January 2012 archive

Last time we looked at 1972, sort of a quiet year for my favorite band.  1973 would be anything but quiet.  Townshend’s opus, Quadrophenia, was released late in the year, and there was a lot of internal conflict with the band members for the way it was done.

In addition, Kit Lambert was shown to be little more than an embezzler, and that caused a lot of more problems.  Townshend counted on Lambert as a musical wizard, and Lambert, because of his affliction to drugs and alcohol, was anything but that.

There was still a struggle for control of the band, with a surprise hit by Daltrey that gave him some credibility.  By that time, The Who belonged to Townshend, but Daltrey would not go down without a fight.

Then there were the other problems.  1973 would prove to be a very bad year for them, but also one of their best years.  Let’s go!

   

[Note: Your Bloguero has rendered the following dialogue into common English. Originally, it was in the local, mumbled dialect of Limestone County, Alabama.]

“Look, the first thing we do is drink this moonshine. See how clear it is?  This whole mason jar.  It’s a quart. Wonderfully clear. Nothing in the bottom.  No twigs. I got it from Mr. Toney. And it’s good. We drink it first. And then we get the lights out and we let the dogs go. The dogs know where to go. They know what they’re supposed to do. They look for the coons and they tell us where they are. Then they chase them.  When they have the scent, they call. And they will chase them up a tree. And they call when they’re up the tree. It’s a special barking. We just run after them, see? With the guns.  And the lights. It’s very dark out there already.

“Now the most important thing about this hunt – I know you never did this before, right? – the most important thing is when the dogs get the coon treed, we have to get there. In a hurry. To that tree. Because very soon, that coon is not going to stay up in that tree with the dogs barking at it. Nope. He’s coming down, and he’s going to be mad, and when he does come down, he’s going to fuck these dogs up. You understand what I’m telling you? We don’t want that to happen.  Look at Old Lester over there.  See that he has no left ear? See that he’s got a scar across the top of his head? He’s a great coon hound. That’s what we’re talking about. We don’t want that to happen to these dogs. So when the dogs are barking the special bark, telling us that the coon is up in the tree, there’s no time for fooling around. Got to run and get there in a big hurry before the coon changes his mind about staying up in the tree.  And then you have to shoot him out of the tree.  That’s what the lights are for. You shine them up in the tree so you can see the coon.  That and making sure you don’t trip and break your head while you’re running.”

“But,” says your Bloguero. “It’s really dark now. There’s no moon yet. And the paths in these woods aren’t clear.  And if we drink all of this shine, how the hell are we going to get to some tree that’s far away in time to shoot the coon before he comes down from the tree? I mean, it sounds like we could be stumbling around drunk in the woods and tripping on things and getting all scratched up. And we could easily shoot ourselves while we’re running. And not get to the tree so fast.  In other words, this could be a disaster.”

“Oh you a city boy, aren’t you? I know you never did this before. That’s not bad. Look. We’re going to show you how to do it. We’ll get there. We might get a little scratched up by the bush, and we might trip on some roots, and we might take a while to run to the tree.  We might get pretty drunk. But don’t you worry. We will get there. These dogs need us to get there, and we will.  Matter of fact, we almost always do. I’ve been doing this since I was 10, and I’m 70 now. And Obie over there, he’s 72 now. We’ve been hunting together for 60 years or so. So we know how to do this.”

“But what about Lester’s ear? And how the hell can 70 year old men who are completely drunk and carrying loaded guns run through the woods without getting hurt? Are you sure this is safe?”

“Look, I told you before, we’re not perfect. Sometimes we fuck up. We try not to, but sometimes it can’t be helped. But that doesn’t mean that we don’t try to do this any more, right? We are not retiring from this. I mean: this is all that can happen when you go coon hunting. There can be problems.  Of course.  Like anything else. And we try to make sure they don’t happen. But we’re not stopping until we can’t do it any more. Right now, thank God, we can still do it.  So we do.”

This Week In The Dream Antilles is usually a weekly digest. Usually, it appears on Friday. It’s a digest of essays posted at The Dream Antilles in the previous week.  Sometimes, of course, like right now, it jumps the rails and doesn’t tell you anything about the past week.  Sometimes it gets all distracted and goes completely astray. To know what’s on the Dream Antilles you have to visit it.

The hard cold fact is unless they print it, there is not enough money in the world to cover Banksters gambling losses.  They have bet on Black, hedged with Red, the wheel has stopped and the ball is now resting in that Green cup marked 00.

Debt talks falter, Greeks warn of disaster

By Dina Kyriakidou, Reuters

Fri Jan 13, 2012 2:13pm EST

“The main problem was the (European Union and International Monetary Fund’s) insistence on a coupon lower than 4 percent on the new bonds,” the banking source said.

That could mean an accounting loss of more than 70 percent for banks on their books, far more than the actual 50 percent cut in the original value of the old bonds laid down in the original deal.

Under the terms of the October plan, bondholders would take a 50 percent hit on the notional value of the old bonds. But the actual losses on their books depend on coupon and maturity of the new bonds, and could be far higher.

“When you’re dealing with a sovereign, you don’t have a huge amount of tricks up your sleeve, because if they choose not to pay you there’s not an awful lot you can do,” said Gary Jenkins, director of Swordfish Research.

…

Without using so called collective action clauses, the participation rate in any debt swap deal could be smaller than needed because many hedge funds would profit more if Greece defaulted because they would get paid in full from insurance.

“A lot of the (old) bonds have traded and are in the hands of the hedge funds. Do you think the governments are going to (pay out) to hedge funds? No way. So people like us, unless we are forced, we don’t have an incentive to accept,” said a source at a hedge fund, which owns Greek bonds.

Mark to Market can not be avoided forever and Mr. Market is going to have to realize a lot of this paper has a value of exactly zero.  Banks will collapse and if there is any justice there will be crowds on the ledges.

Nations will not suddenly wink out of existence, but Sarkozy and Merkel may find new amounts of time to contemplate their failure.

France to Lose AAA Rating From S&P: Finance Minister

By Mark Deen, Bloomberg News

Jan 13, 2012 2:10 PM ET

Standard & Poor’s is stripping France of its AAA credit rating for the first time, Finance Minister Francois Baroin said, reflecting the risk to the country from the spread of the euro-area debt crisis.

Coming 100 days before France’s presidential elections, the ratings cut to AA+ is a blow for President Nicolas Sarkozy. Other countries in Europe were also notified by the ratings company, Baroin said, without being more specific.

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The downgrade comes amid signs that France is slipping into a recession, complicating Sarkozy’s bid for re-election in voting in April and May.

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Sarkozy trails his main rival, Socialist Party candidate Francois Hollande, by about 14 points in voting intention for the second round of the election, according to a BVA poll for Le Parisien newspaper published Jan. 9.

Stop coddling Europe’s banks

Morris Goldstein, Vox

11 January 2012

After initial denials, Europe’s leaders have started to acknowledge that IMF Chief Christine Lagarde was right. Through their statements and decisions, policymakers are showing their agreement with her assessment in August 2011 at the Federal Reserve’s Jackson Hole symposium that there was an urgent need for recapitalisation of Europe’s banks (Lagarde 2011).

…

(R)ather than converting that ratio into a target for increases in bank capital alone, the European Banking Authority (EBA) has increased the risk of a pro-cyclical response in a region where economic growth is fragile and weakening further.

This is because many banks may choose to reach the higher capital ratio as much by decreasing the denominator (shedding bank assets) as by increasing the numerator (raising bank equity). As an impressive body of research has shown, increasing bank equity need not be expensive or adverse for the real economy because the higher equity cushion makes bank equity safer and because the marketplace puts a positive value on such increased safety (Admati et al 2010); in contrast, reaching a higher capital ratio by restricting loan growth to the real economy and by engaging in fire sales of bank assets has an unambiguous contractionary effect.

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Any EU bank that was below the capital target should have been directed to stop paying dividends until it reached the new capital target and until it was not in danger of falling back below it over the next year. Clearly, some large and under-capitalised EU banks are operating under no such constraints.

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Neither the IMF nor the ECB seem to be rushing forward to give up their de jure or de facto preferred creditor status. All of this just increases the odds that future bank losses on sovereign debt will ultimately be assumed by the public sector and by taxpayers in the highly indebted countries – much to the detriment both of public-debt sustainability and of sustained public support for adjustment programmes. Once again, coddling the banks will impose higher costs on the rest of society.

…

To sum up, throughout this European debt and banking crisis, Eurozone leaders have expressed their determination to “do whatever it takes” to restore stability and save the euro. But if one examines the stance the official sector has taken toward banks, it looks much more like Eurozone leadership “takes (sheepishly) whatever its large banks do” – even when those actions are much more in the banks’ narrow interest than in the wider public one. It is high time for a change.

Wolf Richter: Greece – Disagreement Everywhere, Rift in the Troika

Wolf Richter, Naked Capitalism

Friday, January 13, 2012

(N)ow the Troika itself is in disarray. It surfaced today at an IMF press briefing in Washington: the IMF no longer supports austerity as a guiding principle.

…

The three Troika inspectors-Poul Thomsen from the IMF, Mathias Morse from the EU, and Klaus Mazouch from the ECB-are supposed to head to Greece next week to inspect its books; the budget deficit is once again higher than the revised limit that Greece had vowed to abide by. And they’re supposed to negotiate additional “structural reforms.” But there probably won’t be three inspectors, according to senior IMF sources. Missing: Poul Thomsen. The IMF has had enough.

Already, according to more leaks, IMF Managing Director Christine Lagarde had warned German Chancellor Angela Merkel and French President Nicolas Sarkozy that the fiscal and economic situation in Greece had deteriorated. Hence, the “voluntary” haircut on Greek bonds held by private sector investors should be increased to more than 50% to maintain the goal of bringing Greece’s debt load down to 120% of GDP. And the second €130 billion bailout package, agreed upon on October 26, should be enlarged by “tens of billions of euros.”

The German reaction was immediate. “There has to be a line somewhere,” said Michael Fuchs, deputy leader of Merkel’s party, the CDU. “This cannot be a bottomless barrel.” Even if Merkel were amenable to committing more taxpayer money to bail out Greece, she’d face a wall of opposition in her own party. And he wasn’t brimming with optimism: “I don’t think that Greece, in its current condition, can be saved,” he said.

…

It may be too difficult to keep Greece in the Eurozone, but allowing it to exit would be even more difficult, at least in the short term. And not only for Greece. It would be a shock to the Eurozone economy, which is already fragile. Even Germany, economic superstar with unemployment at a 20-year low and exports at an all-time high, has smacked into a wall. Read…. Germany’s Export Debacle.

Europe’s Road to Nowhere (Part 1)

Author: Satyajit Das, EconoMonitor

January 12th, 2012

Financially futile, economically erroneous, politically puzzling and socially irresponsible, the December 2011 European summit was a failure. Only the attending leaders and their acolytes believe otherwise. German Chancellor Angela Merkel’s post-summit homilies about the “long run”, “running a marathon” and “more Europe” rang hollow.

The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.

…

The plan may result in a further slowdown in growth in Europe, worsening public finances and increasing pressure on credit ratings. This is precisely the experience of Greece, Ireland, Portugal and Britain as they have tried to reduce budget deficits through austerity programs. This would make the existing debt burden even harder to sustain. The rigidity of the rules also limits government policy flexibility, risking making economic downturns worse.

Fiscal controls may not prevent future problems. Until 2008, Ireland, Spain and Italy boasted a better fiscal position and lower debt than Germany and France. The weak economic fundamentals of these countries were exposed by the global financial crisis, leading to a rapid deterioration in public finances.

…

Unlike US banks in 2008/2009, European banks are reluctant to cut significant dividend payouts. Spanish bank Santander plans to pay shareholders Euro 2 billion in cash and more in stock (over 15% of its stated capital requirements). They argue the need to preserve their brand, compensate investors for poor share price performance and a return to profitability. Curiously, the EBA or the Bank of Spain has not intervened to force a suspension of dividends to husband capital.

…

Credit Agricole, the third largest French bank, is planning to reduce assets by around Euro 15-18 billion by the end of 2011 and by Euro 60 billion by end 2013. This will improve the bank’s capital position and also reduce its funding needs by Euro 50 billion. If all banks undertake similar actions, selling foreign assets and shutting (mainly overseas) operations, then the effect on the broader economy will be significant. The tighter credit conditions and lower economic activity may increase normal credit losses setting off a negative feedback loop.

Asset sales by European banks to improve capital are acceptable to the EU as long as they “do not lead to a reduced flow of lending to the EU’s real economy”. Withdrawal from foreign markets is already having a noticeable impact in Eastern Europe and Asia. A slowdown in these economies will indirectly affect Europe, reducing demand for European exports.

Europe’s Road to Nowhere (Part 2)

Author: Satyajit Das, EconoMonitor

January 13th, 2012

Sarko-nomics perpetuates the circular flow of funds with governments supporting banks that are in turn supposed to bail out the government. It does not address the unsustainable high cost of funds for countries like Italy. If its cost of debt stays around current market rates, then Italy’s interest costs will rise by about Euro 30 billion over the next two years, from 4.2% of GDP currently to 5.1% next year and 5.6% in 2013.

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Debt reduction through restructuring remains off the agenda. The adverse market reaction to the announcement of the 50% Greek writedown forced the EU to assure investors that it was a one-off and did not constitute a precedent. Despite this, investors remain sceptical, limiting purchases of European sovereign debt.

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Even Ireland, the much lauded poster child of bailout austerity, has experienced problems. The country’s third quarter GDP fell 1.9% and its Gross National Product fell 2.2% (the later is a better measure of economic performance due to the country’s large export/ transhipment activity). Ireland must reduce its budget deficit from 32% of GDP in 2010 to 3% by 2015. Despite spending cuts and tax increases, Ireland is spending Euro 57 billion euros including Euro 10 billion to support its five nationalised banks, against Euro 34 billion in tax revenue.

Spain, which has voluntarily taken the austerity cure, is missing economic targets. Spain’s budget deficit is above forecast (at 8% of GDP, it is a full 2% above the target agreed with the EU) and the need for support of the Spanish banking system may strain public finances further. Unemployment increased to over 21% (nearly 5 million people). Spain’s economic outlook is poor and deteriorating.

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In the third quarter of 2011, Italy’s economy contracted by 0.2%. The government forecast is for a further contraction of 0.4% in 2012. The government forecasts may be too optimistic. Confindustria, the Italian business federation forecasts the economy will contract by 1.6% in 2012.

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German export orders are slowing, reflecting the fact that the EU remains its largest export market, larger than demand from emerging countries. Germany exports to Italy and Spain total around 9-10 per cent in 2010), higher than to either the US (6-7%) or China (4-5%).

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Greece faces elections in April 2011. The polls indicate a fractious outcome, with the major parties unlikely to gain majorities with significant representation of minor parties. An unstable government combined with a broad coalition against austerity may result in attempts to renegotiate the bailout package. Failure could result in a disorderly default and Greece leaving the Euro.

The French presidential elections, scheduled for May 2012, also create uncertain. The principal opponents to incumbent Nicolas Sarkozy either oppose the Euro and the bailout (the National Front led by Marine Le Pen) or want to renegotiate the plan with the introduction of jointly guaranteed Euro-Zone bonds (the Socialists led by Francios Holland).

The European debt crisis is also creating political problems in Germany, Netherlands and Finland, especially among governing coalitions. The risk of unexpected political instability is not insignificant.

In the weaker countries, austerity means high unemployment, reductions in social services, higher taxes and reduced living standards. Social benefits increasingly below subsistence are widening income inequality and creating a “new poor”. Protest movements are gaining ground, with growing social unrest.

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A downgrade of Germany’s cherished AAA rating or any steps to undermine the sanctity of a hard currency (by printing money or other monetary techniques) will force increasing focus on the costs to Germans of the bailouts. Germany’s commitment to date is Euro 211 billion in guarantees, Euro 45 billion in advances to the IMF and Euro 500 billion owed to the Bundesbank by other national central banks – around 25% of GDP.

…

The debt is concentrated in countries where growth, productivity and cost competitiveness is low, which is what caused the problems in the first place. The relevant wealth is in the hands of a few countries like Germany that appear unwilling to bail out spendthrift and irresponsible neighbours. A substantial portion of the savings is also invested in European government debt directly or in vulnerable banks, which have invested in the same securities.

The total debt of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) plus Belgium is more than Euro 4 trillion. A writedown of around Euro 1 trillion in this debt is required to bring the debt levels down to sustainable levels (say 90% of GDP). In the absence of structural reforms and a return to growth, the writedowns required are significantly larger. This compares to the GDP of Germany and France respectively of Euro 3 trillion and Euro 2.2 trillion.

“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”.

Paul Krugman: America Isn’t a Corporation

“And greed – you mark my words – will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”

That’s how the fictional Gordon Gekko finished his famous “Greed is good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.

Today, however, let’s focus on the rest of that sentence, which compares America to a corporation. This, too, is an idea that has been widely accepted. And it’s the main plank of Mitt Romney’s case that he should be president: In effect, he is asserting that what we need to fix our ailing economy is someone who has been successful in business.

Amy Goodman: Guantanamo at 10: The Prisoner and the Prosecutor

Ten years ago, Omar Deghayes and Morris Davis would have struck anyone as an odd pair. While they have never met, they now share a profound connection, cemented through their time at the notorious U.S. military prison at Guantanamo Bay, Cuba. Deghayes was a prisoner there. Air Force Col. Morris Davis was chief prosecutor of the military commissions there from 2005 to 2007.

Deghayes was arrested in Pakistan and handed over to the U.S. military. He told me: “There was a payment made for every person who was handed to the Americans. … We were chained, head covered, then sent to Bagram [Afghanistan]-we were tortured in Bagram-and then from Bagram to Guantanamo.”

At Guantanamo, Deghayes, one of close to 800 men who have been sent there since January 2002, received the standard treatment: “People were subjected to beatings, daily fear … without being convicted of any crime.”

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.

January 13 is the 13th day of the year in the Gregorian calendar. There are 352 days remaining until the end of the year (353 in leap years).

It is still celebrated as New Year’s Eve (at least in the 20th & 21st centuries) by countries still using the thirteen day slower Julian calendar (Old New Year).

On this day in 1898, French writer Emile Zola’s inflammatory newspaper editorial, entitled “J’accuse,” is printed. The letter exposed a military cover-up regarding Captain Alfred Dreyfus. Dreyfus, a French army captain, had been accused of espionage in 1894 and sentenced in a secret military court-martial to imprisonment in a South American penal colony. Two years later, evidence of Dreyfus’ innocence surfaced, but the army suppressed the information. Zola’s letter excoriated the military for concealing its mistaken conviction.

Dreyfus Affair

Captain Alfred Dreyfus was a Jewish artillery officer in the French army. When the French intelligence found information about someone giving the German embassy military secrets, anti-semitism seems to have caused senior officers to suspect Dreyfus, though there was no direct evidence of any wrongdoing. Dreyfus was court-martialled, convicted of treason and sent to Devil’s Island in French Guiana.

LL Col. Georges Picquart, though, came across evidence that implicated another officer, Ferdinand Walsin Esterhazy, and informed his superiors. Rather than move to clear Dreyfus, the decision was made to protect Esterhazy and ensure the original verdict was not overturned. Major Hubert-Joseph Henry forged documents that made it seem that Dreyfus was guilty and then had Picquart assigned duty in Africa. Before leaving, Picquart told some of Dreyfus’s supporters what he knew. Soon Senator August Scheurer-Kestner took up the case and announced in the Senate that Dreyfus was innocent and accused Esterhazy. The right-wing government refused new evidence to be allowed and Esterhazy was tried and acquitted. Picquart was then sentenced to 60 days in prison.

Émile Zola risked his career and even his life on 13 January 1898, when his “J’accuse“, was published on the front page of the Paris daily, L’Aurore. The newspaper was run by Ernest Vaughan and Georges Clemenceau, who decided that the controversial story would be in the form of an open letter to the President, Felix Faure. Émile Zola’s “J’Accuse” accused the highest levels of the French Army of obstruction of justice and antisemitism by having wrongfully convicted Alfred Dreyfus to life imprisonment on Devil’s Island. Zola declared that Dreyfus’ conviction came after a false accusation of espionage and was a miscarriage of justice. The case, known as the Dreyfus affair, divided France deeply between the reactionary army and church, and the more liberal commercial society. The ramifications continued for many years; on the 100th anniversary of Zola’s article, France’s Roman Catholic daily paper, La Croix, apologized for its antisemitic editorials during the Dreyfus Affair. As Zola was a leading French thinker, his letter formed a major turning-point in the affair.

Zola was brought to trial for criminal libel on 7 February 1898, and was convicted on 23 February, sentenced, and removed from the Legion of Honor. Rather than go to jail, Zola fled to England. Without even having had the time to pack a few clothes, he arrived at Victoria Station on 19 July. After his brief and unhappy residence in London, from October 1898 to June 1899, he was allowed to return in time to see the government fall.

The government offered Dreyfus a pardon (rather than exoneration), which he could accept and go free and so effectively admit that he was guilty, or face a re-trial in which he was sure to be convicted again. Although he was clearly not guilty, he chose to accept the pardon. Émile Zola said, “The truth is on the march, and nothing shall stop it.” In 1906, Dreyfus was completely exonerated by the Supreme Court.

The 1898 article by Émile Zola is widely marked in France as the most prominent manifestation of the new power of the intellectuals (writers, artists, academicians) in shaping public opinion, the media and the state.

The current case that Iran is developing enriched uranium for a bomb is hardly conclusive and the evidence is sketchy at best. There used to be but it was abandoned under international pressure in 2003. Former member of the IAEA’s Iraq Action Team in 2003 and nuclear engineer, Robert Kelley writes in Bloomberg News that the charges against Iran are no “slam dunk”:

(T)he issue is not whether there is evidence of such a program, but whether there is evidence that it was restarted after being shut down in 2003.

The Nov. 8, 2011, report of the IAEA, under the leadership of Director General Yukiya Amano, is long on the former and very short on the latter. In the 24-page document, intended for a restricted distribution but widely available on the Internet, all but three of the items that were offered as proof of a possible nuclear-arms program are either undated or refer to events before 2004. The agency spends about 96 percent of a 14- page annex reprising what was already known: that at one time there were military dimensions to Iran’s nuclear program.

What about the three indications that the arms project may have been reactivated?

Two of the three are attributed only to two member states, so the sourcing is impossible to evaluate. In addition, their validity is called into question by the agency’s handling of the third piece of evidence.

That evidence, according to the IAEA, tells us Iran embarked on a four-year program, starting around 2006, to validate the design of a device to produce a burst of neutrons that could initiate a fission chain reaction. Though I cannot say for sure what source the agency is relying on, I can say for certain that this project was earlier at the center of what appeared to be a misinformation campaign.

In 2009, the IAEA received a two-page document, purporting to come from Iran, describing this same alleged work. Mohamed ElBaradei, who was then the agency’s director general, rejected the information because there was no chain of custody for the paper, no clear source, document markings, date of issue or anything else that could establish its authenticity. What’s more, the document contained style errors, suggesting the author was not a native Farsi speaker. It appeared to have been typed using an Arabic, rather than a Farsi, word-processing program. When ElBaradei put the document in the trash heap, the U.K.’s Times newspaper published it.

Appearing on “Face the Nation with Bob Scheiffer”, Secretary of Defense Robert Panetta let it slip that Iran is not trying to build nuclear weapons but is pursuing a “nuclear capability”:

“I think the pressure of the sanctions, the diplomatic pressures from everywhere, Europe, the United States, elsewhere, it’s working to put pressure on them,” Panetta explained on Sunday. “To make them understand that they cannot continue to do what they’re doing. Are they trying to develop a nuclear weapon? No. But we know that they’re trying to develop a nuclear capability, and that’s what concerns us. And our red line to Iran is, do not develop a nuclear weapon. That’s a red line for us.”

Republicans have been beating the drums of war in recent weeks as tensions in the Iranian gulf have soared. Iran has threatened to shut down the Strait of Hormuz, a key oil transport hub crucial to global industry, if U.S. warships return to monitor their activities. [..]

The International Atomic Energy Agency said late last year that Iran had carried out tests that suggested they may be taking the first steps toward building a nuclear weapon, but former agency insiders disputed the claim as being misleading.

Reality check. This is not, nor has it ever been, just about nuclear weapons. It’s also about oil and securing the strategic passage from the major oil fields that surround the Persian Gulf. Now closing the Strait of Hormuz is a “red line” that would provoke an American response, according to United States government officials.  

After having decided in December to delay raising the debt ceiling for the third time at the request of Congress until they returned from vacation in January, President Barack Obama has sent a letters to the House and Senate requesting the ceiling be raised. The debt ceiling has come within $100 billion of the current $15.194 trillion limit. The formal letters trigger a 15-day clock for Congress to consider and vote on a joint resolution disapproving of the increase. The vote a resolution of disapproval will be held in the House on January 18.

The trigger for the request actually occurred on December 30 while the President was vacationing in Hawaii and congress was “on a holiday break”. This is the third and final request to raise the ceiling that was agreed to last year when congress approved the budget. The last resolution of disapproval passed the Republican controlled House but failed in the Democratic controlled Senate. It’s expected that will again be the case, sparing President Obama the need to veto it.

This last bump will carry the government’s ability to pay its bills past the November elections when another raise will have to be discussed by the lame duck congress. Looking forward to that battle.

Should The Times Be a Truth Vigilante?

By ARTHUR S. BRISBANE, The New York Times

January 12, 2012, 10:29 am

I’m looking for reader input on whether and when New York Times news reporters should challenge “facts” that are asserted by newsmakers they write about.

…

This message was typical of mail from some readers who, fed up with the distortions and evasions that are common in public life, look to The Times to set the record straight. They worry less about reporters imposing their judgment on what is false and what is true.

Is that the prevailing view? And if so, how can The Times do this in a way that is objective and fair? Is it possible to be objective and fair when the reporter is choosing to correct one fact over another? Are there other problems that The Times would face that I haven’t mentioned here?

The current policy of austerity that is being forced on the European Union by Germany and England has been called “financially futile, economically erroneous, politically puzzling and socially irresponsible” by economists and monetary experts. Author and derivatives expert, Satyajit Das, writes in the first part of his series on “The Road to Nowhere, Part 1 – Fiscal Bondage” at naked capitalism that the December 2011 European summit to resolve the euro crisis was a failure:

The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.[..]

The plan may result in a further slowdown in growth in Europe, worsening public finances and increasing pressure on credit ratings. This is precisely the experience of Greece, Ireland, Portugal and Britain as they have tried to reduce budget deficits through austerity programs. This would make the existing debt burden even harder to sustain. The rigidity of the rules also limits government policy flexibility, risking making economic downturns worse.[..]

The fiscal compact did not countenance any writedowns in existing debt. It also did not commit any new funding to support the beleaguered European periphery. Germany specifically ruled out the prospect of jointly and severally guaranteed Euro-Zone bonds. Instead, there were vague platitudes about working towards further fiscal integration.[..]

Instead of dealing with the financial problems of the central bailout mechanism (the EFSF – European Financial Stability Fund), European leaders chose the re-branding option.

Actions, or rather inactions, have consequences.

As I predicted in a message to Credit Writedowns Pro subscribers on Monday, statistics have shown that the German economy has finally succumbed to the deflationary economic policy of the euro zone.

   Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.

   Gross domestic product (GDP) grew 3.0 percent in 2011, preliminary Federal Statistics Office data showed on Wednesday, below the previous year’s growth rate of 3.7 percent – the fastest since reunification – and in line with a Reuters poll estimate.

   But GDP contracted by around 0.25 percent in the fourth quarter of 2011, an official from the Statistics Office added.

   “Germany cannot isolate itself so easily from tensions within the euro zone. In addition the export sector is facing a difficult period given the fall in global demand,” said Joerg Zeuner, chief economist at VP Bank.

Harrison wrote in November in the New York Times

that Europe is already in a double-dip recession. Already two months ago, the Markit Eurozone Manufacturing Purchasing Managers Index, which measures activity across Europe in services and manufacturing, had fallen to 50.4, the lowest since September 2009. The divider between expansion and contraction is 50, so Europe was still expanding. But last Wednesday, Markit data indicated that the situation has since deteriorated; the latest data showed a drop in private sector activity in the euro zone for the first time since July 2009. Moreover, the data are poor in the core of the euro zone as well as in the periphery, with Germany and France’s economies stalling as well. The sovereign debt crisis and the fiscal consolidation implemented to deal with it have taken their toll.[..]

Until the banks take substantially more credit write-downs and recapitalize, this crisis will continue and get worse.

The downward spiral is evident throughout Europe with even the strong German economy feeling the effects of erroneous policies

The German economy expanded faster than any other Group of 7 nation last year, official data showed Wednesday, but the stress of the euro crisis and a slowing global economy appear to be already weighing on output.

Germany expanded by 3 percent last year from 2010, the Federal Statistical Office said in Wiesbaden. It noted, however, that the growth came mostly in the first half of 2011, and estimated that the economy actually contracted by about 0.25 percent in the fourth quarter from the prior three months.

Some economists now predict another contraction for Germany in the first three months of 2012, which would meet the usual definition of a recession as two consecutive quarterly declines in output.

And austerity measures in Greece are making their budget deficits even worse:

Greece’s budget deficit widened last year as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Thursday. The central government budget gap widened 0.8 percent year-on-year to 21.64 billion euros ($27.45 billion) last year, according to figures from the finance ministry.

David Dayen at FDL News Desk thinks it is probably worse since “the EU uses a different measure to assess the Greek budget.”  He points out that even with increased taxes, the fall in tax compliance from an already lax system has reduced income. It all looks good on paper but that’s not the reality of what is actually in the treasury.

There is some hope that Europe’s leader are waking up to reality that there needs to be a growth strategy, although it may not be enough, or soon enough, to reverse the spiral.

It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an “optimum currency area”

It’s not just government, to “sovereign debt” but also excesses in the financial sector, real estate etc.

We must do everything to avoid recession. … We need a fiscal strategy that is “growth friendly”

Fiscal consolidation will not tell us to say “no” to all or which is cut everywhere. We must “prioritize”

We ask each member state to establish a “job plan”, we make commitments we can evaluate

The next meeting of the Eurozone member is the end of this month where a tax on financial transactions will be considered and, hopefully, they will discuss job creation and debt reduction.

“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”.

Jeff Cohen: Obama, Sarkozy and Taxing Wall Street

With U.S. media obsessing on the fight here at home among conservatives vying to become president, most of them missed some big news about France, which already has a conservative president.  This week, French President Nicolas Sarkozy announced that he would take the lead – even go it alone within Europe, if need be – in introducing and pushing a Financial Transaction Tax in his country.

That’s right – the conservative president of France wants to tax the financial traders and speculators.

Referring to the tax as a “moral issue” and blaming deregulation and speculation for the global economic meltdown, Sarkozy has said that traders must “repay for the damage they have caused.”

What does it tell us about U.S. politics that the conservative president of France – on this issue and others – is way to the left of President Obama?  The U.S. president has not publicly promoted a Wall Street transaction tax (even though US financial institutions, not the French, were largely responsible for the global financial crisis).

Michael Ratner: Guantánamo at 10: The Defeat of Liberty by Fear

The unprecedented executive powers assumed by both presidents since 9/11 have crippled America’s body politic

On 11 January 2002, the United States began showing major signs of what I call “Guantánamo syndrome”, after one of the ailment’s first and most enduring symptoms. That was the day when the Bush administration transferred the first 20 detainees to Camp X-Ray at Guantánamo Bay, Cuba, after being assured by its Department of Justice that the location placed detainees outside of US legal jurisdiction.

But the first hint of our national illness appeared earlier, in the weeks following the attacks on the Pentagon and the World Trade Centers, when the Bush administration took the lid off unlimited executive power. This is the lid that nobles, who had endured centuries of rulers imprisoning anyone who ticked them off and holding them indefinitely without having to state or prove any kind of case, affixed in 1215 with the Magna Carta. It’s the lid that the original framers tightened to the specifications of the United States when they ratified the Constitution in 1790.