justice Anthony M. Kennedy’s majority opinion was so dismissive of Arizona’s effort to “protect its sovereignty” through the invalidated provisions of S.B. 1070, the law that was at issue, that “we should cease referring to it as a sovereign state.”
Pretty strong stuff. I turned to the majority opinion with mounting anticipation. What on earth had the court done? The first thing that jumped out at me was the name of Chief Justice John G. Roberts Jr. on Justice Kennedy’s opinion, along with the expected names of Justices Ruth Bader Ginsburg, Stephen G. Breyer, and Sonia Sotomayor. The chief justice was, apparently, in complete agreement with the majority as evidenced by his silence – the dog that didn’t bark, you might say. He felt no need to write separately to express even a shade of difference from the majority or a hint of sympathy with the dissenting views of his usual allies. Beyond Justice Scalia’s transparent dislike for the president, perhaps it was the chief justice’s apostasy that drove him around the bend.
In fact, Chief Justice Roberts has never shown himself to be a nativist (not for him the description offered by Justice Scalia of Arizona’s citizens who feel “under siege by large numbers of illegal immigrants who invade their property, strain their social services, and even place their lives in jeopardy”). More to the point, this man of the Beltway and veteran of the White House counsel’s office has never assumed the guise of a committed states-righter. He shares many of the views of his mentor and predecessor, the late Chief Justice William H. Rehnquist, but an appetite for reigniting the federalism wars hasn’t seemed to be one of them, at least not yet.
There is one passage in Justice Kennedy’s opinion that struck me as notably – although not unduly – mistrustful of the state’s motives. It was in the portion declaring unconstitutional Section 6 of S.B. 1070, which authorized local police to arrest, without a warrant, someone they had probable cause to believe had committed a deportable offense – in other words, turning Arizona police into immigration police. “This would allow the state to achieve its own immigration policy,” Justice Kennedy wrote, adding that “the result could be unnecessary harassment of some aliens” whom the federal government would elect not to deport.
“Unnecessary harassment” is a harsh prediction. There were undoubtedly other ways to explain why the state shouldn’t be given the authority it had grabbed: state police officers might make mistakes, there might be misunderstandings. But “unnecessary harassment”? This dump on Arizona, from a justice who has written expansively in the past about the “dignity” and sovereignty of the states, didn’t seem to bother the chief justice a bit.
All of which, of course, leads to the question: what about the health care decision?
Since this column will be coexisting in cyberspace with the court’s Affordable Care Act ruling, due on Thursday morning, it’s undoubtedly foolhardy to repeat my prediction that the court will uphold the law. Well there, I just did.
Chief Justice Roberts was not completely silent on Monday. He filed an opinion dissenting from the court’s other decision that day, Miller v. Alabama, which barred mandatory sentences of life without parole for those convicted of committing murder before the age of 18. Noting that the federal government and most states have such sentencing laws on their books, the chief justice criticized the court’s majority for having failed to “display our usual respect for elected officials.” Courts “must presume an Act of Congress is constitutional” barring some obvious reason it isn’t, he said, citing a 19th-century precedent for that proposition. And quoting the 1976 Supreme Court decision that reauthorized capital punishment, he said there was a “heavy burden” on “those who would attack the judgment of the representatives of the people.”
The court heard argument in the life-without-parole case during the same March sitting in which it heard the Affordable Care Act case – which at its core comes down to the authority of judges to substitute their views on matters of economic policy for those of the people’s elected representatives. There were other grounds on which to object to Justice Kagan’s majority opinion — Justices Thomas and Alito found some in their separate dissenting opinions – so it’s of at least passing interest that the chief justice chose a theme of judicial deference to legislative policy choices.
Thursday promises to be a rare day of Supreme Court theater. While there are frequent dramatic moments at the court, they occur randomly, because the justices don’t announce in advance which decisions they will hand down on a given day. But once a decade or so, the last day of the term arrives with a momentous case still undecided, so there is no secret about what the day holds in store. I remember the almost unbearable tension in the courtroom on June 29, 1992, when Planned Parenthood v. Casey was due to be decided and there was a distinct prospect that the court would use that case to overturn Roe v. Wade.
And on June 26, 2003, everyone knew the court would announce its decision in Lawrence v. Texas, the gay rights case. Gay members of the Supreme Court bar, a number of them former law clerks, filled the bar section of the courtroom, and some wept openly as Justice Kennedy announced that Bowers v. Hardwick had been wrongly decided 17 years earlier and that gay men and lesbians were “entitled to respect for their private lives.”
If there are tears in the courtroom on June 28, 2012, will they be tears of relief, or of regret? And whose?"
http://earlywarn.blogspot.com/2012/06/latest-us-drought-map-and-colorado.html
Wednesday, June 27, 2012
Latest US Drought Map and Colorado
Record highs continue to fall Tuesday afternoon in the central U.S., where Denver, Colorado had its fifth consecutive day of triple-digit heat after it reached 100°F at 1pm MDT, and could continue to rise this afternoon. This ties the all-time record for consecutive 100°F+ days. Nebraska and Kansas are particularly toasty this afternoon; McCook, Nebraska has reached 113°F so far, and Hill City, Kansas is up to 112°F. Though, to put that in perspective, the state record for Nebraska is 118°F, and the state record for Kansas is 121°F.The consequences are ugly:
The heat moves east tomorrow, and by Thursday, many of the major Midwest cities are forecast to be in the triple-digits, including Chicago, St. Louis, and Indianapolis.
A wildfire raging near some of Colorado's most popular tourist sites grew suddenly more ferocious on Tuesday, forcing 32,000 people from their homes, prompting evacuations from the U.S. Air Force Academy and swallowing numerous houses at the edge of Colorado Springs.There are also fires threatening Boulder and (recently) Fort Collins. My heart goes out to those suffering in these disasters.
The fire was "shaping up as one of the biggest disasters in Colorado history," the Denver Post reported.
From the vantage point of a command post about 10 miles from the path of advancing flames, the entire community of Mountain Shadows, a northwest subdivision of Colorado Springs, appeared to be enveloped in an orange glow after dark.
"This is a fire of epic proportions," Colorado Springs Fire Chief Rich Brown told Reuters as ash drifted down on the city, sirens wailed and the thick smell of smoke permeated the air.
The stubborn and towering wildfire had jumped firefighters' perimeter lines in the hills overlooking Colorado Springs.
"We have homes burning right now," El Paso County Sheriff Terry Maketa said Tuesday night, according to the Denver Post.
The sheriff was among those forced from home by the fire, the newspaper added.
"It was like looking at the worst movie set you could imagine," Gov. John Hickenlooper said after flying over the 9-square-mile fire late Tuesday. "It's almost surreal. You look at that, and it's like nothing I've seen before."
Still, it would be remiss not to remind readers of this map from the report Global Climate Change: Impacts in the United States
What is happening in Colarado Springs at present, and what happened to Texas last summer, is going to happen to most of the country in coming decade.
There is work to be done.
Sooner is better. As soon as you can is best.
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