December 2011 archive

and why they might be the best alternative.

I found this a thought provoking piece.

David Apgar: Could Germany Be Right about the Euro?

Naked Capitalism

Sunday, December 4, 2011

What if there are good reasons for the preternatural calm of German Chancellor Merkel’s inner circle as the English-language media (based, after all, in the investor capitals of London and New York) light their collective hair on fire about the euro’s imminent immolation? Surprisingly, you can make a decent argument that the euro zone is at no risk of breakup – unless someone secretly switches its purpose from facilitating European trade to providing investors an implicit guarantee against losses.

…

Suppose, however, the feasibility of Mediterranean austerity – austerity at a scale big enough to impress the bond markets – is not what Merkel’s team is counting on. Suppose instead the Germans are really counting on the feasibility of a series of orderly partial defaults.

…

The big unasked question is not whether austerity might be tolerable but whether defaults would be as intolerable as the bond media insist. Here’s why Merkel’s team could have quietly concluded that the costs of a series of partial defaults are unavoidable even without any defaults, that some of those supposed costs may in fact be disguised benefits, and that the alternatives to selective debt relief are probably unsustainable.

As far as costs go, massive European bank restructuring comes to mind, especially following a cool €300 billion or so of losses on government bond holdings. It’s hard to say anything nice about bank restructuring, but at least we know how to do it. We know, for example, how to split good banks from bad banks. (Hint: rank balance sheet assets by quality and liabilities by seniority and draw a line across the balance sheet after the last asset of reasonably determinate value.) That’s handy when you need banks with systems in place ready to restart lending. And we know these transactions work when free from political interference as they were in Sweden in 1992. We also have institutions like the ECB ready to fix broken banks – unlike broken governments.

Less widely discussed, massive European bank restructuring may be unavoidable even if Europe somehow enlisted enough ECB printing presses, enough future earnings of all those carefree northern European taxpayers, and enough future benefits of all those docile southerners to plaster a smile on the face of every bond portfolio manager at BNP Paribas and Commerzbank. The scale of the bailout needed to avoid further investor losses as of today – much less tomorrow or next week – would entail cross-border consolidation or de facto nationalization of a significant portion of the euro banking sector.

…

The alternatives to partial defaults by countries that can’t afford to pay rising interest rates, furthermore, may be unsustainable. The most popular alternative has the ECB stepping in to buy bonds every time investors try to cut their exposure. At first blush, it looks clean – no forced austerity, no messy investor losses and bank restructurings, no burden on taxpayers in creditor countries like Germany. The only problem is that it would be inflationary.

And that inflation turns out to be quite a problem. With such ECB generosity on offer – and with euro zone inflation looming – why would any bond trader with a pulse stop after dumping her Greek, Portuguese, Irish, Italian, and Spanish exposure? Why not get rid of the French and German paper in the vaults, as well? Get rid of it all. Well, maybe not the Estonian bonds. But the ECB would be buried.

…

Ironically, the ECB purchaser-of-last-resort and eurobond alternatives probably would break up the euro zone. The inflationary strains of the former, and the accountability problems of the latter, would never survive the next referendum in a euro zone state. The purpose of the euro is to facilitate trade and commerce – not facilitate government borrowing.

This, then, is the impasse euro zone bond investors have reached. To avoid losses, they clamor for alternatives that could disrupt the currency itself – one of the few things that might actually make them worse off in real terms than they are right now.

Frankly there is no reason to believe that the Euro crisis is causing anything but kneejerk neoliberal responses from elites who are bound by faith alone to policies and doctrines that are factually proven failures.

Still, it does make you think.

America’s Next TARP Model

A Bloomberg report reveals that the U.S. government loaned banks $7.7 trillion in secret bailout funds at no interest and then borrowed the money back at interest.

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future

Find the past “On This Day in History” here.

December 4 is the 338th day of the year (339th in leap years) in the Gregorian calendar. There are 27 days remaining until the end of the year

On this day in 1783, future President George Washington, then commanding general of the Continental Army, summons his military officers to Fraunces Tavern in New York City to inform them that he will be resigning his commission and returning to civilian life.

Washington had led the army through six long years of war against the British before the American forces finally prevailed at the Battle of Yorktown in 1781. There, Washington received the formal surrender of British General Lord Charles Cornwallis, effectively ending the Revolutionary War, although it took almost two more years to conclude a peace treaty and slightly longer for all British troops to leave New York.

Fraunces Tavern is a tavern, restaurant and museum housed in a conjectural reconstruction of a building that played a prominent role in pre-Revolution and Revolution history. The building, located at 54 Pearl Street at the corner of Broad Street, has been owned by Sons of the Revolution in the State of New York Inc. since 1904, which claims it is Manhattan’s oldest surviving building. The building is a tourist site and a part of the American Whiskey Trail and the New York Freedom Trail.

Revolution history

In August 1775, Americans took possession of cannons from the artillery battery at the southern point of Manhattan and fired on the HMS Asia. The British ship retaliated by firing a 32-gun broadside on the city, sending a cannonball through the roof of the building.

When the war was all but won, the building was the site of “British-American Board of Inquiry” meetings, which negotiated to ensure to American leaders that no “American property” (meaning former slaves who were emancipated by the British for their military service) be allowed to leave with British troops. Board members reviewed the evidence and testimonies that were given by freed slaves every Wednesday from April to November 1783, and British representatives were successful in ensuring that almost all of the loyalist blacks of New York maintained their liberty.

After British troops evacuated New York, the tavern hosted an elaborate “turtle feast” dinner on December 4, 1783 in the building’s Long Room for U.S. Gen. George Washington where he bade farewell to his officers of the Continental Army by saying “[w]ith a heart full of love and gratitude, I now take leave of you. I most devoutly wish that your latter days may be as prosperous and happy as your former ones have been glorious and honorable.”

The building housed some offices of the Confederation Congress as the nation struggled under the Articles of Confederation. With the establishment of the U.S. Constitution and the inauguration of Washington as president in 1789, the departments of Foreign Affairs, Treasury and War located offices at the building. The offices were vacated when the location of the U.S. capital moved on December 6, 1790 from New York to Philadelphia.

The art of Griftopia

Felix Salmon, Reuters

Dec 2, 2011 11:43 EST

I’m in Miami right now, for the annual bacchanal of conspicuous consumption that is Art Basel Miami Beach. There are two equally important things going on here (and by “important” I mean “not important at all”) – a tiny group of people spending huge sums of money on art; and a small group of people in extremely expensive shoes gossiping about who’s buying what.

But the money sloshing around the art world is, ultimately, small potatoes. Any one artwork might sell for an astonishing amount of money… (b)ut compared with the sums of money in finance, the entire contemporary-art circus is basically a rounding error.

…

(A) work of art about the way in which the entire financial crisis is utterly incomprehensible to anybody who doesn’t study it day in and day out for months. Everybody wants easy answers or villains, but in fact everybody was to blame, and Powhida’s piece is a great way of showing how difficult it really is to understand this stuff. The CFTC, for instance, has a prominent part in the work, and goes unexplained: if you don’t know what it is – and 95% of the people looking at the work will have no idea what it is – then you’ll begin to get a good idea of just how beyond your grasp the financial crisis lies.

Here at Art Basel, everybody is in their comfort zone – the art world knows how to buy and sell and backstab and gossip, and it does it very well. And wading into the belly of the beast, Postmasters has brought Powhida’s works down to Miami, the natural home for high-impact pieces for people with short attention spans. I doubt they’ll do very well. But you never know: if people are still feeling the pain on the condo they bought at the top of the market because they thought it would be nice way to make a profit while having a pied-à-terre down here, Powhida might just pique their interest.

When art galleries ratify forgeries

Felix Salmon, Reuters

Dec 3, 2011 12:50 EST

Patricia Cohen has uncovered the art-world scandal of the year: it seems as though Knoedler, the 164-year-old Upper East Side institution, closed abruptly on Wednesday in large part to protect itself against a $17 million lawsuit from Pierre Lagrange. Lagrange spent that sum on a Pollock which he then discovered contained two paints which had not been manufactured until after Pollock died. And now it seems that Knoedler regularly sold AbEx paintings procured by Glafira Rosales with the vaguest of provenance.

…

The point here is that the art market, like the stock market, runs on a combination of trust and storytelling ability. The most expensive artists are nearly always those who can be credibly placed into central slot in the history of art; one of the main reasons that Abstract Expressionists in general are so expensive is because they have spent decades as the very heart of MoMA’s collection, which presented them as the pinnacle of 20th Century art, the artists standing on the shoulders of people like Picasso.

When gallerists sell paintings, they tell stories not only about the work, but also about the story behind the work, conjuring up romantic notions of dealings between Robert Motherwell and Mexican sugar magnates, brokered by “man named Alfonso Ossorio”. So long as the institution selling the work is trustworthy, potential buyers tend to take such stories at face value – and, of course, they have a vested financial interest in those stories being true, the minute they actually buy the piece.

…

Freedman would also have found it much harder to sell all those Motherwells if she hadn’t had the full institutional credibility of Knoedler behind her. That’s how galleries can be such lucrative businesses to be in: once you’re established, you can literally add hundreds of thousands or even millions of dollars to the value of a painting, just by hanging it on your wall. A fake Motherwell in a garage in Switzerland is worthless; in an Upper East Side gallery, it’s priceless.

Until the forgery is uncovered, of course.

A metaphor our times.

Massachusetts Attorney General Martha Coakley filed a law suit against five major banks and MERSover deceptive mortgage practices. One of those entities, GMAC, the mortgage lender of Ally Financial Inc., decided to stop mortgage lending in Massachusetts. The nation’s fifth-largest mortgage originator said it “has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable,”. Seriously, they are not going to play in the state because Martha wants them to play by the rules. How dare she!

Yves Smith at naked capitalism says that in essence GMAC Mugs Massachusetts for Insisting on the Rule of Law, Suspends Mortgage Lending in the State

This move by GMAC, now Ally, is remarkably brazen. GMAC has effectively said that Massachusetts must hew to its demands of how to deal with foreclosures. It announced it is withdrawing from mortgage lending in the state in an effort to bring it to heel. [..]

GMAC is trying to get other big banks to follow suit. I hope the state and other groups that do substantial financial business with banks (largish churches are also attractive clients) make it clear than any effort to punish the state for enforcing the law will be met by moving their accounts to smaller institutions that respect the law. [..]

Sorry, for the first decade plus of the private mortgage securitization business, banks and servicers did hew to the requirements of state law. It was only in the late 1990s through 2004 or so that they started to fail to comply with the requirements of their own contracts (the breakdown appears to have taken place over time, with the biggest decay taking place during the 2002-2003 refi boom). That’s what has put their foreclosures on shaky footing, which in turn has led to wideranging legal abuses to get around the mess they created.

The insolence of the securitization industry continues to be astonishing. They act as if they have an imperial right to dictate to governments, and refuse to admit any role in a disaster of their own creation. I hope those of you who do business with Ally close your accounts immediately and tell the bank that it is due to their Mafia style move in Massachusetts.

If you’re a GMAC customer in Massachusetts, it’s time to move your loan.  

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

The Sunday Talking Heads:

Up with Chris Hayes: Sunday’s guests are Rev. Samuel Rodriguez (@NHCLC), President of The National Hispanic Christian Leadership Conference; Dr. Donald Berwick, former administrator for the Centers for Medicare and Medicaid Services under President Obama; Jared Bernstein, former chief economist and economic advisor to Vice President Joe Biden;  Chrystia Freeland, editor of Thomson Reuters Digital; Mahlon Mitchell, President of the Professional Fire Fighters of Wisconsin; John McWhorter, Columbia University Professor of Linguistic and American Studies, and Contributing Editor at New Republic and TheRoot.com; and Katrina Vanden Heuvel, editor & publisher at The Nation magazine.

This Week with Christiane Amanpour: Sunday’s guests are former Pennsylvania senator and Republican presidential candidate Rick Santorum; , Rep. Barney Frank (D-MA) and Academy Award winning actress Angelina Jolie. The rountable pundits are George Will, Democratic strategist Donna Brazile, AOL Huffington Post’s Arianna Huffington, and Major Garrett of National Journal.  

Face the Nation with Bob Schieffer: Guests are RNC Chair Reince Priebus and Obama Campaign Advisor Robert Gibbs. Roundtable analysis from CBS News Chief White House Correspondent Norah O’Donnell, CBS News Political Director John Dickerson, CBS News Congressional Correspondent Nancy Cordes, and Politico’s Chief White House Correspondent Mike Allen.

The Chris Matthews Show: This week’s guests are Joe Klein, TIME Columnist, Helene Cooper, The New York Times White House Correspondent, Gillian Tett, Financial Times U.S. Managing Editor and John Heilemann, New York Magazine National Political Correspondent

Meet the Press with David Gregory: Guests are Obama re-elect chief strategist David Axelrod and RNC Chairman Reince Priebus.

But in separate studios to minimize the level of bull s**t that will be shoveled

The roundtable guests are Publisher of the New Hampshire Union Leader Joe McQuaid, the BBC’s Katty Kay, Fmr. Rep. Harold Ford, Jr. (D-TN) and TIME’s Mark Halperin.

State of the Union with Candy Crowley: Guests are Rep. Ron Paul (R-TX), Rep. Michele Bachmann (R-MI) and Sen. John McCain (R-AZ). Guests on an economic panel are Alice Rivlin, Douglas Holtz-Eakin, and Ron Brownstein.

In Gaza, lives shaped by drones

 

By Scott Wilson, Sunday, December 4

GAZA CITY – The buzz began near midnight on a cool evening last month, a dull distant purr that within moments swelled into the rattling sound of an outboard motor common on the fishing boats working just offshore.

At a busy downtown traffic circle not far from the dormant port, a pickup truck full of police pulled up abruptly. The half-dozen men spilled into the streets.

“Inside, inside,” the officers, all of them bearded in the style favored by the Hamas movement that runs Gaza, urged passersby. Then, pointing to the sky, one muttered, “Zenana, zenana.”

OK, IF YOU SAY SO

A Japanese aid worker who was rescued from the rubble following last month’s earthquake in Turkey said that the glow from her laptop “calmed me down and gave me hope to stay alive.”

The newly installed head of the US Navy’s 7th Fleet, which is based in Yokosuka, claims to spend “a lot of time thinking about North Korea.”

Officials at Mitsubishi Heavy Industries say that no national defense secrets were lost during a recent cyber-attack on its servers, although the company didn’t rule out the possibility that “important data, such as those related to nuclear power, have been leaked.”

An Air SDF pilot whose plane crashed into the East China Sea in July and whose body was never recovered is believed to have suffered from G-LOC, or g force-related loss of consciousness.

A poll conducted by the Yomiuri Shimbun and the Xinhua news agency found that 17 percent of Japanese have a positive view of relations with China, while 46 percent of Chinese have a positive view of Japan.

Welcome to the Stars Hollow Health and Fitness weekly diary. It will publish on Saturday afternoon and be open for discussion about health related issues including diet, exercise, health and health care issues, as well as, tips on what you can do when there is a medical emergency. Also an opportunity to share and exchange your favorite healthy recipes.

Questions are encouraged and I will answer to the best of my ability. If I can’t, I will try to steer you in the right direction. Naturally, I cannot give individual medical advice for personal health issues. I can give you information about medical conditions and the current treatments available.

You can now find past Health and Fitness News diaries here and on the right hand side of the Front Page.

I didn’t break the bank buying fresh fish. I looked in the freezer department, where there is often a better selection (depending on where you shop), and was able to find moderately priced varieties. Among them were albacore steaks, one of the few types of tuna that we can still enjoy with a clear conscience, and a great fish to eat if you’re trying to get more omega-3s into your diet, and farmed Arctic char, another fatty fish full of omega-3s. It’s pink like salmon, but meatier, and the taste is not as strong.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

New York Times Editorial: Been Down So Long …

The unemployment rate dropped to 8.6 percent in November from 9 percent in October in the jobs report released Friday. The economy added 120,000 jobs and job growth was revised upward in September and October.

That’s better than rising unemployment and falling payrolls. Yet, properly understood, the new figures reveal more about the depth of distress in the job market than about real improvement in job prospects.

Most of the decline in November’s unemployment rate was not because jobless people found new work. Rather, it is because 315,000 people dropped out of the work force, a reflection of extraordinarily weak demand by employers for new workers. It is also a sign of socioeconomic decline, of wasted resources and untapped potential, the human equivalent of boarded-up Main Streets and shuttered factories.

Charles M. Blow: Newt’s War on Poor Children

Newt Gingrich has reached a new low, and that is hard for him to do.

Nearly two weeks after claiming that child labor laws are “truly stupid” and implying that poor children should be put to work as janitors in their schools, he now claims that poor children don’t understand work unless they’re doing something illegal.

On Thursday, at a campaign stop in Iowa, the former House speaker said, “Start with the following two facts: Really poor children in really poor neighborhoods have no habits of working and have nobody around them who works. So they literally have no habit of showing up on Monday. They have no habit of staying all day. They have no habit of ‘I do this and you give me cash’ unless it’s illegal.” (His second “fact” was that every first generational person he knew started work early.)

This statement isn’t only cruel and, broadly speaking, incorrect, it’s mind-numbingly tone-deaf at a time when poverty is rising in this country. He comes across as a callous Dickensian character in his attitude toward America’s most vulnerable – our poor children. This is the kind of statement that shines light on the soul of a man and shows how dark it is.