Monday, May 30, 2011

Who is Paul Krugman?

Paul Krugman: liberal loner who thinks Obama is spineless and Gordon Brown saved the world
Funny text by Andrew Clark in the British Guardian on the foremost American "intellectual" and "economist".
Comment: It is the readers who make the author.

Next crash around the corner

Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.
“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said ...

Saturday, May 28, 2011

Dollar collapse

U.N. sees risk of crisis of confidence in dollar
UNITED NATIONS(Reuters) - The United Nations warned on Wednesday of a possible crisis of confidence in, and even a "collapse" of, the U.S. dollar if its value against other currencies continued to decline.
In a mid-year review of the world economy, the U.N. economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.
The report, an update of the U.N. "World Economic Situation and Prospects 2011" report first issued in December, noted that the dollar exchange rate against a basket of other key currencies had reached its lowest level since the 1970s.
Full text
UN Report: World Economic Situation and Prospects 2011 Global Outlook
Comment: The effects of a dollar collapse would dwarf any consequences of the euro crisis.

Why we're doomed

Michael S. Rozeff explains:
"... This system is dynamically unstable too. It eventually must run into a wall or limit because the parasitic activities will overwhelm the productive activities. This limit is now in view. The government’s unfunded liabilities ($200 trillion by some estimates) vastly exceed its capacity to tax at current levels. Only by outright expropriation of wealth in the form of saved assets (seizing pensions) or by high levels of taxation that sap human wealth can the promises be kept. Those routes spell massive pain.
If a society does not impose limits on its own parasitic activities, it will eventually destroy itself. If it crushes its productive activities, it will destroy itself. If the society’s people do not impose the proper limits on their own behavior, individually and collectively, then they are setting a course for massive pain.
At this time, Greece does look like the future of America. Is it too late for America? Just about. When I see this society impose some limits on its parasitic behavior and encourage productive behavior, I will become more optimistic. However, I’ve been waiting for that for 40 years and I’ve yet to see it..."
Full text
Comment:  What shows up as a financial and economic problem is rooted in a political system which by its very nature brings forth decisions that are void of prudence.

Friday, May 27, 2011

The Stimulus Scam

As recovery falters, Washington offers little help

By Zachary RothSigns that the economic recovery, never robust, is now in serious jeopardy have been multiplying lately. And it doesn't look like anyone in Washington has a plan that'll do anything about it.
First-time claims for unemployment benefits unexpectedly rose this week, suggesting the labor market remains weak. A new government estimate of first-quarter economic growth put it at an anemic 1.8 percent--exactly what the original estimate was, when economists had been expecting an improvement. And it's looking like the second quarter won't be a whole lot better. The economic consulting firm Macroeconomic Advisers this week projected growth over the next three months at 2.8 percent, far off the 4 percent it was predicting recently.
At this rate, it's going to be several years at best before we see healthy growth again--and the jobless rate, currently stuck at 9 percent, descending to an acceptable level.
So, what's Washington doing about it? Not much.
Full text
Comment: Well, no surprise, I have to say. Wish I had been wrong, but it isn't so:

Thursday, May 26, 2011

The stimulus scam revisisted

20 Questions To Ask Anyone Foolish Enough To Believe The Economic Crisis Is Over

Courtesy of Michael Snyder of Economic Collapse
If you listen to Ben Bernanke, Barack Obama and the mainstream media long enough, and if you didn't know any better, you might be tempted to think that the economic crisis is long gone and that we are in the midst of a burgeoning economic recovery.  Unfortunately, the truth is that the economic crisis is far from over.
In 2010, more homes were repossessed than ever before, more Americans were on food stamps than ever before and a smaller percentage of American men had jobs than ever before. The reality is that the United States is an economic basket case and all of these natural disasters certainly are not helping things. The Federal Reserve has been printing gigantic piles of money and the U.S. government has been borrowing and spending cash at a dizzying pace in an all-out effort to stabilize things.  They have succeeded for the moment, but our long-term economic problems are worse then ever.  We are still in the middle of a full-blown economic crisis and things are about to get even worse.
If you know someone that is foolish enough to believe that the economic crisis is over and that our economic problems are behind us, just ask that person the following questions....
#1 During the 23 months of the "Obama recovery", an average of about 23,000 jobs a month have been created.  It takes somewhere in the neighborhood of 150,000 jobs a month just to keep up with population growth.  So shouldn't we hold off a bit before we declare the economic crisis to be over?
#2 During the "recession", somewhere between 6.3 million and 7.5 million jobs were lost.  During the "Obama recovery", approximately 535,000 jobs have been added.  When will the rest of the jobs finally come back?
#3 Of the 535,000 jobs that have been created during the "Obama recovery", only about 35,000 of them are permanent full-time jobs. Today, "low income jobs" account for 41 percent of all jobs in the United States. If our economy is recovering, then why can't it produce large numbers of good jobs that will enable people to provide for their families?
#4 Agricultural commodities have been absolutely soaring this decade.  The combined price of cotton, wheat, gasoline and hogs is now more than 3 times higher than it was back in 2002.  So how in the world can the Federal Reserve claim that inflation has been at minimal levels all this time?  (Because they have changed the way the measure inflation not to include food and energy prices.... ed.)
#5 Back in 2008, banks had a total of 27 billion dollars in excess reserves at the Fed.  Today, banks have a total of approximately 1.5 trillion dollars in excess reserves at the Fed.  So what is going to happen when all of this money eventually hits the economy?....

#6 If the U.S. economy is recovering, then why are shipments by U.S. factories still substantially below 2008 levels?
#7 Why are imports of goods from overseas growing much more rapidly than shipments of goods from U.S. factories?
#8 According to Zillow, the average price of a home in the U.S. is about 8 percent lower than it was a year ago and that it continues to fall about 1 percent a month. During the first quarter of 2011, home values declined at the fastest rate since late 2008. So can we really talk about a "recovery" when the real estate crisis continues to get worse?
#9 According to a shocking new survey, 54 percent of Americans believe that a housing recovery is "unlikely" until at least 2014.  So how is the housing industry supposed to improve if so many people are convinced that it will not?
#10 The latest GDP numbers out of Japan are a complete and total disaster.  During the first quarter GDP declined by a stunning 3.7 percent. Of course I have been saying for months that the Japanese economy is collapsing, but most mainstream economists were absolutely stunned by the latest figures. So will the rest of the world be able to avoid slipping into a recession as well?
#11 Next week, Republicans in the House of Representatives are going to allow a vote on raising the debt ceiling.  Everyone knows that this is an opportunity for Republican lawmakers to "look tough" to their constituents (the vast majority of which do not want the debt ceiling raised).  Everyone also knows that eventually the Republicans are almost certainly going to cave on the debt ceiling after minimal concessions by the Democrats. The truth is that neither "establishment Republicans" nor "establishment Democrats" are actually serious about significantly cutting government debt.  So why do we need all of this political theater? (Distraction?)
#12 Why are so many of our once great manufacturing cities being transformed into hellholes?  In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.
#13 According to one new survey, about half of all Baby Boomers fear that when they retire they are going to end up living in poverty. So who is going to take care of them all when the money runs out?
#14 According to the U.S. Bureau of Labor Statistics, an average of about 5 million Americans were being hired every single month during 2006.  Today, an average of about 3.5 million Americans are being hired every single month.  So why are our politicians talking about "economic recovery" instead of "the collapse of the economy" when hiring remains about 50 percent below normal?
#15 Since August, 2 million more Americans have left the labor force.  But the entire period from August to today was supposed to have been a time of economic growth and recovery.  So why are so many Americans giving up on looking for a job?
#16 According to Gallup, 41 percent of Americans believed that the economy was "getting better" at this time last year.  Today, that number is at just 27 percent.  Are Americans losing faith in the U.S. economy?
#17 According to the U.S. Census, the number of children living in poverty has gone up by about 2 million in just the past 2 years, and one out of every four American children is currently on food stamps.  During this same time period, Barack Obama and Ben Bernanke have told us over and over that the U.S. economy has been getting better. So what is the truth?
#18 America has become absolutely addicted to government money. 59 percent of all Americans now receive money from the federal government in one form or another. U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes. Americans hate having their taxes raised and they hate having their government benefits cut.  So is there any hope that this will ever be turned around before disaster strikes?  (59% - that is insane.  Is there any hope - I don't think so. ed.)
#19 The combined debt of the major GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to 6.4 trillion in 2011.  How in the world is the U.S. government going to be able to afford to guarantee all of that debt on top of everything else?
#20 If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.  The U.S. government borrows about 168 million dollars every single hour.  If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.  So how in the world can our politicians tell us that everything is going to be okay?
BACKGROUNDER: The Stimulus Scam

Sunday, May 22, 2011

Strauss-Kahn will be free says his lawyer

NEW YORK (AFP) – Fallen IMF chief Dominique Strauss-Kahn will plead not guilty and be cleared of attempting to rape a hotel chambermaid, his main lawyer said Sunday.
The French politician is holed up in a Broadway apartment under armed guard while efforts were made to find him a more permanent home to prepare his defense.
Benjamin Brafman, who handled the child sex case against the late Michael Jackson, told Israeli newspaper Haaretz he was confident that Strauss-Kahn would go free.
Full text
Comment: Whatever has happened, whoever is guilty or not, the spectacle is ugly. DSK is being treated like a criminal although there hasn't been a sentence yet. Nobody seems to care to find out who set him up. Almost everyone seems to agree that he is a rapist. What kind of massive manipulation is going on here?

What happens when Greece defaults 

Andrew Lilico   

Andrew Lilico is an Economist with Europe Economics, and a member of the Shadow Monetary Policy Committee. He was formerly the Chief Economist of Policy Exchange.

It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.
What happens when Greece defaults. Here are a few things:
 Read more
Comment: Well, dear Andrew, you may be right in your analysis about the consequences, yet I bet you are wrong in your premise. Exactly because of the consequences you so brilliantly described, Greece will not default.

Friday, May 20, 2011

European debt crisis Q & A

Questions and answers about Europe's debt crisis

Why Europe's debt crisis and the IMF chief's resignation matter to the US

, On Friday May 20, 2011, 12:17 pm
NEW YORK (AP) -- The arrest and resignation of Dominique Strauss-Kahn, chief of the International Monetary Fund, has put the debt troubles in Europe back in the news.
The U.S economy has its own woes: stubbornly high unemployment, sluggish growth and $14 trillion in government debt. And that's just the short list. So why should you care about what's happening in Athens, Berlin or Brussels?
Because markets are global and the economies of Europe and the U.S. are intertwined through trade and multinational company interests. Just the rumor that Greece, which is in danger of defaulting on its debt to lenders, might drop the euro as its currency sent U.S. bond yields to lows for the year.
Here are answers to some questions about why Europe's troubles matter to the U.S.:
Read more

Thursday, May 19, 2011

A man to remember

Seve Ballesteros

Severiano Ballesteros, Europe’s greatest golfer, died on May 7th, aged 54

AS HE struck the ball, Seve Ballesteros feared he had overdone it. After a good 3-wood tee shot and a decent sand-wedge to the 18th green at St Andrews in 1984, the ball was only 15 feet below the hole. Now, in his sheer eagerness to win, he had hit it too hard. But no. The ball rolled sweetly towards the hole, improbably curving round, hovered on the edge of the cup, then tumbled in. It seemed to go in slow motion as he willed it and willed it forward. And with that he had won the Open.
His joy then, as he punched the air, raised his arms to the crowd, laughed and almost danced, was perhaps the most ecstatic moment ever seen in golf. Later he made that image his logo. Bags, shirts, caps and putter-covers proclaimed him to be the best. And for more than a decade, from 1979 to 1991, he was. He won three British Open championships and two Masters, and over his whole career bore off 87 titles. He was in the European Ryder Cup team that in 1985 overturned 28 years of American domination, and later led a team to Ryder victory himself.
It was also beautifully done, inspiring a whole generation of European golfers. He had strength for the long game, finesse and subtlety for the short game, but also a daring that bordered on recklessness. Pure passion made him drive his tee shots into car parks, gorse and bunkers, but this was a man who could pitch a ball over an eight-foot wall, or hook a 5-iron shot round a tree, or chip-and-run through a tiny gap between two yawning bunkers, and sink the putt for an improbable birdie. He was always in trouble, yet he never was.
Luck, said some. Miraculous, said others, as they sighed at his soft blasts out of bunkers on to the green, or the fluid grace of his swing. Commentators talked of natural genius, as though he was still a seven-year-old whacking a pebble with a home-made club on a beach in Cantabria. His impoverished family put it down to destino. Such talk annoyed him. It was all hard graft and iron discipline: hitting a ball, alone, for hours. It started in boyhood, putting into tomato cans on a bumpy two-hole piece of field on his parents’ farm, or driving into a fishing net hung in the barn. He reckoned he had hit 1,000 balls a day. Because he had only one club, a 3-iron, he learned how to do everything with it: low, powerful shots, high, soft-landing shots and impossible recovery shots out of long, tangled grass. He could improvise his way out of anything.
Admirers asked where the passion came from. He found it hard to explain. The joy of impact, finding the sweet spot on the club-face and feeling the ball obey, visualising the perfect shot and sensing that he could achieve it, was a large part of it. But pride fired him more. Man and boy, he was consumed by the need to prove himself. First against his three brothers, who also became professional golfers; against the old guard at the Royal Golf Club at Pedreña, who treated him like dirt when he caddied there; against the Americans, whose players, he assumed, had been formally instructed on world-class courses, and who thought the Masters and the Ryder Cup belonged to them; against anyone who thought he was inferior, or tried to control him with senseless regulations. Though the European Tour owed so much to him, he fell out badly with its officials in the 1980s—even being left out of the 1981 Ryder Cup team, when he was ranked number one in both Europe and the world.
Rising, falling
He started every game to win it, and sometimes wept when he failed. About three weeks before each big tournament he would enter a bubble of concentration that muffled even the crowd’s applause. He was aware only of his body, the club, the ball, and the winning interaction between them. Hence the expression, serious even to mournful, that shadowed his film-star-handsome face on the course. But he was not above a little psychological warfare—the odd cough, the innocent remark—to put his rivals off their stroke. And as he politely shook their hands, he would be thinking: “I am going to bury you.”
He had made his name on the professional golfing scene at 19, still a gawky lad continually hitching up his trousers, throwing away a lead with sublime impatience at Royal Birkdale in 1976. He left the scene early, too. At Augusta in 1986, when he lost the Masters with a clumsy 4-iron shot into water at the 15th, he felt his touch was fading. Increasingly through the 1990s he missed the cut for tournaments and slid down the rankings of players. Back pain crippled him. His marriage broke up, leaving him alone in the huge new house he had built at Pedreña with display cases full of silver cups and an 18-hole course in the garden, and in 2008 he was diagnosed with the brain cancer that killed him.
Golf, he often said, was a mysterious thing. Despite all his practice, some days he played well and others badly. A good swing would come, then disappear. On that fantastic day at St Andrews in 1984 he had “dressed for the kill” at the 15th, pulling on his dark-blue Slazenger sweater in which he had won at Lytham five years earlier as if it was a matador’s suit of lights. On other occasions he watched ruefully as the shot, like the bull, avoided the target. The ball rose, travelled and fell; you were born, you did your best, you died. The arc of golf was perhaps no more biddable than the sad trajectory of his life.
The Economist
Comment: Great writing about a great man!

Misplaced euphoria that will cost dearly


Warning signal

Leading indicators slip for 1st time in 10 months

Leading indicators drop in April for first time since June 2010, suggests choppy economy

, On Thursday May 19, 2011, 11:29 am EDT
NEW YORK (AP) -- A private research group's forecasting gauge suggests some bumps in the economic recovery this summer.
The Conference Board said Thursday its index of leading economic indicators dropped 0.3 percent in April, the first decline since June 2010.
The index had moved sharply higher in four of the past five months as the job market improved and the stock market rallied. Last month's spike in the number of people filing for unemployment assistance -- which many economists viewed as a temporary event -- and a troubled housing market weighed on the indicators. A measure that suggested the resurgence in the manufacturing sector was slackening also hurt.
Read more
Comment: Germany's IFO index also dropped. Outlook isn't rosy for stocks.

It's over for Strauss-Kahn

Strauss-Kahn Quits IMF, Kicking Off Succession Contest

Dominique Strauss-Kahn resigned as the 10th leader of the International Monetary Fund, kicking off a contest for his successor as Europeans seek to retain the job amid a lack of unity among emerging-market nations.
Full text
Comment: What a shameful event. The band of criminals at the top are in panic. Like mad wolfes they fall over each other in despair. A trail of blood and scandal and shame in the corridors of power. The next one in line is already targeted.

Wednesday, May 18, 2011

World Bank predicts end of dollar hegemony

, On Tuesday May 17, 2011, 9:00 am EDT 
With China overtaking Japan as the world's second-largest economy last year, there can be no doubt that emerging markets are becoming increasingly powerful.
A new report from the World Bank predicts that by 2025, China, along with five other emerging economies - Brazil, India, Indonesia, South Korea and Russia - will account for more than half of all global growth, up from one-third now.
The report, "Global Development Horizons 2011 - Multipolarity: The New Global Economy," also anticipates that the dollar will be joined by the euro and the renminbi as dominant international currencies. The Chinese government is already easing currency controls and has taken other steps to help the renminbi become a fully convertible reserve currency, which would make it easier for foreign companies to finance projects in China.
Hans Timmer, director of development prospects for the World Bank, said in an interview that despite the current sovereign debt crises roiling Europe, the euro remained a strong and viable currency. "With all the problems they have had in the past 10 years, they have been successful," Mr. Timmer said. "A big part of global reserves is denominated in euros. There is more borrowing going on in euros. As a reserve currency, dollars are still dominant, but countries are drifting away from the dollar into the euro."According to the report, the fast-growing developing countries will continue to outpace those in the developed world - mainly Europe, Japan, Britain and the United States. The emerging economies will grow at an average pace of 4.7 percent a year between now and 2025, while the developed countries will grow at an average of 2.3 percent.
Full text
The Demise of the Dollar?
The End of Dollar Supremacy?
Why the Dollar is Falling
Dollars and Politics
What's Behind the Currency War?

Towards a new world order

May 17, 2011—By 2025, six major emerging economies—Brazil, China, India, Indonesia, South Korea, and Russia—will account for more than half of all global growth, and the international monetary system will no longer be dominated by a single currency. As economic power shifts, these successful economies will help drive growth in lower income countries through cross-border commercial and financial transactions.
Global Development Horizons 2011—Multipolarity: The New Global Economy projects that today's emerging economies will grow, on average, by 4.7 percent a year between 2011 and 2025, and their share of global GDP will expand from 36 percent to 45 percent. Advanced economies, meanwhile, are forecast to grow by 2.3 percent over the same period, yet will remain prominent in the global economy, with the euro area, Japan, the United Kingdom, and the United States all playing a core role in supporting the global economic engine. More Report Highlights »
See also:

Tuesday, May 17, 2011

Pulp fiction played by fake actors

Greece Default Risk Rising With IMF Turmoil: El-Erian
The probability of Greece defaulting or restructuring its debt has increased since the arrest of International Monetary Fund headDominique Strauss-Kahn, Pacific Investment Management Co.’s Mohamed El-Erian said.  “Don’t underestimate how important Dominique Strauss-Kahn was in coordinating action” among European nations, El-Erian, the chief executive officer of Pimco, said in a Bloomberg Television interview on “In the Loop” with Betty Liu. “It’s the worst possible time to lose your general. You need the IMF to coordinate this global healing.”
Comment: The Greek tragedy had already turned into a farce and the farce has now turned into pulp fiction.  

Sunday, May 15, 2011

Thou shall not speak bad about me nor put me in doubt

IMF boss calls for global currency
Dominique Strauss-Kahn, head of the International Monetary Fund, thinks a new world currency would calm economic instability and curb the dollar's power,
Dominique Strauss-Kahn, managing director of the International Monetary Fund, has called for a new world currency that would challenge the dominance of the dollar and help curb future financial instability.
In a speech in Washington, Strauss-Kahn argued that the reserves that member countries held with the fund could be used, instead of the dollar, to price international trade. These so-called special drawing rights (SDRs) could also act as an alternative to the dollar in central banks' foreign currency reserves.
"Using the SDR to price global trade and denominate financial assets would provide a buffer from exchange rate volatility," he said, while "issuing SDR-denominated bonds could create a potentially new class of reserve assets".
The IMF published a policy paper backing Strauss-Kahn's views as it gathered top-level economists for discussions on the future of the international monetary system.
Comment: I guess what he said back in February was enough to make him a candidate to be put in jail by the powers that be. In his talk, DSK did not only challenge the dominance of the US dollar, he challenged the US empire. He may call himself lucky that he did not (yet) endure the fate of OBL. It seems that the secret powers of the Empire are still intact and good at work. Their latest feat was a great job. Not just no bloodshed. Instead a great spectacle. A story so absurd that it will believed.

Saturday, May 14, 2011

Time to quit

Euro Drops to Six-Week Low Versus Dollar Before Ministers Meet on Greece

The euro fell against all but two of its 16 most-traded counterparts, reaching a six-week low against the dollar, on concern Greece may have to restructure its debt and the nation’s problems may spread in the region.
The 17-nation currency weakened before European finance ministers meet next week to discuss further support for Greece as the nation’s cost of borrowing hovers at almost record levels. The dollar gained versus most peers this week as stocks and commodities fluctuated.
Full text
Comment: Markets are highly confused because of the uncertainty surrounding Greek debt. It is time that the authorities find a clear soluation. The Greek government must sell and collateralize most of its huge holding of assets amounting, as some sources say, to more than 300 billion euros.

Thursday, May 12, 2011

Go with Bill

Reuters) - PIMCO's Bill Gross, the manager of the world's largest bond fund, raised his bet against U.S. government-related debt in April to 4 percent from 3 percent, according to the company's website on Monday.
Comment: Let's go with Bill, let's go short on US debt. Now!

Wednesday, May 11, 2011

Things have changed

Watching the markets today I got the feeling that things have changed. The old pattern is disappearing, the new one is not yet fully in place. One major element of the new constellation, however, will surely be inflation. Yet it is still unclear how central banks will react to the challenge and how much inflation expectations will change. There is a subtle balance now in place where central banks feel that they are not yet behind the curve and at the same time inflation expectations have not yet gotton out of control. Both of these factors can change very quickly. I stick to my recommendation to take a joy ride. Take profits where you can and spend it. In a short time from now it may already be too late.

Monday, May 9, 2011

German economy on expansion course

German Exports Surged to Record $141.4 Billion in March, Boosting Growth

German exports surged in March to the highest monthly value ever recorded, boosting growth in Europe’s largest economy...
Germany’s economic recovery is broadening as companies boost investment and hiring to meet booming export demand from emerging Asia. The economy may have expanded as much as 1 percent in the first three months of the year and may maintain its growth momentum in the current quarter...
“In times of investment catching up in the emerging world, infrastructure renewals in the western world and a general shift of energy policies toward alternative and renewable energies, German industry simply offers the right mix,” said Carsten Brzeski, senior economist at ING Group in Brussels...
Full text
Comment: It won't take long and the German expansion will be felt in many other economies of the eurozone, even in Greece. AS long as the German economy power along, the default risk of Portugal, Spain and Italy are nill and Ireland will get a strong boost anyway.

This play has been going on for too long

Greece Leads Surge in European Debt Risk on ‘Selective Default’ Concerns

Greece led a surge in the cost of insuring European government bonds as Standard & Poor’s cut its credit rating on concern the nation is heading for a “selective default” by extending debt maturities.
Credit-default swaps on Greece jumped 30 basis points to a record 1,371 basis points, according to CMA. Swaps on Ireland reached an all-time high of 681 basis points and contracts on Portugal also rose.
Full text
Comment: What once was a good piece of tragedy is now a farce and the play has been going on way too long to amuse anymore. You can nag and bite, the euromen and eurowomen won't let Greece default. It's a political game. When it comes to a full-blown power game, governments almost always win and financial markets lose.

David Stockman's case for the gold standard

The Case for the Gold Standard 
by David Stockman   
This talk was delivered at the New York Historical Society on May 8, 2011.
It took 200 years to build and perfect the classic gold standard system; then it was destroyed in about seven weeks when the Guns of August 1914 thundered across Europe; and now I am allotted seven minutes to resurrect it. Fortunately, Churchill’s defense of democracy also applies to the daunting task at hand: To wit, the classic gold standard is the worst possible monetary system – except for all of the alternative inflation-generating, savings-destroying, debt-breeding, bubble-emitting and boom and bust-prone systems which have been tried in the 100 years since its demise. Hence, we offer six present day monetary vices which are curable by gold:
Read more
Comment: The problem with the gold standard is exactly what happened to it in 1914. Being under the authority of the state, the gold standard could be removed easily and quickly when it stood in the way of the interest of government. A new gold standard wold probably suffer the same fate. There is no way back. We must find something new. One condition for the new system to work seems to be that the new monetary order must have its anchor outside of government. Additionally, we must find a system which is supported by forces outside of government. Strong private economic interests should be linked to the new system with their interest of maintaing it. Systems for review could be a private gold standard, free banking, or combinations among these elements. In order to find out we should markets let experiment with different systems yet everywhere in the financial world the monetary system is tightly controlled and under governmental authority. The fact that we have national fiat monies in existence leaves quasi no room for state-free, market-based monetary experiments.

No exit for Greece

Euro Holds No. 1 Spot as EU Shows Resolve on Greece Debt
European Union leaders are showing their resolve in keeping the euro region together, agreeing in an unannounced meeting on May 6 to review the terms of the 110 billion-euro ($158 billion) lifeline Greece received last year....
Even with last week’s decline, the single European currency remains this year’s best performer after German Chancellor Angela Merkel said Jan. 12 her country would do “whatever is needed to support the euro,” exports grew and the ECB raised borrowing costs for the first time since 2008. Bloomberg Correlation Weighted Indexes show the euro has gained 3 percent against nine of its most-traded peers, compared with a drop of 5.1 percent in the dollar and 4.6 percent in the yen.
Full text
Comment: Being part of the eurozone may be bad, but leaving it is worse, particularly for Greece.

Sunday, May 8, 2011

Saturday, May 7, 2011

Panic mood for the euro

Euro Tumbles Most Against Dollar Since January on Rate Signal; Yen Climbs

The euro fell the most in four months against the dollar after European Central Bank President Jean- Claude Trichet signaled he may not raise interest rates next month and concern grew that Greece’s debt crisis is worsening.
The shared currency tumbled yesterday by the most in a year after Germany’s Spiegel magazine said Greece may withdraw from the euro. European Union ministers attending talks in Luxembourg later denied Greece would leave the currency and said it may receive more aid. The yen strengthened as plunging commodities prompted investors to unwind bets in higher-yielding assets. In the U.S. inflation may have slowed in April even as more jobs were added, a report next week is forecast to show.
“You combine the less-hawkish-than-expected Trichet and stronger U.S. payrolls, and you get a 4 cent fall in the euro in two days,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The saga continues to unfold” in Greece, he said.
Full text
Comment: The Greek monetary tragedy is becoming a farce. Politics which has always been the home of criminals is more and more becoming also the home of clowns. Yet let's not forget that the biggest kindergarten of the world is at a place called Wall Street. Thus, in conclusion, one may add that the world is ruled by little else other than criminals, clowns and kids.

To leave or not to leave

BBC: Euro falls on rumours Greece is to quit the eurozone
The euro has fallen by more than 1% against the dollar, following a report that Greece had raised the possibility of leaving the single currency.
German magazine Der Spiegel reported that a meeting was taking place on Friday evening about Greece readopting its own currency.
The claim was vigorously denied by Greece and Germany.
However it was later confirmed that ministers from five eurozone countries were meeting in Luxembourg.
Full text
Comment: Greece has become a member of the EU and of the euro mainly for symbolic reasons as one of the main sources of the so-calle "European identity". Economically, the country has been unqualified from the beginning. Chances are high that the rest of the euro club will keep Greece in even at hight cost. In politics symbolism is reality.

Friday, May 6, 2011

Rumours, rumours, everywhere

The more incompetent financial market operators have become as the result of the poor education they get nowadays, the more they are prone to act on rumours and instead of practicing judgment, they are victims of fear and greed and to panic at any moment.

Greek debt shakes the eurozone

Greece may leave the eurozone. Such a step would make matters worse for the country. Yet some nations want troubles and particularly those countries which once were at the top seem to wish nothing more than to run to the bottom and when they've hit bottom want to stay there forever.

Beyond reason

As we mark Osama bin Laden's death, what's striking is how much he cost our nation—and how little we've gained from our fight against him. By conservative estimates, bin Laden cost the United States at least $3 trillion over the past 15 years, counting the disruptions he wrought on the domestic economy, the wars and heightened security triggered by the terrorist attacks he engineered, and the direct efforts to hunt him down.
Full text
Comment: And it ain't over yet.

Thursday, May 5, 2011

No escape

The number of claims for U.S. unemployment benefits unexpectedly rose last week, pushed up by auto-plant shutdowns and other unusual events that seasonal variations failed to take into account, the Labor Department said.
Full text

Groundwork for inflation

The productivity of U.S. workers slowed in the first quarter and labor costs rose as a growing economy prompted companies to boost employment.
Full text

Why he's still alive

It is harder to kill a phantom than a reality.
— Virginia Woolf

Wednesday, May 4, 2011

Points of no return

The current debt situation in Portugal, Greece and Ireland
dark blue line: GDP in billions of euros
light blue line: debt in billions of euros
red line: debt burden (debt in per cent of GDP)

Euro approaches $ 1.50



Amazing insights for nirvana economics

Robo-Investors Beware: What You Don’t Know Can Kill Your Portfolio: Books

One particularly fatal assumption is that markets follow mechanical rules, argue Roman Frydman and Michael D. Goldberg in“Beyond Mechanical Markets,” a groundbreaking look at how to tame asset booms and busts...
 Yet of all the books I’ve read on the crisis that began in 2007, this one comes closest to laying a foundation for a more pragmatic and genuinely useful school of economics."
Full review
Comment: I'm amazed. At least what I gather from the review there is nothing new in this book. Why is the reviewer so enthusiastic? Because he is dumb or because he thinks that investors are dumb? Anyway, this book seems to be another example of economics setting up a bogeyman and then bashing it. The first step indeed is as dumb as the second one. Always has been. Amazing insights? Only for dedicated followers of nirvana economics who don't know any better.

Monday, May 2, 2011

Even dead Osama could not revive the dollar

The dollar touched the weakest level in 16 months versus the euro after slower manufacturing growth reinforced speculation the Federal Reserve will keep interest rates low as the European Central Bank raises its benchmark.
Full text

Debt limit

Geithner Says Ultimate Deadline on Debt Limit Pushed to August

By taking “extraordinary measures,”the U.S. can keep borrowing until Aug. 2 after reaching its $14.29 trillion legal debt limit no later than May 16 unless Congress acts, Treasury Secretary Timothy F. Geithner said.
The Treasury Department will turn to a toolkit of emergency measures that can provide additional borrowing room if the limit isn’t raised in the next two weeks, Geithner said in a letter today to Senate Majority Leader Harry Reid, a Nevada Democrat, and other congressional leaders.
Full text
Comment: The second half of 2011 will be a wild ride anyway.

Joy to the world

Osama bin Laden Dead

Every time the US waves the bloody shirt of Osama, it has a purpose. Obama has been drastically weakened in recent months, and the US has been hurt by murdering Gadaffi’s family members. The mass-killing in Afghanistan, Iraq, Pakistan, etc. is not going well. The economy is a wreck. Dollar debasement is speeding up. Gasoline prices are high. So…tah-dah…the body of Osama bin Laden for our edification and distration. It may even be true. Certainly the CIA will assure us that its DNA test proves it.
UPDATE from Darien Sumner:
In re: Osama bin Laden’s death, here are the first three things that went through my mind:1) Congratulations to the United States government on spending only ten years and a few trillion dollars to kill one old man.
2) This means we get all of our liberties back now, right? And our money? And the thousands of lives lost?
3) Ah, now the Libyan war is beginning to make a lot more sense from a political standpoint. The government needed a new bogeyman to chase.
At least I can count on LRC not to be oozing with “hooray for government murder” pablum like my Twitter feed is overflowing with.