06/19/2012 archive

The Greeks choice of staying with the pain of austerity measures may have helped divert a crisis for the Euro Zone, but not for long. There is still Spain.

Spain bailout fears mount

Fears of a full-scale bailout for Spain have mounted as its borrowing costs spiked to danger levels on concern over the nation’s stricken banks and fast-rising debt. [..]

Tapping the markets for the first time since the Greek vote on Sunday, Spain raised 3.04 billion euros, beating its 2.0-3.0 billion euro target in an auction of 12- and 18-month notes.

But it had to pay exorbitant rates to lure investors – 5.074 per cent for 12-month debt and 5.107 per cent for 18-month debt.

The yield on Spanish benchmark 10-year government bonds shattered the 7.0 per cent barrier on Monday for the first time since the creation of the euro in 1999, pushing above 7.2 per cent.

On Tuesday, the yield on 10-year bonds was at 7.003 per cent. [..]

Spanish borrowing costs at ominous levels

Spain, on the edge of losing debt-market access, paid around 200 basis points more in interest rates Tuesday than a month ago to lure investors to its Treasury bill sale, an ominous sign ahead of a critical government bond auction Thursday.

The latest surge in the country’s borrowing costs comes a day after fresh central-bank data showed Spanish lenders were sitting on the highest level of bad loans in 18 years, raising fresh worries over the battered sector’s capital needs.

The Fat Lady isn’t singing yet.

Just an interesting aside about interest rates, David Dayen points out this exchange from today’s House hearings with none other than the Obama administration’s favorite banker, Jaime Dimon:

But the two stars of the show thus far were Democratic Reps. Gary Ackerman and Brad Sherman. Ackerman asked point-blank if there’s any difference between gambling and investing. Dimon replied that with gambling, the house usually won, to which Ackerman quipped “That has been my experience in investing.” But he got at the central point, that hedging, which entails making a bet that would counteract any other actions in the markets, really bears reveals no difference from gambling. He emphasized that “with hedging, if you’re right, only you win, and if you’re wrong, we all lose.” Precisely. There’s no productive business being done with hedging.

Dimon replied to this by saying that they do a lot of other productive business with the rest of their $2 trillion in assets, so the gentleman from New York should kindly shut his mouth (that’s a paraphrase). And Brad Sherman followed up on that very well. He first said that hundreds if not thousands of small businesses need loans, and instead of accommodating them, “you took $350 billion to London.” Sherman added that JPMorgan holds a $14 billion subsidy through their implicit Too Big to Fail guarantee. This elicited an amusing moment, as Dimon said “We borrow in the marketplace, with the smartest people in the world, with 200 basis points over Treasury.” Sherman replied that “after you lost so much money in London, I would be surprised if people lent you money for less than that.”

Well.

“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”.

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New York Times Editorial: Egypt’s Democracy Interrupted

he once-promising democratic transition in Egypt is in peril after a power grab by the generals and the courts – holdovers from Hosni Mubarak’s repressive regime. This is not what Egyptians rallied and died for in Tahrir Square. It guarantees more turmoil. Given Egypt’s importance in the Arab world, it sets a terrible example for other societies trying to get beyond autocratic rule. [..]

American officials were right to warn the generals on Monday that they risk losing billions of dollars if they don’t swiftly transfer power to the president, ensure elections for a new Parliament and begin writing a new constitution with help from a broad range of Egyptians. The United States needs to work with Egypt to maintain the peace treaty and a stable border with Israel. But an undemocratic Egypt in perpetual turmoil is no help to its own people or Israel or the rest of the region.

Ari Melber: Do Liberals Support Obama’s Kill List?

President Obama is wielding several security powers that have been historically controversial among Democrats, from indefinitely detaining Guantánamo prisoners to shutting down torture lawsuits as “state secrets” that cannot be addressed in court. There has not been a major Democratic backlash, but all the recent attention on Obama’s “kill list”-a set of targets that has included American citizens as young as 16 years old-seemed like an opening for a new chapter in challenging the administration’s security policies.

For starters, the kill list is just different. Many divisive security measures linked to the Bush administration have been inherently convoluted-Obama’s team had to clean up a mess while developing new policies on the fly. For example, take the Bush-era detainees. Some are difficult to convict in civilian courts because the evidence against them was gathered through torture. Obama supporters understand that the administration’s options are more limited on this score, a predicament Daniel Klaidman stresses in his new chronicle of Obama’s terror policies, Kill or Capture.

The drone program, however, goes far beyond what Bush ever did. It was not required by the past. And it sets a stunning precedent for the future.

Guilt

I am guilty,

But not in the way you think.

I should have earlier recognized my duty;

I should have more sharply called evil evil;

I reined in my judgment too long.

I did warn,

But not enough, and clear;

And today I know what I was guilty of.

Albrecht Haushofer

PBS News Hour

A Mythical Anniversary

June 18, 2012, 3:34 pm

I tried to knock down the simply insane conventional wisdom then gelling among Very Serious People. Intellectually it was, I think I can say without false modesty, a huge win; I (and those of like mind) have been right about everything.

But I had no success in deflecting the terrible wrong turn in policy. Moreover, as far as I can tell none of the people responsible for that wrong turn has paid any price, not even in reputation; they’re still regarded as Very Serious, treated with great deference.

Rachel Maddow

Myths of Austerity

Published: July 1, 2010

When I was young and naïve, I believed that important people took positions based on careful consideration of the options. Now I know better. Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.

…

This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination – specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.

…

So the next time you hear serious-sounding people explaining the need for fiscal austerity, try to parse their argument. Almost surely, you’ll discover that what sounds like hardheaded realism actually rests on a foundation of fantasy, on the belief that invisible vigilantes will punish us if we’re bad and the confidence fairy will reward us if we’re good.

Colbert Report

Interest Rates: Varieties of Error

June 19, 2012, 8:57 am

Originally, claims that deficits would drive up rates weren’t based on arguments about solvency; they were based on the “crowding out” claim that the government would be competing with the private sector for a limited supply of savings. Then, when the promised rate spike failed to materialize, this was attributed to Fed purchases, with the claim that rates would spike when those came to an end. Wrong, and wrong again. As I wrote at the time, all this represented a basic misunderstanding of how the economy works.

Now, maybe there’s a solvency issue, and bond vigilantes will turn on America over that – although of course this keeps not happening either to us or to anyone else with their own currency. But you do need to know that many of the people making the solvency argument originally made a completely different argument – one that was completely wrong.

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.

Click on images to enlarge.

June 19 is the 170th day of the year (171st in leap years) in the Gregorian calendar. There are 195 days remaining until the end of the year.

On this day in 1964, the Civil Rights Act of 1964 is approved after surviving an 83-day filibuster in the United States Senate.

Passage in the Senate

(President Lyndon B.) Johnson, who wanted the bill passed as soon as possible, ensured that the bill would be quickly considered by the Senate. Normally, the bill would have been referred to the Senate Judiciary Committee, chaired by Senator James O. Eastland , Democrat from Mississippi. Given Eastland’s firm opposition, it seemed impossible that the bill would reach the Senate floor. Senate Majority Leader Mike Mansfield took a novel approach to prevent the bill from being relegated to Judiciary Committee limbo. Having initially waived a second reading of the bill, which would have led to it being immediately referred to Judiciary, Mansfield gave the bill a second reading on February 26, 1964, and then proposed, in the absence of precedent for instances when a second reading did not immediately follow the first, that the bill bypass the Judiciary Committee and immediately be sent to the Senate floor for debate. Although this parliamentary move led to a filibuster, the senators eventually let it pass, preferring to concentrate their resistance on passage of the bill itself.

The bill came before the full Senate for debate on March 30, 1964 and the “Southern Bloc” of 18 southern Democratic Senators and one Republican Senator led by Richard Russell (D-GA) launched a filibuster to prevent its passage. Said Russell: “We will resist to the bitter end any measure or any movement which would have a tendency to bring about social equality and intermingling and amalgamation of the races in our (Southern) states.”

The most fervent opposition to the bill came from Senator Strom Thurmond (D-SC): “This so-called Civil Rights Proposals, which the President has sent to Capitol Hill for enactment into law, are unconstitutional, unnecessary, unwise and extend beyond the realm of reason. This is the worst civil-rights package ever presented to the Congress and is reminiscent of the Reconstruction proposals and actions of the radical Republican Congress.”

After 54 days of filibuster, Senators Everett Dirksen (R-IL), Thomas Kuchel (R-CA), Hubert Humphrey (D-MN), and Mike Mansfield (D-MT) introduced a substitute bill that they hoped would attract enough Republican swing votes to end the filibuster. The compromise bill was weaker than the House version in regard to government power to regulate the conduct of private business, but it was not so weak as to cause the House to reconsider the legislation.

On the morning of June 10, 1964, Senator Robert Byrd (D-W.Va.) completed a filibustering address that he had begun 14 hours and 13 minutes earlier opposing the legislation. Until then, the measure had occupied the Senate for 57 working days, including six Saturdays. A day earlier, Democratic Whip Hubert Humphrey of Minnesota, the bill’s manager, concluded he had the 67 votes required at that time to end the debate and end the filibuster. With six wavering senators providing a four-vote victory margin, the final tally stood at 71 to 29. Never in history had the Senate been able to muster enough votes to cut off a filibuster on a civil rights bill. And only once in the 37 years since 1927 had it agreed to cloture for any measure.

On June 19, the substitute (compromise) bill passed the Senate by a vote of 71-29, and quickly passed through the House-Senate conference committee, which adopted the Senate version of the bill. The conference bill was passed by both houses of Congress, and was signed into law by President Johnson on July 2, 1964.

Other than the names and faces of the actors, not much is different in either Greece or Egypt after much analyzed and anticipated elections this weekend. In Greece, the center right is still faced with the dilemma of forming and holding together a coalition government to deal with the economic crisis that threatens to take down the Eurozone. While is Egypt, despite the historic election of an Islamic president, the military still maintains a tight control and all the power.

Greek elections: Antonis Samaras faces tough task to forge unity

The fault lines are so deep that even if a government is formed, many believe it will be a miracle if it survives for long

[..]The ambitious politician faces the Herculean labour of forging a government of “national salvation” at a time of unprecedented crisis. Not since the collapse of military rule has the country come so close to resembling a failed state. Following almost three months of political paralysis – before and after an inconclusive poll in May – Greece’s public finances are in tatters, its public administration is in disarray and its austerity-weary people are beaten down. It is now for Samaras to pick up the pieces. [..]

Late on Monday Samaras announced he had agreed with the head of Pasok, Evangelos Venizelos, to build a coalition, with negotiations expected to be concluded by Tuesday. Once bitter political rivals, the socialists, who came in with 12.3% of the vote, say the creation of a government of “national co-responsibility” is vital if Greece is to be steered through the crisis.

Combined, the two parties would control a comfortable majority of 162 seats in the Greek parliament. [..]

But fault lines in Greek society are so deep that even if a government is formed many believe it will be a miracle if it survives for long. To secure further rescue loans Athens has agreed to pass an extra €12bn in budget cuts, measures seen as vital if its economy is to reclaim competitiveness. And on Monday creditors led by Germany appeared in little mood to relent.The fiscal adjustment programme might be relaxed but “only marginally,” several officials said. “Greek society simply cannot endure any more measures,” insisted (New Democracy MP Kyriakos) Mitsotakis. “It’s not a question of what party is in office, it is a fact.”

German Chancellor Andrea Merkel, emboldened by the Greek center right narrow victory, has continued her hard line stand on enforcing the Greek deal

“The Greek government will and must naturally follow through on the commitments that were made,” Ms. Merkel told reporters at the Group of 20 meeting in Los Cabos, Mexico, disappointing those in Athens who hoped for a signal of new flexibility toward Greece in the wake of the vote. “There can be no loosening of the reform steps.”

At least Greece has a Parliament. Egypt on the other hand is once again on the verge of revolution as the Muslim Brotherhood threatens to take to the streets once again in protest over the military usurpation of power:

The ruling generals sought for the first time to sell the public on the decision to dissolve the Brotherhood-led Parliament on the eve of the vote. In a nearly two-hour news conference that was edited before it was televised, two members of the military council insisted that they regretted dissolving Parliament, but that they had been forced by a court ruling from judges appointed by former President Hosni Mubarak.

And although they have now issued an interim Constitution keeping legislative and much of the executive power for themselves – and even said later Monday that they would appoint a general to run the new president’s staff – the generals promised to hold a “grand celebration” when they turned over power as promised at the end of the month. [..]

In their news conference, the generals acknowledged they would have a monopoly on all lawmaking powers as well as control of the national budget. But they said that the new president – they did not name Mr. Morsi – would retain a veto over any new laws and could name the prime minister as well as other cabinet officials.

The generals have not backed away from the initial charter that removed the military and the defense minister from presidential authority and oversight and defended the imposition of martial, arresting and detaining civilians for trials in military courts. They also took it upon themselves to appoint the new president’s chief of staff and revived a special national defense council packed with loyal military officers, charged with overseeing matters of national security. This is not going over very well with the Egyptian people.

The bright spot in all of these travails, the French who gave newly elected president François Hollande a majority in Parliament on Sunday, which is likely only to embolden his drive for more growth-oriented spending and a retreat from German-style austerity. But if everything you hear about Greece and Egypt sound familiar, it is.

I am feeling a bit wistful tonight, so please bear with me.  On this date 35 years ago the former Mrs. Translator and I were married.  I was 20 and she was 19.  We had both been in relationships before, but as soon as we met we knew that we were going to be special to each other.

I was at a friend’s house one afternoon and a powder blue 1976 Camaro pulled into the driveway.  I do not recognize the car.  It pulled up to where my friend and I were and driving it was the most beautiful girl that I ever saw.

She was my “type”.  Petite, with long, dark, hair that had just enough natural curl.  Her voice was not shrill, but not masculine either.  As Goldilocks would say, it was just right.  I was 18 and she was 17.  It was not what is termed “love at first sight”, but we were immediately attracted to each other.