February 2012 archive

As Greece stares into the abyss, Europe must choose

Maria Margaronis, The Guardian

Sunday 12 February 2012 14.10 EST

When you ask people on the street if they would rather Greece went bankrupt than submit to further measures, many now point out that it is already bankrupt, that public sector workers have gone unpaid for months, that hospitals have no supplies, that the poor are being wrung dry in order to pay the banks. “Let’s get it over with,” a woman who works for the education ministry said to me. “Then we’d know we only had €250 a month and we could start again. This is not the people’s Europe we dreamed of.” The fact that Poul Thomsen of the IMF, the eurozone’s poster boy Mario Monti, the markets and countless economists agree that more austerity will deepen Greece’s depression without making the debt sustainable adds weight to her argument. The icy reception given last week to the Greek delegation in Brussels confirms the sense that its lenders are ready to end the relationship.

Why, then, have large sections of the Greek elite clung so hard to the fantasy that a new loan deal can “save” the country? The obvious answer is that default is a black hole and an enormous risk. No one can predict what suffering a default might bring. Another is that the current crop of politicians built their careers in the system that is now unravelling, based on oligarchies, clientelism and corruption; they’ve proved unwilling to make the reforms that might, in a different global climate, have revived both Greece’s economy and its democracy.

The deeper reasons, though, may be cultural and political. The crisis has intensified old splits in Greek society. You can see it in the polls, which show support ebbing from the centre to the edges of the political spectrum, and especially to the fragmented left. You can see it, too, in the historical parallels people reach for in a vain attempt to name this unprecedented nightmare. Protesters chant slogans from the dictatorship of 1967 to 1974, comparing the deal’s Greek enforcers with the CIA-backed junta. Both left and right talk about a new German occupation – an understandable reference given that Germany is calling the shots and that Greeks last queued at soup kitchens in the 1940s, but one that can edge into racism or crude exaggeration, as in a recent headline that read simply “Dachau”. Both those tropes call up the silent ghosts of the Greek civil war, which launched the cold war in Europe and outlawed the Greek left for the next 30 years. In this story, the west plays the part of the repressive imperial interloper.

For the liberal centre, this is populist anathema. To them Europe is still Greece’s heartland and its hope, the only guarantor of liberal capitalism, human rights and democracy. A few weeks ago a distinguished law professor compared the prospect of default to the Asia Minor disaster of 1922, which brought a million-and-a-half refugees into Greece and convulsed the state, and went so far as to suggest that leaving the eurozone would end the 200-year cycle of the Greek Enlightenment.

Next Steps for Greeks after the Austerity Bill (AKA: Hope for Greece, at last)

by Ian Welsh

2012 February 12

Ok, another austerity package just passed.  That’s the bad news, but amidst the bad news there is some good news.  More than 40 MPs were expelled from the PASOK and ND parties, two from LAOS-those MPs need to form a new, explicitly anti-austerity, pro-default government.  Odds are good they will win the next election, and can form the new government.

No deals made by a sovereign are unrevocable.  Whatever this government is doing, has done and will do, can be undone by a new government.

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Greece can be fixed, if the Greeks are willing to do what it takes, both in terms of electing a new government and that government doing the right things.  Those things will be unorthodox and painful, but no more painful than austerity, and unlike austerity, they will lead to a better economy, and based on experience elsewhere, probably within two or three years of doing the right thing, with some relief being felt within 6 months.

What passes for smart on the Greek Debt Crisis

by Ian Welsh

2011 November 4

It didn’t take years for Argentina when they defaulted.  When Iceland told Europeans to go take a long flying leap of a short pier, it didn’t take them years.  In fact, my best guess is it would take a year, maybe less.  There is too much money chasing far too few returns.  Contrary to the idea that there isn’t enough money in the world, the problem is that there is too much, and it is chasing diminishing returns.

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No, no they don’t have to bail out the banks.  Not for the full value of the default (if Greece just said “we won’t pay”, as opposed to “we’ll pay at some point”.)  The banks have shareholders and bondholders.  Those institutions and people take the losses.  Some of them are public (pension funds, etc…) but many of them aren’t.  Let them eat their losses.  The banks go under, you refloat them, but the cost of doing so is far less than paying off all the bad loans, because the private actors have taken their losses and any excess losses, well, they’re just written off.  Same as when you realize cousin Fred ain’t ever paying you back than $100.  It’s gone.  Done.  Over with.

The only reason “all the debts” must be paid off is because the rich demand it.  They don’t want to take their losses. This is what should have been done in the US.  It is what should be done in Europe.  It is what our lords and masters refuse to do at all costs, because the people who own them, or they themselves, or their friends, or their lovers, are the ones who will take the bath.

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According to the IMF, hardly an organization that wants countries to default, the effect on the economy of defaulting is one year of sharp pain, followed (perhaps) by a few years of lesser growth than otherwise.  In other words, not that bad, and no worse than Greece has already suffered.

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(C)ountries could simply slap on currency controls, which experience shows (most recently and clearly in the Asian currency crisis of the 90s), works.  And permanent austerity, which is what France and Germany want to impose on Italy, Greece and Spain (with the apparent cooperation of their political classes, I might add) will erode the value of the bank holdings in time anyway.

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There are economic tools for dealing with these issues.  Capital and currency controls are one of them, the distinction between default (we’ll pay you eventually, as opposed to we’ll never pay you) is another.  The question of who is being bailed out (private investors, in large part) is another.  And bailing out those investors is a political act, their money is their political power.  The current political class, who is complicit with the current monied class, of course wants to bail them out.

All of this is before we even get to the horribly anti-democratic nature of all of this: the repeated refusal of the political class to allow referendums, the complicity of all major political parties in the process (notice there is no party to vote for if you want to default), and so on.

There is no actual democracy in any part of the world which is attached to the Wall Street centered financial system.   Calls can run up to 1000:1 against TARP and it will pass.  Strong majorities can be for or against particular policies and if the elite disagrees, that’s all that matters.  There are no parties to vote for if you are against the current system.

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Politicians compete for the money and favors of the rich, and what they sell is the ability to wrangle you: to pass the austerity bills, to cut the benefits, to privatize the jewels of the public system, to force through the multi-trillion dollar bailouts.  They control government for the benefit of the rich.

And the rich pay all the way down the line.  They control the media, right down to the bottom, to make sure that what is discussed is what they want discussed, in the terms they want it discussed.  That default isn’t that bad: forbidden.  That currency controls mitigate damage in these circumstances: forbidden.  That lenders will lend to defaulting countries almost immediately: forbidden.

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.

February 13 is the 44th day of the year in the Gregorian calendar. There are 321 days remaining until the end of the year (322 in leap years).

On this day in 1633, Italian philosopher, astronomer and mathematician Galileo Galilei arrives in Rome to face charges of heresy for advocating Copernican theory, which holds that the Earth revolves around the Sun. Galileo officially faced the Roman Inquisition in April of that same year and agreed to plead guilty in exchange for a lighter sentence. Put under house arrest indefinitely by Pope Urban VIII, Galileo spent the rest of his days at his villa in Arcetri, near Florence, before dying on January 8, 1642.

Galileo Galilei (15 February 1564 – 8 January 1642), commonly known as Galileo, was an Italian physicist, mathematician, astronomer and philosopher who played a major role in the Scientific Revolution. His achievements include improvements to the telescope and consequent astronomical observations, and support for Copernicanism. Galileo has been called the “father of modern observational astronomy”, the “father of modern physics”, the “father of science”, and “the Father of Modern Science”. Stephen Hawking says, “Galileo, perhaps more than any other single person, was responsible for the birth of modern science.”

The motion of uniformly accelerated objects, taught in nearly all high school and introductory college physics courses, was studied by Galileo as the subject of kinematics. His contributions to observational astronomy include the telescopic confirmation of the phases of Venus, the discovery of the four largest satellites of Jupiter (named the Galilean moons in his honour), and the observation and analysis of sunspots. Galileo also worked in applied science and technology, inventing an improved military compass and other instruments.

Galileo’s championing of Copernicanism was controversial within his lifetime, when a large majority of philosophers and astronomers still subscribed to the geocentric view that the Earth is at the centre of the universe. After 1610, when he began publicly supporting the heliocentric view, which placed the Sun at the centre of the universe, he met with bitter opposition from some philosophers and clerics, and two of the latter eventually denounced him to the Roman Inquisition early in 1615. In February 1616, although he had been cleared of any offence, the Catholic Church nevertheless condemned heliocentrism as “false and contrary to Scripture”, and Galileo was warned to abandon his support for it-which he promised to do. When he later defended his views in his most famous work, Dialogue Concerning the Two Chief World Systems, published in 1632, he was tried by the Inquisition, found “vehemently suspect of heresy”, forced to recant, and spent the rest of his life under house arrest.

ATHENS – After violent protests left dozens of buildings aflame in Athens, the Greek Parliament voted early on Monday to approve a package of harsh austerity measures demanded by the country’s foreign lenders in exchange for new loans to keep Greece from defaulting on its debt.

Though it came after days of intense debate and the resignation of several ministers in protest, in the end the vote on the austerity measures was not close: 199 in favor and 74 opposed, with 27 abstentions or blank ballots. The Parliament also gave the government the authority to sign a new loan agreement with the foreign lenders and approve a broader arrangement to reduce the amount Greece must repay to its bondholders.  [..]

But the chaos on the streets of Athens, where more than 80,000 people turned out to protest on Sunday, and in other cities across Greece reflected a growing dread – certainly among Greeks, but also among economists and perhaps even European officials – that the sharp belt-tightening and the bailout money it brings will still not be enough to keep the count

The killing of Greece

By Delusional Economics

What makes the situation completely surreal are the numbers. Greek debt in 2008 was approximately 260bn Euro. The first bailout was 110bn, the current one, that appears to be tearing the country apart, is 130bn. Add in the PSI+ haircut of approximately 100bn ( after sweetener deduction ) and you realized that Europe could have simply paid the entire bill in 2008 and saved itself 80bn Euro. Ok, that is an oversimplification of the problem but you can see my point.

However now, after 340bn Euros, Greece is still has an unmanageable debt, is in a far worse position than it was 3 years ago and it appears the country itself is coming apart at the seams.

So basically the Greek politicians and the other Eurocrats took a quarter of a billion euro problem and turned it into a existential trillion Euro one. Worst still their refusal to work cooperatively and misguided policies based around “expansionary fiscal contraction” have plunged Greece into a depression which threatens contagion to other weak economies. Yet at this point I can see absolutely no data suggesting the country is in any way more competitive than it was 3 years ago.

Greece – A Default is Better Than the Deal on Offer

By Marshall Auerback

Pick your poison. In the words of Greek Finance Minister Evangelos Venizelos, the choice facing Greece today in the wake of its deal with the so-called “Troika” (the ECB, IMF, and EU) is “to choose between difficult decisions and decisions even more difficult. We unfortunately have to choose between sacrifice and even greater sacrifices in incomparably more dearly.” Of course, Venizelos implied that failure to accept the latest offer by the Troika is the lesser of two sacrifices. And the markets appeared to agree, selling off on news that the deal struck between the two parties was coming unstuck after weeks of building up expectations of an imminent conclusion.

In our view, the market’s judgment is wrong: an outright default might ultimately prove the better tonic for both Greece and the euro zone.

The only questions that remain to be resolved are these: have all of the parties begun preparations to mitigate the ultimate impact of an outright default by Athens? And will the ECB be sufficiently aggressive in combating the inevitable speculative attacks on the other members of the euro zone periphery, which are almost certain to ensue, once Greece is “resolved” one way or the other.

Greek Bailout Deal, With More Austerity, Poised to Pass Parliament Amid Riots

I’m curious what record unemployment and poverty, bonfires and 100,000 protesters in front of Parliament is, then, if not uncontrollable economic chaos and a social explosion. And Papademos added, strangely, that the deal would allow Greece to return to economic growth in late 2013. I don’t know where this claim was pulled from. Austerity has only brought a deeper recession – and a higher debt-to-GDP ratio – thus far.

About 20 members of the coalition of parties – which control 236 of the 300 seats in Parliament – said they would not agree to the deal. But this leaves a healthy cushion for success. Three members of the Socialists resigned from their party after the bailout terms were announced.

European finance ministers would not agree to bailout terms until Greece passed them first in the Parliament, as they have run out of patience with the Greek’s ability to abide by prior deals. The deal would pave the way for a work-out with Greece’s creditors that would include a nearly 70% haircut on existing debt. European leaders hope this will be seen as a “voluntary” reduction and not a default event that would trigger credit default swaps, but leading rating agencies have already said they won’t see it that way.

Yes, this is a mess with wide ranging global impact.

I think there ought to be a rule. If a famous musician just a few years younger than you survives their twenties, they ought to make it until you can go as a retiree yourself see them singing golden oldies on a golden oldies tour. That’s the way it ought to be.

This is not a political diary, as such, but just a log of my reaction to hearing the news. I heard the news on twitter, and after clicking through to listen to the linked YouTube clip … and verifying the news, which at first I could not believe … I set to browsing Youtube and sharing little reactions and memories, as one does when thinking about the passing of a pop culture star.

The tweet that sent me off on my journey was this one, which I retweeted with my visceral reaction:

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V @edgery / @TheTweetOfGod: This will always and forever be the definition of “nailing it”. […] || Wow. Shivers.

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My lord, it gave me chills again. Someone with the range to not merely belt out the high notes, but to sing them, and toss in a rising flourish on top of “Home of the Free” … and the ability to sing the anthem as a song.

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NB. A lot of these clips are the VEVO music rights clearing house system, which inserts ads ~ but their ad servers may be running behind due to the load, so if there is more than normal buffering, that could be the problem.

Two weeks ago we began a short series on milk, in particular cow’s milk, used as a food by humans.  We mentioned that humans are the only species to drink any kind of milk after infancy (unless we feed it to animals).  We also mentioned that human milk is the very best food for human infants.  Next week we shall end the series by talking about the advantages of real milk to infants unless readers would rather see a discussion of cheese first.

Last time we pretty much focused on fresh milk and few derivatives of it.  This week we shall look at some of the derivatives of milk, either fresh or fermented.  There is a marvelous variety of liquid milk derivatives available, and some are very delicious.  In addition, there is butter which obviously is not liquid.

For a product as perishable as milk, it is amazing that so many wholesome fermented products can be made from it.  There are reasons for that, and we shall get to them in due course.

In 1991 at Super Bowl XXV, Whitney gave this flawless performance of the National Anthem that has yet to be matched.

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.

February 12 is the 43rd day of the year in the Gregorian calendar. There are 322 days remaining until the end of the year (323 in leap years).

On this day in 1924, Rhapsody In Blue, by George Gershwin, performed for first time

Rhapsody in Blue premiered in an afternoon concert on February 12, 1924, held by Paul Whiteman and his band Palais Royal Orchestra, entitled An Experiment in Modern Music, which took place in Aeolian Hall in New York City. Many important and influential composers of the time such as John Phillip Sousa and Sergei Rachmaninoff were present. The event has since become historic specifically because of its premiere of the Rhapsody.

The purpose of the experiment, as told by Whiteman in a pre-concert lecture in front of many classical music critics and highbrows, was “to be purely educational.” It would “at least provide a stepping stone which will make it very simple for the masses to understand, and therefore, enjoy symphony and opera.” The program was long, including 26 separate musical movements, divided into 2 parts and 11 sections, bearing titles such as “True form of jazz” and “Contrast: legitimate scoring vs. jazzing”. Gershwin’s latest composition was the second to last piece (before Elgar’s Pomp and Circumstance March No. 1). Many of the numbers sounded similar and the ventilation system in the concert hall was broken. People in the audience were losing their patience, until the clarinet glissando that opened Rhapsody in Blue was heard. The piece was a huge success, and remains popular to this day.

The Rhapsody was performed by Whiteman’s band, with an added section of string players, and George Gershwin on piano. Gershwin decided to keep his options open as to when Whiteman would bring in the orchestra and he did not write out one of the pages for solo piano, with only the words “Wait for nod” scrawled by Grofe on the band score. Gershwin improvised some of what he was playing. As he did not write out the piano part until after the performance, we do not know exactly how the original Rhapsody sounded.

The opening clarinet glissando came into being during rehearsal when; “…as a joke on Gershwin, [Ross] Gorman (Whiteman’s virtuoso clarinettist) played the opening measure with a noticeable glissando, adding what he considered a humorous touch to the passage. Reacting favourably to Gorman’s whimsy, Gershwin asked him to perform the opening measure that way at the concert and to add as much of a ‘wail’ as possible.”

So one has yet seen the final agreement between the banks and the state attorneys general and it may be awhile before we do. And as Yves Smith at naked capitalism stated “You know it’s bad when banks are the most truthful guys in the room“:

Remember that historical mortgage settlement deal that was the lead news story on Thursday? It has been widely depicted as a done deal. The various AGs who had been holdouts said their concerns had been satisfied.

But in fact, Bank of America’s press release said that the deal was “agreements in principle” as opposed to a final agreement. The Charlotte bank had to be more precise than politicians because it is subject to SEC regulations about the accuracy of its disclosures. And if you read the template for the AG press release carefully, you can see how it finesses where the pact stands. And today, American Banker confirmed that the settlement pact is far from done, and the details will be kept from the public as long as possible, until it is filed in Federal court (because it includes injunctive relief, a judge must bless the agreement).

This may not sound all that important to laypeople, but most negotiators and attorneys will react viscerally to how negligent the behavior of the AGs has been. The most common reaction among lawyers I know who been with white shoe firms (including former partners) is “shocking”.

In fact as the American Banker points out the document does not exist:

More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren’t public. The website created for the national settlement lists the document as “coming soon.”

That’s because a fully authorized, legally binding deal has not been inked yet.

The implication of this is hard to say. Spokespersons for both the Iowa attorney general’s office and the Department of Justice both told American Banker that the actual settlement will not be made public until it is submitted to a court. A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed. [..]

Other sources who spoke with American Banker raised doubts that everything is yet in place. A person familiar with the mortgage servicing pact says that a settlement term sheet does not yet exist. Instead, there are a series of nearly-complete documents that will be attached to a consent judgment eventually filed with the court. That truly final version will include things such as servicing standards, consumer relief options, legal releases, and enforcement terms. There will likely be separate state and a federal versions of the release.

Some who talked to American Banker said that the political pressure to announce the settlement drove the timing, in effect putting the press release cart in front of the settlement horse.

Whatever the reason for the document’s continued non-appearance, the lack of a public final settlement is already the cause for disgruntlement among those who closely follow the banking industry. Quite simply, the actual terms of a settlement matter. [..]

“The devil’s in the details,” says Ron Glancz, chairman of law firm Venable LLP’s Financial Services Group. “Until you see the document you’re never quite sure what your rights are.”

“It’s frustrating,” agrees Stern Agee analyst John Nadel. “But it’s not unlike anything else that’s been going on in financial reform generally, is it?” [..]

“It is hard for me to believe that they would have gone public in the way that they did if they didn’t have it all worked out. But it is unusual that we don’t have a copy of the settlement yet,” says Diane Thompson, an attorney for the National Consumer Law Center.

A spokesperson from the South Carolina AG’s office told American Banker that when the agreement is finalized it would be posted to this website “nationalmortgagesettlement.com,” which raised some eyebrows. David Dayen at FDL News Desk questioned why .com and not .org? Dayen also pointed out that by not having all the details ironed out is “just a shocking abdication of responsibility”:

This is incredible. The Administration, the AGs, everyone involved in this made a big show of an agreement reached on foreclosure fraud. But there is no piece of paper with the agreement on it. There’s no term sheet. There are just agreements in principle.

There’s a HUGE difference between an agreement in principle and the actual terms. I mean night and day. The Dodd-Frank bill was for all intents and purposes an agreement in principle. It left to the federal regulators to write hundreds of rules. And we have seen how that process of implementation has faltered on several key points. But the Administration wanted to announce a “big deal,” the details be damned. And they got buy-in from the AGs. Everyone else stayed silent.

Yves Smith appeared with Amy Goodman and Juan Gonzalez on Democracy Now to discuss just how bad this deal is.

The U.S. Justice Department has unveiled a record mortgage settlement with the nation’s five largest banks to resolve claims over faulty foreclosures and mortgage practices that have indebted and displaced homeowners and sunk the nation’s economy. While the deal is being described as a $25 billion settlement, the banks will only have to pay out a total of $5 billion in cash between them. We speak to one of the settlement’s most prominent critics, Yves Smith, a longtime financial analyst who runs the popular finance website, “Naked Capitalism.” “The settlement, on the surface, does look like it is helping homeowners,” Smith says. “But in fact, the bigger part that most people don’t recognize is the way it actually helps the banks with mortgages on their own books. … The real problem is that this deal is just not going to give that much relief.”

Yes, this could be a lot worse and won’t address the needs of the underwater homeowners or those who lost their homes through fraud.

“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 Rep. John Sarbanes (D-MD) (@johnsarbanes), Congressman from Maryland’s third district since 2007, member of Committee on Natural Resources and Committee on Science, Space, and Technology; Jared Bernstein (@econjared), Former Chief Economist & Economic Policy Advisor to Vice President Biden, and Senior Fellow at the Center on Budget & Policy Priorities; Zephyr Teachout (@zephyrteachout), Associate Professor of Law at Fordham University School of Law and Visiting Assistant Professor of Public Policy at the Harvard Kennedy School; Errol Louis (@errollouis), Host of “Inside City Hall” on NY1 News; and Karam Nachar (@knachar), Cyber-activist working with Syrian opposition and Ph.D. candidate at Princeton University.

This Week with George Stephanopolis: George will interview former Pennsylvania Sen. Rick Santorum, White House Chief of Staff Jack Lew, and House Budget Committee Chairman Rep. Paul Ryan (R-WI). On the roundtable panel are ABC’s George Will, political strategist and ABC News contributor Donna Brazile, Fox News contributor and co-founder of Keep America Safe Liz Cheney, and Washington Post columnist David Ignatius.

Face the Nation with Bob Schieffer: Joining Bob this Sunday are GOP presidential candidate Rep. Ron Paul (R-TX), Minority Leader Sen. Mitch McConnell (R-KY), White House Chief of Staff Jack Lew, and Deputy National Security Adviser Ben Rhodes.

The Chris Matthews Show: This week’s guests Gloria Borger, CNN Senior Political Analyst, Kathleen Parker, The Washington Post Columnist, Clarence Page, Chicago Tribune Columnist and John Heilemann New York Magazine National Political Correspondent.

Meet the Press with David Gregory: This Sunday David Gregory’s guests are GOP hopeful former Pennsylvania Sen. Rick Santorum and White House Chief of Staff Jack Lew. The round table panel guests are the head of the Super PAC supporting Pres. Obama, Bill Burton; Wall Street Journal‘s Peggy Noonan; Washington Post‘s EJ Dionne, and MSNBC‘s Joe Scarborough.

State of the Union with Candy Crowley: Ms. Crowley’s guests are White House Chief of Staff Jack Lew (Lew will need a long nap after all these stops), Republican presidential candidate Rick Santorum, Sen. Joseph Lieberman (I-CT), CNN‘s Senior Congressional Correspondent Dana Bash, and Time Magazine‘s Washington Bureau Chief Mike Duffy.