Tag: ek Politics

That I told you so?

Holiday Sales Appear to Stall: Are Big Discounts Next?

By: John Melloy, CNBC

Published: Monday, 12 Dec 2011 3:57 PM ET

After early bird discounts fueled a Black Friday buying boom, retailers are seeing sales dry up halfway through the holiday sales period, a consumer survey completed Sunday showed. The trend may force discounts as deep as 70 percent on coats and flat panel TVs as Christmas Eve approaches.

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“While Black Friday sales appeared to give the retailers an early leg up in the season, I believe that continued high unemployment and economic uncertainty will keep spending muted for the vast majority of American consumers,” said Patty Edwards of Trutina Financial.

“Retailers will announce a number of unplanned sales and discounts, hoping to surprise and delight customers into opening their wallets. The big question is how much is left in those wallets that isn’t pledged to the light bill.”

(h/t Chris in Paris @ Americablog)

I wonder how many ‘the Emperor has no clothes’ moments we’re going to have to go through before Mr. Market finally realizes he’s nude?  The big news about the Euro is that nothing has changed at all, except to get worse.

What the pieces I’ve selected make clear is that goverments in the Euro Zone can’t afford to pay off the banksters crap assets at anything near their notional balance sheet value.  The European Central Bank (ECB) is the only one who can print Euros and impose investor haircuts through asset inflation and they can’t lend directly to governments, only to banks.  Any country that follows the Irish example of paying off their vampire bank failures is committing economic suicide.

What they don’t highlight, but which is none the less true, is that the ECB balance sheet is running out of room without a looser monitary policy (i.e. ‘printing’) AND that the assets it’s accepting as collateral are, even under the relaxed standards, made acceptable only through Credit Default Swap ‘Insurance’ issued by the self same banks that don’t have the reserves to cover their primary obligations.

Like AIG these ‘counter parties’ have absolutely no intention of paying off and no ability to do so even if they did.

‘House of Cards’ hardly begins to describe the tissue thin fictional fig leaf these insolvent banksters are trying to hide their behinds behind.

How the ECB could be forced to print money

Felix Salmon, Reuters

Dec 6, 2011 10:52 EST

The line to concentrate on, here, is the solid one in blue. It shows a key part of the Bundesbank’s assets – its loans to other institutions – falling perilously low to zero, even as its loans to other European central banks – the maroon dotted line – continue to rise inexorably. (These loans from one national central bank to another are known as the TARGET system.)

Up until now, the Bundesbank has managed to fund the latter by means of selling off the former: when it’s asked to lend money to PIIGS central banks, it just sells off some other loans and advances the cash to the Irish or Portuguese central bank instead.

But it can’t do that any more, because the Bundesbank is down to its last €21 billion in private loans. And when that hits zero, the only things left to sell are the Bundesbank’s gold and reserves. Which, it’s pretty safe to say, the Bundesbank is not going to sell.

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Basically, there’s a constant flow of money out of the European periphery and towards the center. Up until now, that flow has been matched by an equal and opposite flow of central bank lending from the Bundesbank to the PIIGS central banks. And when the Bundesbank runs out of money to lend those central banks? The ECB will have no choice but to step in and print all the money necessary to stop those banks from going bust. And that, I think, is how we’re going to see the ECB finally take on the lender-of-last-resort role it has been so reluctant to adopt until now.

Eurozone Crisis, Act Two: Has the Bundesbank Reached its Limit?

Authors: Aaron Tornell & Frank Westermann, EconoMonitor

December 7th, 2011

In the wake of the 2008 crisis, some national central banks, especially those in Greece, Ireland, Italy, Portugal, and Spain (the GIIPS), have dramatically increased their loans to financial institutions. To fund these loans, GIIPS central banks borrowed mainly – via the ECB – from other central banks, in particular the Bundesbank.

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In principle, the limit on the amount of claims on the Eurosystem that the Bundesbank can accumulate equals the assets in its balance sheet plus the amount it can borrow in capital markets. Pressure from the German public, however, might prevent the Bundesbank from reaching the theoretical limit. There are several political thresholds. The first is when the stock of Bunds in the Bundesbank hits zero. As Table 2 shows, this threshold has been reached. Even before the 2008 crisis the stock of Bunds in the Bundesbank was practically zero. The second threshold will be reached when the stock of loans from the Bundesbank to the private sector is depleted. As we described above, the stock of loans to private credit institutions has fallen to almost zero. At the end of October 2011, it stood at €21 billion.

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As we have described, in the European monetary union, the stock of securities held by a central bank can increase in a member country even though the ECB might not pursue an expansionary policy for the Eurozone as a whole. This creation of base money is not done via the printing press as in old times, but electronically. To illustrate the mechanism consider the following example. An owner of Greek government bonds uses them as collateral to borrow from his commercial bank, which in turn borrows from the Bank of Greece. The Greek central bank wires the funds via the ECB to the Bundesbank, which in turn deposits them in the Frankfurt bank account of the Greek resident. As a consequence, the Bundesbank gets a ‘TARGET claim’ on the ECB and the Bank of Greece gets a ‘TARGET liability’ at the ECB. This TARGET claim is secured by collateral – the Greek government bonds – deposited at the ECB that were previously in the possession of the Greek resident. Through this operation, the increase in the stock of securities at the Bank of Greece is matched by a reduction of securities in the Bundesbanks’ balance sheet. The Bundesbank sells some of its assets to be able to deposit the funds into the Greek residents’ private Frankfurt bank account. As a result, German assets are replaced by ECB collateral (TARGET claims) in the balance sheet of the Bundesbank.

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How long can the central banks of the GIIPS accumulate TARGET liabilities at the ECB? In theory, as long as they have collateral that is acceptable to the ECB, which is the total stock of government debt plus other marketable assets (such as mortgage-backed securities) recognised by the ECB. However, running out of collateral won’t necessarily stop the borrowing. Should central banks run out of government bonds, the national governments could issue more bonds, and sell them to private banks. Banks in turn could use them as collateral to borrow from their central banks. Thus, practically, there is no limit to the amount of domestic government bonds the national central banks could use as collateral to accumulate TARGET claims at the ECB.

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Up to now, Bundesbank loans have allowed GIIPS central banks to buy government bonds without a corresponding increase in the monetary base of the Eurozone as a whole – ie, without the ECB printing more money (after an expansion in 2008, the monetary base returned to trend growth). Before long, however, the Bundesbank’s stock of domestic assets is going to hit zero, and it is highly unlikely that it will agree to sell its gold or borrow more in private capital markets. At that point, the Bundesbank will not be able to lend more funds to the Eurozone TARGET mechanism. As a result we are heading towards the multiple equilibria zone in which beliefs of a breakdown of the Eurozone are self-fulfilling. In such a situation, market participants may transfer funds from financial institutions in fiscally weak countries to other ‘safe’ countries like Germany. In tranquil times, such transfers can be done seamlessly through the TARGET mechanism of the ECB. However, if a critical mass of agents were to engage in such capital flight away from fiscally weak countries, the TARGET system would be overwhelmed. In principle, a speculative attack could occur within a day, and the ECB would have to assume all of the marketable securities from countries that suffer the speculative attack. Since the ECB has a relatively small capital base, it would not be able to purchase a large amount of assets from countries that suffer the attack.

EU Banks Must Raise $153B of Extra Capital: EBA

By Ben Moshinsky and Jim Brunsden, Bloomberg News

Dec 8, 2011 8:01 PM ET

German banks need to raise an additional 13.1 billion euros, Italian banks 15.4 billion euros, and Spanish lenders 26.2 billion euros in core tier 1 capital, the European Banking Authority in London said yesterday. The capital shortfalls include 15.3 billion euros for Spain’s Banco Santander SA (SAN) and 7.97 billion euros for Italy’s UniCredit SpA. (UCG)

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Other lenders needing to bolster their reserves include Deutsche Bank AG, with a shortfall of 3.2 billion euros, Banco Bilbao Vizcaya Argentaria SA (BBVA), which missed the target by 6.33 billion euros, BNP Paribas (BNP) SA, with a shortfall of 1.5 billion euros, and Societe Generale SA (GLE), which needs 2.1 billion euros. Commerzbank AG (CBK) needs 5.3 billion euros to meet the target, German regulator Bafin said. France’s Groupe BPCE, the owner of Natixis SA, had a 3.7 billion euro shortfall, and Italy’s Banca Monte dei Paschi di Siena SpA (BMPS) needs to raise 3.27 billion euros.

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Regulators more than doubled the amount of capital German lenders need to raise from the original 5.2 billion-euro estimate for the country’s banks in October.

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French banks will have to raise 7.3 billion euros, 1.5 billion euros less than previously estimated.

German Funds to Sell $3.6 Billion of Best Properties as Liquidation Looms

By Simon Packard, Bloomberg News

Dec 11, 2011 7:00 PM ET

Three German funds facing a May deadline to avoid liquidation aim to raise about 2.7 billion euros ($3.6 billion) selling trophy real estate including Berlin’s Potsdamer Platz and the European Bank of Reconstruction & Development’s London headquarters.

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Raising cash from real estate sales became more difficult after Europe’s growing sovereign-debt crisis led buyers to favor properties in prime locations occupied by tenants on long leases. Selling most-prized assets risks making more investors withdraw money from the funds when they re-open.

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Germany’s 85 billion-euro real-estate mutual fund industry may be facing the biggest crisis in its 50-year history. A dozen of the 44 funds, which own 28 percent of the industry’s assets, are liquidating or have suspended redemptions, according to Frankfurt-based BVI Bundesverband Investment & Asset Management.

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The German government stepped in to shore up an investment product favored by savers because of the reliable income returns it generates and the country’s lack of a developed real estate investment trust market. Legislation adopted in May and taking effect in 2013 will introduce notification periods, caps on withdrawals and staggered repayments to free funds from a potential liquidity trap.

EU Banks Taking Government Cash Seen Sparking ‘Vicious Cycle’

By Yalman Onaran, Bloomberg

Dec 11, 2011 7:01 PM ET

Ireland’s effort to back its banks brought the country to the verge of collapse last year. After issuing a blanket guarantee on all bank debt in 2008, the government was compelled to keep plugging holes as losses mounted. Sovereign debt doubled to more than 100 percent of GDP after about 60 billion euros were put into the nation’s lenders. Ireland sought a rescue package from the EU and the IMF in November 2010.

“The European banks (BEBANKS) can’t get fresh capital, so governments are going to have to cough up the money,” said Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based consulting firm. “Germany is re-establishing its bank rescue fund, and it has the money to put in its banks. But when you look at public sources, you run into a problem. Do the other sovereigns have the cash to do it?”

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“The EFSF doesn’t have enough money to support Italian and Spanish sovereign debt as well as put money into the European banks,” said Desmond Lachman, resident fellow at the American Enterprise Institute in Washington. “It just can’t do all of that.”

The EU banks’ capital holes are bigger than the EBA’s latest estimate, Lachman said, citing a September IMF estimate of a 300 billion-euro risk based on more favorable prices for government bonds at the time.

Because banks can’t raise capital from the market and some governments can’t afford to provide cash, compliance most likely will be through asset sales and reduced lending in the region, said Lannoo of the Centre for European Policy Studies. The EBA has told banks not to meet the new capital requirements through such measures, instead asking them to refrain from paying dividends.

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The size of potential losses at European banks has scared away short-term creditors, squeezing the region’s lenders. The European Central Bank has stepped in to replace funds being withdrawn, providing unlimited cash and lowering requirements on the quality of collateral it will accept.

“We’re in a death spiral,” said Andy Brough, a fund manager at Schroders Plc in London. “As the yields on the peripheral bonds increase, value of the bonds decreases and the amount of capital the bank has to raise increases.”

A Profile in Fracking: How One Tiny Hamlet Could Be Devastated by Gas

By Molly Oswaks, The Atlantic

Dec 7 2011, 10:02 AM ET

Hancock is home to four bait-and-tackle shops, three beauty salons, six churches, ever more vacant and dilapidated-looking homes, one video rental thrift store hyphenate, and one funeral parlor. The stateliest establishment in this otherwise decidedly unstately community is the Hancock House Hotel; here you will find Honest Eddie’s Tap Room, a dimly lighted wood-paneled bar named for the major league baseball player John Edward “Honest Eddie” Murphy, who was born in Hancock in 1891. The food menu at Honest Eddie’s includes items like “They’re Smothered!” (thick-cut fries blanketed in a melty cheese sauce) and “The Deep-fried Pickle” (which is exactly what it sounds like). There is also an off-menu rice pudding, which they serve in a tall bevelled glass sundae cup and garnish with a dollop of whipped cream. The pudding has no spice.

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Here, some 9,000 feet below traversable ground, lies a particularly profitable piece of the Marcellus Shale, a 400-million year old formation of marine sedimentary rock rich with reserves of untapped natural gas. Shale gas reserves are extracted by means of a multi-step process called hydraulic fracturing, or fracking. Chemical fracking fluid is pumped into a targeted borehole drilled deep into the ground; sand is then introduced into the fluid to maintain the integrity of the fracture. The pressure and depth at which this is executed produces a subterranean climate porous and permeable enough for shale gas to be recovered profitably: this is a “frack job.”

For a cash-strapped community like Hancock, fracking would seem a high-yield stimulus plan millennia in the making: there is, of course, the economic appeal of home-sourced natural gas, but there are also land royalties to be reaped by residents and money to be made from all the supplies and sandwiches sold in town to the fracking crew itself. Not to mention jobs.

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It’s difficult to predict whether Hancock’s soil and water will, in fact, be poisoned once the drilling begins. Various assessments of the environmental impact of fracking have been conducted, at both state and national levels. The second-hand damage is much easier to forecast.

The roads and highways that run through town will experience a significant surge in traffic, with large trucks and heavy machinery traveling to and from the drill sites, and all the accompanying noise pollution. The bucolic natural landscape, which has long drawn lucrative hunting and camping tourism at peak season, will be cut up and and cordoned off for pipes and drills and gas collection.

It’s a paradox: The town needs money to survive, but the money being offered comes at the expense of the town itself. It would seem, then, however ironic, that capitalism is killing the company town.

Actually, it’s not at all difficult to predict that “Hancock’s soil and water will, in fact, be poisoned once the drilling begins.”

EPA Finds Fracking Contaminated Drinking Water in Wyoming

By: David Dayen, Firedog Lake

Friday December 9, 2011 6:23 am

Independent reports have previously shown contaminants in water due to fracking, but this is the first time the EPA has come out and said so. And while they cite Pavillion as a special case, it calls into question the surge in fracking across the country. From the Marcellus Shale to the Rocky Mountains, thousands of natural gas drilling sites have sprung up, and questions about air and water quality have persisted. Multiple examples of residents lighting the water out of their faucets on fire, and incidents of sickness in areas around the natural gas wells (many of which are in the backyards of people paid handsomely by the fracking companies for the privilege), abound.

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The samples in Wyoming came from two deep water monitoring wells, as well as private and public wells in the area. EPA found synthetic chemicals consistent with fracking fluids, as well as high levels of benzene and methane. They said that the chemicals could move through the aquifer over time and only worsen the water quality. The chemicals in the private and public water wells showed evidence of migration from drilling sites.

Independent reports?  Oh my, yes.  Tons of them.

Chemicals Were Injected Into Wells, Report Says

By IAN URBINA, The New York Times

Published: April 16, 2011

WASHINGTON – Oil and gas companies injected hundreds of millions of gallons of hazardous or carcinogenic chemicals into wells in more than 13 states from 2005 to 2009, according to an investigation by Congressional Democrats.

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Companies injected large amounts of other hazardous chemicals, including 11.4 million gallons of fluids containing at least one of the toxic or carcinogenic B.T.E.X. chemicals – benzene, toluene, xylene and ethylbenzene. The companies used the highest volume of fluids containing one or more carcinogens in Colorado, Oklahoma and Texas.

The report comes two and a half months after an initial report by the same three lawmakers that found that 32.2 millions of gallons of fluids containing diesel, considered an especially hazardous pollutant because it contains benzene, were injected into the ground during hydrofracking by a dozen companies from 2005 to 2009, in possible violation of the drinking water act.

A 2010 report by Environmental Working Group, a research and advocacy organization, found that benzene levels in other hydrofracking ingredients were as much as 93 times higher than those found in diesel.

The use of these chemicals has been a source of concern to regulators and environmentalists who worry that some of them could find their way out of a well bore – because of above-ground spills, underground failures of well casing or migration through layers of rock – and into nearby sources of drinking water.

These contaminants also remain in the fluid that returns to the surface after a well is hydrofracked. A recent investigation by The New York Times found high levels of contaminants, including benzene and radioactive materials, in wastewater that is being sent to treatment plants not designed to fully treat the waste before it is discharged into rivers. At one plant in Pennsylvania, documents from the Environmental Protection Agency revealed levels of benzene roughly 28 times the federal drinking water standard in wastewater as it was discharged, after treatment, into the Allegheny River in May 2008.

If you’re looking for Oil Company compassion, look somewhere else.

Driller to stop water to families in Dimock, Pa.

By MICHAEL RUBINKAM, Associated Press

Nov 30, 2011

ALLENTOWN, Pa. (AP) – Families in a northeastern Pennsylvania village with tainted water wells will have to procure their own water for the first time in nearly three years as a natural-gas driller blamed for polluting the aquifer moves ahead with its plan to stop paying for daily deliveries.

Houston-based Cabot Oil & Gas Corp. ended delivery of bulk and bottled water to 11 families in Dimock on Wednesday. Cabot asserts Dimock’s water is safe to drink and won permission from state environmental regulators last month to stop paying for water for the residents.

(h/t dday)

And, you know, it’s a proven, predictable, fact that it also causes earthquakes.

Method predicts size of fracking earthquakes

Scientists develop way to forecast worst-case tremor scenario.

Zoë Corbyn, Nature

09 December 2011

Small earthquakes are a recognized risk of hydraulic fracturing, or ‘fracking’, a procedure in which companies unlock energy reserves by pumping millions of litres of water underground to fracture shale rock and release the natural gas trapped inside. Researchers now say that they can calculate the highest magnitude earthquake that such an operation could induce – though it won’t determine the likelihood of a quake occurring.

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McGarr and his team studied seven cases of quakes induced by fluid injection. They included the Oklahoma fracking site where 8,900 cubic metres were injected; a scientific bore hole in Germany, where an injection of 200 cubic metres of salt water caused a magnitude 1.4 earthquake; a geothermal-energy project on the outskirts of Basel, Switzerland, that was terminated after an injection of 11,600 cubic metres of water triggered a series of quakes of magnitude up to 3.4; another in Cooper Basin, Australia, where a 20,000-cubic-metre injection resulted in a magnitude 3.7 quake; and a liquid-waste-disposal project in Colorado in the 1960s, where an injection of 631,000 cubic metres triggered earthquakes of magnitude up to 5, the largest yet seen as a result of fluid injection.

The researchers found a proportional relationship between the volume of fluid injected and the magnitude of the earthquake.

“If you inject about 10,000 cubic metres, then the maximum sized earthquake would be about a magnitude 3.3,” says McGarr. Every time the volume of water doubles, the maximum magnitude of any quake rises by roughly 0.4. “The earthquakes may end up being much smaller, but you want to be prepared for the worst-case scenario,” says McGarr. The relationship is straightforward, but it is the first time that anyone has quantified it, he adds.

Shale Pioneers Plan Next English Wells After Fracking Causes Earthquake

By Kari Lundgren, Bloomberg News

Dec 2, 2011 9:17 AM ET

The sound that woke Caroline Murphy after midnight on April 1 was so loud she thought a car had crashed into her house. She doesn’t feel any better knowing it was the U.K.’s first recorded earthquake caused by natural-gas exploration.

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Murphy’s home is within three miles of a drill site belonging to Cuadrilla Resources Ltd., an explorer that says it’s found more natural gas trapped in the local shale rock than Iraq has in its entire reserves. The magnitude 2.3 tremor that shook Murphy, and a second weaker quake on May 27, forced Cuadrilla to suspend hydraulic fracturing, the process of blasting sand, water and chemicals into shale that’s made the U.S. the world’s largest natural-gas producer.

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“They say they’ve been fracking for years and years and it hasn’t caused any problems,” Murphy, an artist and designer, said in an interview. “I say: ‘You caused an earthquake. To me, that’s a big issue.'”

And for what?  For money of course-

Supporters of shale gas say the U.K. can’t afford to overlook the potential. The North Sea fields discovered in the 1970s that made the U.K. self-sufficient are running dry and the country will import more than half its gas supplies this year. The prospect of plentiful, cheap gas — prices have fallen about 75 percent since shale drilling took off in the U.S. — could help the economy, said Tim Yeo, who chairs parliament’s energy and climate change committee.

“It is likely the U.K. has quite substantial shale gas reserves and there may be sufficient resources to replace a significant amount of reserves,” Yeo, a member of the governing Conservative Party, said in a telephone interview. “Shale is good from a security point of view. It gives us some degree of protection from international gas prices.”

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Cuadrilla, backed by Riverstone Holdings LLC, a private equity investor that includes former BP Plc Chief Executive Officer John Browne among its directors, wants to start fracking again. The company said its first wells showed the shale rock it’s exploring may hold 200 trillion cubic feet of gas. While only a fraction will ever get drilled, 10 percent of that amount is enough to supply the U.K. for about six years.

Protection from international gas prices?  Folks, there’s a glut of natural gas and the prices are falling through the floor.

Fracking for Gas in a Field of Cabbages

By Kari Lundgren, Bloomberg News

Dec 6, 2011 10:18 AM ET

Earthquakes aside, shale may struggle to get a foothold in Europe, according to Deutsche Bank AG analysts. It’s more expensive to drill in Europe, where a well may cost between $6.5 million and $14 million, compared with $4 million for a Marcellus Shale well in Pennsylvania. Then there’s the issue of mineral rights. In the U.K., the government owns the nation’s oil and gas resources, so there are few prospects to entice landowners to become “shale-ionaires.”

If Cuadrilla’s shale-gas dream doesn’t pan out, the site will go back to being a world-class cabbage field.

It won’t be the first natural gas well in the neighborhood that’s been left to fade away. There’s one that belonged to BG Group just a few miles down the road.

EPA: ‘Fracking’ likely polluted town’s water

MSNBC

12/8/11

Development of the new shale deposits over the last few years has provided the United States with a century’s worth of natural gas supply.

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At the last hearing last month, protesters gathered in downtown Manhattan to express concern about the safety of water supplies, holding signs saying “Governor Cuomo, don’t frack it up” and “Don’t frack with New York.”

“We have to be literally insane to contemplate fracking,” state Sen. Tony Avella told reporters outside the hearings. “Wake up Governor Cuomo, this is not going to provide jobs or revenue, but what it will do is poison the water supply for 17 million New Yorkers.”

In fact it’s so fracking cheap that Oil Companies are desperately seeking export markets.

Shale gas opens door to U.S. LNG exports

Energy companies step up effort to ship surplus gas overseas

By Steve Gelsi, MarketWatch

Dec. 5, 2011, 6:52 p.m. EST

NEW YORK (MarketWatch) — A decade ago, a global glut of clean, cheap natural gas bred big plans to import liquefied natural gas to the energy-hungry United States.

That’s all changed.

Nowadays, energy companies are tapping into previously untouched North American gas reserves, prompting them to take a hard look at ways to sell their new-found gas to the rest of the world.

This sudden shift from gas importer to possible exporter is the result of innovative drilling technology that frees gas trapped in vast shale rock formations that until recently had been dismissed as non-commercial.

For the U.S. to become a serious natural gas exporter requires building a costly infrastructure, which will only happen if the right market conditions exist in coming years. Read about the booming U.S. shale gas sector.

Nevertheless, several companies already have plans to build liquefied natural gas, or LNG, export terminals while others are well into the evaluation process, raising the prospects of a billion-dollar construction boom for these highly specialized facilities.

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This is quickly boosting output at home. The U.S. Energy Information Administration’s short-term energy outlook sees a 6.1% increase in domestic natural gas production in 2011, rising another 2% in 2012. All of the gains are from onshore drilling operations in the lower 48 states.

“The projected U.S. demand is not sufficient to absorb the supply from these fields,” Gordon said in an interview.

That leaves producers two obvious outlets to absorb future production: transportation fuel and LNG exports, he said.

And the US and the UK are not the only games in town, it’s a world-wide glut.

The Southern Gas Corridor Gets a Kick-Start

Author: Robert M. Cutler, EconoMonitor

December 8th, 2011

Azerbaijan and Turkey have announced plans to construct a pipeline from the South Caucasus across Turkey to carry natural gas from Azerbaijan’s offshore Shah Deniz Two deposit to Southeastern Europe. At first glance, this would seem to leave Nabucco and two other candidate pipeline projects that have already submitted bids, out in the cold. However, what is involved is the creation of a format for bargaining where Azerbaijan can assert its strategic interests more convincingly against the pipeline consortia, which by their project-oriented nature have not been inclined to take a broader view.

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The announcement of the SEEP and TAGP projects thus signifies Azerbaijan’s growing autonomy in the setting of its natural gas export policy. The outcome of the current process will point the way towards methods for the disposition of future quantities of natural gas from Azerbaijan’s offshore. Two wholly undeveloped deposits, Absheron and Umid, have been undergoing exploration and are credibly estimated to contain 350 bcm of natural gas each. Azerbaijan expects to produce just over 25 bcm of natural gas this year from existing deposits and looks for that figure to increase to 50 bcm/y by 2025.

Why all the hurry to drill into shale? It’s not going anywhere

This is an open letter to U.S. Sen. Sherrod Brown, D-Ohio.

Dr. Cate Matisi

Wednesday, December 7,2011

I live in southeastern Ohio and have been watching with alarm as fracking has been marching toward my home over the past several years. I have major concerns about how quickly people have convinced themselves that this will be a viable solution for both the financial difficulties we are facing in Ohio and the energy shortages we face as a nation, while ignoring potentially devastating environmental consequences. The industry touts the patriotic theme of U.S. energy independence, even though a number of these oil and gas companies have partnerships with Korean, Chinese, British and Norwegian companies that certainly don’t have our energy or economic interests forefront in their minds.

The oil and gas industry is calling natural gas a cleaner energy alternative on the face, without including the climate cost of diesel fuel-powered equipment transporting, setting up and developing the site, the amount of methane, a much dirtier pollutant that is accidentally leaked during well construction, production and transport, during processing and storage of this natural gas and that’s often intentionally “flared off.” If there were no environmental issues negatively impacted by horizontal drilling with hydraulic fracturing, why doesn’t the industry insist on following the provisions of the Clean Air, the Clean Water Act and the Superfund mandate.

The oil and gas industry has also used employment statistics in an industry-sponsored study in Pennsylvania that gives industry employment figures almost 10 times higher than the Pennsylvania state employment bureau has noted.

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There are alternative, sustainable sources of energy that could see incredible growth in development if they were to receive the tax exemptions and grants that the oil and gas industry now receives.

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I am not a fringe environmentalist. I am a responsible Ohio landowner who realizes that the fresh air we breathe, the water we need for ourselves, our children and our land are not limitless, and should not be jeopardized by this practice, which has not been in use for the past 60 years, but in reality, less than eight years. The natural gas has been in the Marcellus/Utica shale formations for 4 billion years. Waiting until regulations can be developed to ensure the safest, most environmentally practical policies to handle and manage natural gas production makes the most sense all the way around.

That’s a very good question.  Could it be because Wall Street speculators and banksters are demanding double digit growth even though the Main Street economy is in a severe Depression?

New York fracking proposal roundly condemned at public hearing

Karen McVeigh, The Guardian

Wednesday 30 November 2011 19.25 EST

At the first of two public hearings in New York City over the plan to end the ban on fracking, the state authorities were left in little doubt about the scale of the opposition. Speakers at the packed and often unruly meeting in the 900-seat Tribeca performing arts centre were overwhelmingly against the technique, which involves blasting chemical-laden water and sand into shale rock to release gas.

Many of the speakers condemned the hearings themselves as a sham, because they said they were set up to allow public comment about draft regulations, before any environmental assessment had been carried out.

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Addressing a crowd of residents, activists and others outside the hearing, Senator Tony Avella, the Democrat author of a bill which would prohibit fracking in New York state, said: “I urge the Department of Conservation and the governor to pause in their deliberations and take full measure of the risks versus the ‘gold rush industry’ and make the right decision for this state for generations to come.”

He added: “The risk of catastrophic danger to the environment, the health of New York residents and adverse economic impacts that result from hydraulic fracturing far outweigh the potential for job creation and promotion of a natural gas alternative for oil.”

Mark Ruffalo, the actor, said: “The more we learn about fracking the more we see that natural gas is not a clean transition fuel, but a bridge to nowhere. The future of New York state depends on the action and resolve of the citizens of today – to reject this dangerous process and build a sustainable future for our children.”

Opponents of the drilling method criticised the Cuomo administration for exaggerating the economic benefits. They questioned the number of jobs that would be created, and said the administration had failed to consider the negative impacts on agriculture, tourism and other industries.

I couldn’t put it better myself-

There are alternative, sustainable sources of energy that could see incredible growth in development if they were to receive the tax exemptions and grants that the oil and gas industry now receives.

Breaking News: Feds Falsely Censor Popular Blog For Over A Year, Deny All Due Process, Hide All Details…

by Mike Masnick, Tech Dirt

Thu, Dec 8th 2011 8:29am

Imagine if the US government, with no notice or warning, raided a small but popular magazine’s offices over a Thanksgiving weekend, seized the company’s printing presses, and told the world that the magazine was a criminal enterprise with a giant banner on their building. Then imagine that it never arrested anyone, never let a trial happen, and filed everything about the case under seal, not even letting the magazine’s lawyers talk to the judge presiding over the case. And it continued to deny any due process at all for over a year, before finally just handing everything back to the magazine and pretending nothing happened. I expect most people would be outraged. I expect that nearly all of you would say that’s a classic case of prior restraint, a massive First Amendment violation, and exactly the kind of thing that does not, or should not, happen in the United States.

…

The Dajaz1 case became particularly interesting to us, after we saw evidence showing that the songs that ICE used in its affidavit as “evidence” of criminal copyright infringement were songs sent by representatives of the copyright holder with the request that the site publicize the works — in one case, even coming from a VP at a major music label. Even worse, about the only evidence that ICE had that these songs were infringing was the word of the “VP of Anti-Piracy Legal Affairs for the RIAA,” Carlos Linares, who was simply not in a position to know if the songs were infringing or authorized. In fact, one of the songs involved an artist not even represented by an RIAA label, and Linares clearly had absolutely no right to speak on behalf of that artist.

Despite all of this, the government simply seized the domain, put up a big scary warning graphic on the site, suggesting its operators were criminals, and then refused to comment at all about the case. Defenders of the seizures insisted that this was all perfectly legal and nothing to be worried about. They promised us that the government had every right to do this and plenty of additional evidence to back up its claims. They promised us that the government would allow for plenty of due process within a reasonable amount of time. They also insisted that, after hearing nothing happening in the case for many months, it meant that no attempt to object to the seizure had occurred. Turns out… none of that was true.

…

Under the seizure laws, the government has 60 days from seizure to “notify” those whose property it seized (imagine having the government swoop in and take away your property, and not even being told why for two whole months). Once notified, the property owner has 35 days to file a claim to request the return of the property. If that doesn’t happen, the government can effectively just keep the property, so it tends to rely on intimidation and threats towards anyone who indicates plans to ask for their property back (usually in the form of threatening to file charges). However, if such a claim is filed, the government then has 90 days to start the full “forfeiture” process, which would allow the government to keep the seized property and never have to give it back. If the claim to return the property is filed and the government does not file for forfeiture, it is required to return the property. Thus seizures are supposedly used as a temporary part of the investigation, to stop criminal activity or to prevent the destruction of evidence. However, that’s not how things always play out in real life.

As we’d heard with a number of domain names that had been seized, the government began stalling like mad when contacted by representatives for domain holders seeking to get their domains back. ICE even flat out lied to the public, stating that no one was challenging the seizures, when it knew full well that some sites were, in fact, challenging. Out of that came the Rojadirecta case, but what of Dajaz1?

After continuing to stall and refusing to respond to Dajaz1’s filing requesting the domain be returned, the government told Dajaz1’s lawyer, Andrew P. Bridges, that it would begin forfeiture procedures (as required by law if it wanted to keep the domain). Bridges made clear that Dajaz1 would challenge the forfeiture procedure and seek to get the domain name back at that time. Then, the deadline for the government to file for forfeiture came and went and nothing apparently happened. Absolutely nothing. Bridges contacted the government to ask what was going on, and was told that the government had received an extension from the court. Bridges, quite reasonably, asked how that was possible without him, as counsel for the site, being informed of it or given a chance to make the case for why such an extension was improper.

He also asked for a copy of the the court’s order allowing the extension. The government told him no and that the extension was filed under seal and could not be released, even in redacted form.

He asked for the motion papers asking for the extension. The government told him no and that the papers were filed under seal and could not be released, even in redacted form.

He again asked whether he would be notified about further filings for extensions. The government told him no.

He then asked the US attorney to inform the court that, if the government made another request for an extension, the domain owner opposed the extension and would like the opportunity to be heard. The government would not agree.

And file further extensions the government did. Repeatedly. Or, at least that’s what Bridges was told. He sent someone to investigate the docket at the court, but the docket itself was secret, meaning there was no record of any of this available.

The government was required to file for forfeiture by May. The initial (supposed) secret extension was until July. Then it got another one that went until September. And then another one until November… or so the government said. When Bridges asked the government for some proof that it had actually obtained the extensions in question, the government attorney told Bridges that he would just have “trust” him.

Finally, the government decided that it would not file a forfeiture complaint — because there was no probable cause — and it let the last (supposed) extension expire. Only after Bridges asked again for the status of the domain did the government indicate that it would return the domain to its owner — something that finally happened today. Dajaz1.com is finally back in the hands of its rightful owner. This is really quite incredible, considering the “rush” with which it seized these domain names, claiming the urgency in stopping a crime in progress. But, of course, after realizing that it had no evidence to suggest a crime was ever in progress – there was absolutely no urgency to correct the error.

The level of secrecy in this case makes it sound like a terrorist investigation, not the censorship of a popular music blog. Normally, when there’s a lawsuit, the docket is available on PACER. Even in cases where things are filed under seal or everything is redacted, there’s at least a placeholder for them in PACER. This case does not exist anywhere that anyone can find. The docket was apparently kept hidden in a judge’s office in Los Angeles the whole time. No one knew this was going on, other than the US Attorney and the representatives of Dajaz1 (who still never saw the docket or the extension orders).

Let’s just take stock here for a second. We have the government clearly censoring free speech in the form of a blog that discussed the music world and was widely recognized for its influence in promoting new acts. The government seized the blog with no adversarial hearing and no initial due process. Then, rather than actually provide some sort of belated due process in the form of an adversarial hearing, it continued to deny any and all due process by secretly (even to Dajaz1’s own lawyer) extending the seizure without any way to challenge those extensions. All in all, the government completely censored a popular web site for over a year, when it had no real evidence for probable cause of infringement, as it had falsely claimed in the original rubber stamped affidavit.

(h/t DCblogger @ Corrente)

The thoroughly discredited Chicago (Freshwater) School of Economics denies that these even exist.

It’s not just a river in Egypt, it’s also faith based not science in contradiction of actual factual evidence-

Wikipedia–

A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded by some as a deflationary spiral. A deflationary spiral is the modern macroeconomic version of the general glut controversy of the 19th century. Another related idea is Irving Fisher’s theory that excess debt can cause a continuing deflation. Whether deflationary spirals can actually occur is controversial, with its possibility being disputed by freshwater economists (including the Chicago school of economics) and Austrian School economists.

In Japan–

Systemic reasons for deflation in Japan can be said to include:

• Tight monetary conditions. The Bank of Japan kept monetary policy loose only when inflation was below zero, tightening whenever deflation ends.

…

• Fallen asset prices. In the case of Japan asset price deflation was a mean reversion or correction back to the price level that prevailed before the asset bubble. There was a rather large price bubble in equities and especially real estate in Japan in the 1980s (peaking in late 1989).

• Insolvent companies:  Banks lent to companies and individuals that invested in real estate. When real estate values dropped, these loans could not be paid. The banks could try to collect on the collateral (land), but this wouldn’t pay off the loan. Banks delayed that decision, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks made even more loans to these companies that are used to service the debt they already had. This continuing process is known as maintaining an “unrealized loss”, and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy. Improving bankruptcy law, land transfer law, and tax law have been suggested (by The Economist) as methods to speed this process and thus end the deflation.

• Insolvent banks:  Banks with a larger percentage of their loans which are “non-performing”, that is to say, they are not receiving payments on them, but have not yet written them off, cannot lend more money; they must increase their cash reserves to cover the bad loans.

• Fear of insolvent banks:  Japanese people are afraid that banks will collapse so they prefer to buy (United States or Japanese) Treasury bonds instead of saving their money in a bank account. This likewise means the money is not available for lending and therefore economic growth. This means that the savings rate depresses consumption, but does not appear in the economy in an efficient form to spur new investment. People also save by owning real estate, further slowing growth, since it inflates land prices.

Sound familiar?  It should.

Anxious Greeks Emptying Their Bank Accounts

Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending — and are inadvertently making the recession even worse.

By Ferry Batzoglou in Athens, Der Spiegel

12/06/2011

(T)he outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion — by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October — the biggest monthly outflow of funds since the start of the debt crisis in late 2009.

…

The hemorrhaging of bank savings has had a disastrous impact on the economy. Many companies have had to tap into their reserves during the recession because banks have become more reluctant to lend. More Greek families are now living off their savings because they have lost their jobs or have had their salaries or pensions cut.

In August, unemployment reached 18.4 percent. Many Greeks now hoard their savings in their homes because they are worried the banking system may collapse.

Those who can are trying to shift their funds abroad. The Greek central bank estimates that around a fifth of the deposits withdrawn have been moved out of the country. “There is a lot of uncertainty,” says Panagiotis Nikoloudis, president of the National Agency for Combating Money Laundering.

…

Nikoloudis has detected a further trend. At first, it was just a few people trying to withdraw large sums of money. Now it’s large numbers of people moving small sums. Ypatia K., a 55-year-old bank worker from Athens, can confirm that. “The customers, especially small savers, have recently been withdrawing sums of €3,000, €4,000 or €5,000. That was panic,” she said.

…

The shrinking Greek bank deposits compare with bank loans totalling €253 million. Analysts say the share of bad loans could rise to 20 percent next year, or €50 billion, as a result of the recession. This in turn will worsen the already pressing liquidity problems faced by Greek banks.

Did I mention thoroughly discredited?

Germany next.

Then mankind would have become as the Great Old Ones; free and wild and beyond good and evil, with laws and morals thrown aside and all men shouting and killing and revelling in joy. Then the liberated Old Ones would teach them new ways to shout and kill and revel and enjoy themselves, and all the earth would flame with a holocaust of ecstasy and freedom.

I’ve been following what purports to be a conversation with a libertarian over at Naked Capitalism and I hardly know how to characterize it except as pathological.  It’s faith based and factually wrong in addition to being illegal, immoral, and selfish.

I’m not making the claim that it accurately represents libertarian doctrine or practice, or even the viewpoint of a real human being and not a fictional straw man construct.

Frankly I don’t know what to think.  I was appalled and horrified reading it and draw your attention because of those qualities.

By Andrew Dittmer, who recently finished his PhD in mathematics at Harvard and is currently continuing work on his thesis topic. He also taught mathematics at a local elementary school. Andrew enjoys explaining the recent history of the financial sector to a popular audience.

Simulposted at The Distributist Review

• Journey into a Libertarian Future: Part I -The Vision
  
  Tuesday, November 29, 2011
• Journey into a Libertarian Future: Part II – The Strategy
  
  Wednesday, November 30, 2011
• Journey into a Libertarian Future: Part III – Regulation
  
  Thursday, December 1, 2011
• Journey into a Libertarian Future: Part IV – The Journey into a Libertarian Past
  
  Friday, December 2, 2011
• Journey into a Libertarian Future: Part V – Dark Realities
  
  Monday, December 5, 2011
• Journey into a Libertarian Future: Part VI – Certainty
  
  Tuesday, December 6, 2011

(h/t Think Progress)

What’s that?  Never heard of it.

The eurozone’s terrible mistake

Felix Salmon, Reuters

Dec 5, 2011 23:36 EST

The FT is reporting today that the new fiscal rules for the EU “include a commitment not to force private sector bondholders to take losses on any future eurozone bail-outs”. If this principle really does get enshrined into some new treaty, it will be one of the most fiscally insane derelictions of statesmanship the world has seen – but it certainly helps explain the short-term rally that we saw today in Italian government debt.

…

To understand just how stupid this is, all you need to do is go back and read Michael Lewis’s Ireland article. The fateful decision in Ireland was to take the insolvent banks and give them a blanket bailout, with the banks’ creditors all getting 100 cents on the euro. That only served to put a positively evil debt burden onto the Irish people, forcing a massive austerity program and causing untold billions of euros in foregone growth, while bailing out lenders who deserved no such thing.

…

The worst case scenario is that the EU kicks the can down the road with one new bailout facility after another, until it eventually gives up throwing good money after bad and imposes the restructuring which was inevitable all along. In that case, as one hedge fund manager was explaining to me last week, private sector creditors get devastated: because the EU and the ECB and the IMF won’t take any losses on their loans, all of the haircut, pretty much, will have to be borne by a private sector which accounts for only a fraction of the debt. So the private sector could end up with very, very little indeed.

…

The immediate result of this plan is that everybody will rush into the highest-yielding bonds in Europe, which is exactly what seems to have happened today. The other effect of the plan, however, is that every country in Europe is now effectively guaranteeing everybody else’s debt. Which is more than sufficient to explain why S&P is minded to downgrade every country in Europe, up to and including Germany.

In order for markets to work, lenders need to suffer when they make bad lending decisions. If the Europeans didn’t learn from Ireland, couldn’t they at least learn from the Fed’s much-criticized decision to pay off all AIG creditors at 100 cents on the dollar? Blanket guarantees at par are pretty much always a really bad idea – and this one, if it comes to pass, will be the biggest one yet. It won’t end well.

Mr. Obama?

Part 1

Part 2

Transcript

Overtime

(h/t Diane Sweet @ Crooks & Liars)

You see, the fundamental problem is that their banks are insolvent.

European banks’ asset sales face disastrous failure

By Gareth Gore, International Finance Review

26 November 2011

European banks are being forced to abandon their efforts to sell off trillions of euros worth of loans, mortgages and real estate after a series of talks with potential investors broke down, leaving many already struggling firms with piles of assets they can barely support.

…

Deadlocked talks with potential buyers – a mix of private equity firms, hedge funds, foreign banks and insurers – show little sign of making breakthroughs, say bankers taking part in those negotiations, with the stalemate threatening to block the industry’s ability to save itself from collapse through a mass deleveraging.

…

People involved in asset sale talks say price is the major sticking point. Lenders want only to sell higher-quality assets near to par value so as to avoid huge write-downs, which would erode capital further. By contrast, potential buyers want high-yielding investments and are offering only knock-down prices.

“There is a huge amount of liquidity among investors right now, but they only want to buy at distressed prices,” said Stefano Marsaglia, a chairman within the financial institutions group at Barclays Capital. “Lots of discussions are taking place but there is a gulf in terms of pricing.”

The homogeneity of assets on offer is also complicating the negotiations – a number of Dutch lenders, for example, all want to sell very similar mortgage-backed securities. Several bankers advising such clients were unanimous in saying that the deals will struggle to happen.

And Now Europe’s Banks Are Starting To Panic As The Oxygen Gets Sucked Out Of The Room

Henry Blodget, Business Insider

Nov. 16, 2011, 9:27 PM

Specifically, traditional sources of bank funding in Europe, such as institutional investors and other banks, are getting cautious as fears grow about the need for sovereign debt restructurings. As liquidity dries up, the only reliable source of funding is often the ECB.

But the ECB only accepts certain types of assets as collateral for loans, and some banks are running out of those assets.

So they’re turning to investment banks and other “counter-parties” that have them. And they’re entering into “swap” agreements in which they exchange their assets for the counter-parties’ assets and then stock-pile the latter assets for use as collateral.

And that’s a fine plan… until the music stops and one big “counter-party” fails.

How does this relate to the sovereign debt crisis?  As Citi’s Willem Buiter puts it-

I think France definitely has its work cut out for itself. It has a government budgeting problem which is structural to a large extent. And then they have a large banking sector. Do not forget that the U.S. banking sector balance sheet is less than 100% of GDP. In Europe and France, it is 300%. Their banks are under fire and so their sovereigns are under fire. I do not think the sovereign will keel over, but they have their work cut out for them.

All the liquidity in the world is not going to solve the problem that European banks are holding over $7 Trillion of valuation on their books that can’t be sold for anything near that AND the sovereign governments have made an implicit promise to bail them and their investors out.

As Roubini put it–

At this point most investors would dump their entire holdings of Italian debt to any sucker – the ECB, European Financial Stability Facility, IMF or whoever – willing to buy it at current yields.

…

So using precious official resources to prevent the unavoidable would simply finance the exit of others.

…

If, as appears likely, Italy remains stuck in an uncompetitive recession and is unable to regain market access in the next twelve months, then even if such large official resources were mobilised, they would be wasted on financing investors’ exit and thus postponing an inevitable debt restructuring that would then be more disorderly.

As your humble servant put it shortly thereafter-

This is a liquidity fix, not an insolvency fix.  The problem it’s intended to address is that banks will no longer lend to other banks because they suspect (and rightly so) that the other banks’ assets are pieces of crap.

It does nothing at all to address the fact that those assets are pieces of crap.

For their part the governments are making the additional bad choice to pursue a program of austerity that has already stifled growth to the point of Recession and the beginnings of a Deflationary Spiral.

What Can Save the Euro?

Joseph E. Stiglitz, Project Syndicate

2011-12-05

It is increasingly evident that Europe’s political leaders, for all their commitment to the euro’s survival, do not have a good grasp of what is required to make the single currency work. The prevailing view when the euro was established was that all that was required was fiscal discipline – no country’s fiscal deficit or public debt, relative to GDP, should be too large. But Ireland and Spain had budget surpluses and low debt before the crisis, which quickly turned into large deficits and high debt. So now European leaders say that it is the current-account deficits of the eurozone’s member countries that must be kept in check.

In that case, it seems curious that, as the crisis continues, the safe haven for global investors is the United States, which has had an enormous current-account deficit for years. So, how will the European Union distinguish between “good” current-account deficits – a government creates a favorable business climate, generating inflows of foreign direct investment – and “bad” current-account deficits? Preventing bad current-account deficits would require far greater intervention in the private sector than the neoliberal and single-market doctrines that were fashionable at the euro’s founding would imply.

…

There is, interestingly, a common thread running through all of these cases, as well as the 2008 crisis: financial sectors behaved badly and failed to assess creditworthiness and manage risk as they were supposed to do.

These problems will occur with or without the euro. But the euro has made it more difficult for governments to respond. And the problem is not just that the euro took away two key tools for adjustment – the interest rate and the exchange rate – and put nothing in their place, or that the European Central Bank’s mandate is to focus on inflation, whereas today’s challenges are unemployment, growth, and financial stability. Without a common fiscal authority, the single market opened the way to tax competition – a race to the bottom to attract investment and boost output that could be freely sold throughout the EU.

…

Even if those from Europe’s northern countries are right in claiming that the euro would work if effective discipline could be imposed on others (I think they are wrong), they are deluding themselves with a morality play. It is fine to blame their southern compatriots for fiscal profligacy, or, in the case of Spain and Ireland, for letting free markets have free reign, without seeing where that would lead. But that doesn’t address today’s problem: huge debts, whether a result of private or public miscalculations, must be managed within the euro framework.

Public-sector cutbacks today do not solve the problem of yesterday’s profligacy; they simply push economies into deeper recessions. Europe’s leaders know this. They know that growth is needed. But, rather than deal with today’s problems and find a formula for growth, they prefer to deliver homilies about what some previous government should have done. This may be satisfying for the sermonizer, but it won’t solve Europe’s problems – and it won’t save the euro.

Is there some hope?  How about some new leadership?

Wolf Richter: French Presidential Election – Coup De Grâce For The Euro?

Naked Capitalism

Friday, December 2, 2011

France isn’t doing well. Unemployment, which has been rising since May, breached 9%. Wages haven’t kept up with inflation, and purchasing power has dropped. Industrial orders plummeted. Layoffs have been announced. Yields are rising. Banks are teetering. Sarkozy had tried to reform the French welfare and tax system. Result: rising income disparity, tax loopholes for the rich, diminished pension benefits for the middle class, reduced subsidies for the poor, etc., and now ugly unemployment trends.

Voters are angry. And the poll numbers that came out today show to what extent (L’Exress, article in French). During the first round on April 22, François Hollande of the Socialist Party would obtain 29.5%, Sarkozy 26%, and right-wing populist Marine Le Pen 19.5%. And this after Sarkozy got a 6-point bump from an anti-nuclear imbroglio on the left that Hollande had trouble squelching. In a face-off during the second round on May 6, Hollande would win by a landslide 56% against Sarkozy’s 44%.

If the economy deteriorates further, Marine Le Pen, president of the National Front, might beat Sarkozy in the first round. Media savvy and endowed with a captivating presence, she’d stunned the French political establishment by beating Sarkozy in the polls earlier this year.

…

François Hollande is more temperate. … His camp has come up with a five-point plan:

1. Expand to the greatest extend possible the European bailout fund (EFSF)
2. Issue Eurobonds and spread national liabilities across all Eurozone countries
3. Get the ECB to play an “active role,” i.e. buy Eurozone sovereign debt.
4. Institute a financial transaction tax
5. Launch growth initiatives instead of austerity measures.

But the core of their solution-monetizing sovereign debt without central control over national budgets-is totally unacceptable to Germany. So, if the euro and the Eurozone as we know them are still alive by early May, then the French presidential election may well deliver the coup de grâce.

That is, if Germany remains intransigent.

On the other hand it’s highly likely Mr. Market isn’t going to wait that long.  German bonds (I refuse to confuse you by calling them bunds just to pretend to be hip and cosmopolitan) were already under considerable pressure before the latest optimism bubble and projected growth of the German economy has been sharply revised downward even from the anemic 1.5 to 2% of a month ago.

The vast majority of German exports are to EU partners who can no longer afford them under the austerity regimes dictated by the German banks who in fact hold more of that unsellable crap sovereign and commercial debt than most of their peers.  If they continue this policy they’ll be committing economic suicide.

There is no confidence fairy.  You can’t cut your way to prosperity.

I say good riddance to bad rubbish in my very best imitation of Hayek and refer you again to David Apgar-

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.

…

(M)assive 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 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.

…

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.

…

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.