Public Versus Private Risk: Heed the Lesson from Greece | Jagadeesh Gokhale | Cato Institute: Commentary

Greece's current debt problems were created by government officials who used underhanded financial mechanisms to hide the size of the nation's debt and exposure to risky assets from their foreign creditors. Once these problems were revealed, the Greek economy began an endless downward spiral.

In order to protect its own banks from exposure to debts in Greece and other fiscally struggling nations, the European Central Bank created the European Stability Fund to provide bailouts. But these payments are conditional on recipient nations adopting very stiff austerity policies.

The latest round of Greek austerity measures is meeting with violent resistance on the nation's streets. The next vote could support or sink the entire bailout enterprise, with potentially huge consequences for the ECB's financial sectors and the survival of the euro.

via cato.org

There is a limit to how much taxpayers can bear... that limit gets ever closer

Stimulus to Nowhere - Reason Magazine

Mired in excruciating negotiations over the budget and the debt ceiling, President Barack Obama might reflect that things didn't have to turn out this way. The impasse grows mainly out of one major decision he made early on: pushing through a giant stimulus.

When he took office in January 2009, this was his first priority. The following month, Obama signed the American Recovery and Reinvestment Act, with a price tag eventually put at $862 billion.

It was, he said at the time, the most sweeping economic recovery package in our history," and would "create or save three and a half million jobs over the next two years."

The president was right about the first claim. As a share of gross domestic output, it was the largest fiscal stimulus program ever tried in this country. But the second claim doesn't stand up so well. Today, total nonfarm employment is down by more than a million jobs.

What Obama didn't foresee is that his program would spark a populist backlash and give rise to the tea party. Where would Michele Bachmann be if the stimulus had never been enacted—or if it had been a brilliant success?

To say it has not been is to understate the obvious. The administration says the results look meager because the economy was weaker than anyone realized. Maybe so, but fiscal policy is a clumsy and uncertain tool for stimulating growth, which the past two years have not vindicated.

via reason.com

Inside Google+ — How the Search Giant Plans to Go Social | Epicenter | Wired.com

Parts of it certainly seem to appear similar to what we’ve seen before. One significant component is a continuous scroll called “the stream” that’s an alternative to Facebook’s news feed — a hub of personalized content. It has a companion called “Sparks,” related to one’s specified interests. Together they are designed to be a primary attention-suck of Google users. Google hopes that eventually people will gravitate to the stream in the same way that members of Facebook or Twitter constantly check those continuous scrolls of personalized information.

The second important app is Circles, an improved way to share information with one’s friends, family, contacts and the public at large. It’s an management tool that’s a necessary component of any social network — a way to organize (and recruit) fellow members of the service.

But as I learned in almost year of following the project’s development, with multiple interviews with the team and its executives, Google+ is not a typical release. Developed under the code name Emerald Sea, it is the result of a lengthy and urgent effort involving almost all of the company’s products. Hundreds of engineers were involved in the effort. It has been a key focus for new CEO Larry Page.

The parts announced Tuesday represent only a portion of Google’s plans. In an approach the company refers to as “rolling thunder,” Google has been quietly been pushing out pieces of its ambitious social strategy — there are well over 100 launches on its calendar. When some launches were greeted by yawns, the Emerald Sea team leaders weren’t ruffled at all — lack of drama is part of the plan. Google has consciously refrained from contextualizing those products into its overall strategy.

via wired.com

Is Dodd-Frank reviving the Shadow Banks? - The Curious Capitalist - TIME.com

They're back.

In the past few months, it appears, shadow banks, financial firms that make loans but aren't actual banks, seem to be making a come back. In case you have forgotten about these things already, shadow banks are financial firms, like hedge funds or money market funds or even insurance companies, that aren't real banks - no deposits, no branches, no ATMs - but make loans nonetheless. And, oh yeah, they might have caused the financial crisis.

Paul Krugman said, shortly after the financial crisis was over, that one of the main things financial reform must do was to bring "non-bank banking out of the shadows." But Dodd-Frank, according to some recent reports, is doing exactly the opposite. Here's why:

Earlier this month, the NYT's Dealbook reported that a number of start-ups were turning to hedge funds to get loans after being rejected by their bank. The company in the article Rentech, which is in the clean energy business, got $100 million loan from a hedge fund. The NYT says the business was moving to hedge funds because banks were worried about making risky loans. But an article in Financial Times today puts the revival of shawdow banking square at the feet of Dodd-Frank.

Many believe, along with Wes Edens, founder of Fortress Investment Group, that this is the golden age of non-bank financial companies; a lot of smaller companies and individuals need credit but rather than do it through banks hamstrung by regulation, they can provide it far more profitably and flexibly through non-banks.

http://curiouscapitalist.blogs.time.com/2011/06/27/is-dodd-frank-reviving-the-shadow-banks/#0_undefined,0_

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Athens struggles to win backing for austerity plan - Business - Mail & Guardian Online

Greece's government faces an electorate vehemently opposed to austerity measures which must be passed in Parliament next week to avert default, but progress is being made in persuading banks to take part in a second bailout.

An opinion poll on Friday put Greece's conservative opposition -- which is refusing to support the plan -- 2.1 points ahead of Prime Minister George Papandreou's PASOK party and showed three quarters of Greeks were opposed to the raft of tax hikes and spending cuts that will hit them hard.

European Union leaders meeting in Brussels promised more money to help Greece stave off looming bankruptcy, provided its Parliament enacts the debt-cutting plan, finalised in fraught last-minute talks with international lenders.

"We have agreed that there will be a new programme for Greece on which the Greek Parliament will have to vote next week," German Chancellor Angela Merkel told reporters at an EU summit in Brussels.

If Parliament does not pass the measures, the EU and International Monetary Fund have said they will not release a vital €12-billion funding tranche and Athens will run out of cash within days.

Papandreou, who won a confidence vote this week with 155 votes in the 300-strong Parliament, has ditched his former finance minister and appointed party rival Evangelos Venizelos to sell the five-year plan to his party and a sceptical public.

http://mg.co.za/article/2011-06-24-athens-struggles-to-win-backing-for-austerity-plan/

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Analysis - Greece in turmoil: Run into the ground

Stelios, a 28-year-old electrician, has been spending several evenings a week at a tent camp outside the Greek parliament run by Indignant Citizens, a new protest movement. He joins hundreds of others attending a self-styled “popular assembly” – a nightly open-microphone event at which Greeks vent their anxieties and frustrations with the country’s disastrous economic and political situation.

“I’m lucky because I’m still in work,” he says. “But my mother’s pension was cut last year and she’s struggling. It’s a relief to get out there and discuss stuff – and maybe the protest will help make things less bad.”

In addition to promoting public debate, the Indignants have succeeded in reducing violence at demonstrations by chasing off hooded extremists who mingle with marchers and trigger clashes with riot police. They have even scrubbed the tarmac around the square to remove the chemical residue left by tear gas. But Stelios admits the protesters’ chances of persuading MPs to vote down a €28bn ($40bn) austerity package are slim. “Greece is broke – we need the money, so the European Union and the International Monetary Fund hold all the cards,” he says.

If the package is rejected, George Papandreou, the prime minister, will have to call a snap election. Greece would not receive a €12bn loan tranche due in July and would risk defaulting on repayments of principal and interest on its debt.

via ft.com

The Gold Standard: Myths and Lies - Robert P. Murphy - Mises Daily

With various states debating measures to elevate the monetary status of gold, the gold standard is more politically relevant now than it has been in decades. When the LA Times (to pick just one example) runs an article stating matter-of-factly that "economists" uniformly oppose gold, you know the defenders of the current system are getting nervous.

Precisely because a gold standard is such a hot topic lately, it's important for people to understand its rationale. In the present article I'll try to clear up a few misconceptions.

via mises.org

#615 | The popular assembly of Syntagma square calls for the blockade of Parliament – the new IMF agreement shall not pass | From the Greek Streets

Last night (June 11th) the popular assembly of Syntagma square announced a call to blockade the Greek parliament ahead of the voting of the so-called Mid-term agreement between the Greek government and the troika (IMF/ECB/EU). The new agreement includes wild tax increases, the further slashing of wages and pensions and the lay-off of approximately more 100,000 civil servants in the next few years.

The call-out for the blockade below is one of the most important acts we have seen by the Syntagma assembly so far. June 15th is gearing up to become a historical day in Greece, a crucial chance to block off the charge-ahead of neoliberalism here.

Don’t be a spectator to this – translate and disseminate the text below; organise a gathering where you are, or come join us at Syntagma. This is the struggle for and of our lives.

http://www.occupiedlondon.org/blog/2011/06/12/615-the-popular-assembly-of-syntagma-square-calls-for-the-blockade-of-parliament-the-new-imf-agreement-shall-not-pass/

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The Fall of the House of Assad - By Robin Yassin-Kassab | Foreign Policy

Even after at least 1,300 deaths and more than 10,000 detentions, according to human rights groups, "selmiyyeh" still resounds on Syrian streets. It's obvious why protest organizers want to keep it that way. Controlling the big guns and fielding the best-trained fighters, the regime would emerge victorious from any pitched battle. Oppositional violence, moreover, would alienate those constituencies the uprising is working so hard to win over: the upper-middle class, religious minorities, the stability-firsters. It would push the uprising off the moral high ground and thereby relieve international pressure against the regime. It would also serve regime propaganda, which against all evidence portrays the unarmed protesters as highly organized groups of armed infiltrators and Salafi terrorists.

The regime is exaggerating the numbers, but soldiers are undoubtedly being killed. Firm evidence is lost in the fog, but there are reliable and consistent reports, backed by YouTube videos, of mutinous soldiers being shot by security forces. Defecting soldiers have reported mukhabarat lined up behind them as they fire on civilians, watching for any soldier's disobedience. A tank battle and aerial bombardment were reported after a small-scale mutiny in the Homs region. Tensions within the military are expanding.

via foreignpolicy.com

Record IMF Greek Lending May Intensify Favoritism Concerns - Real Time Economics - WSJ

International Monetary Fund lending to Greece has already blown away any previous borrowing records based on country contributions to the world’s last-chance bank.

That fact, along with the increasing likelihood the IMF will lend the failed economy even more cash and hasn’t required talks with private creditors, is underscoring concerns by emerging markets that the fund favors rich countries and may further undermine the bank’s perceived legitimacy.

The IMF says the extraordinary lending is not just to save Greece, but the world economy. “Our programs are designed to of course support an individual country so that they can restore financial stability, but the goal is to support the global international system,” said fund spokeswoman Caroline Atkinson.

IMF officials say the risk of European contagion is ring-fenced. But economists say the sheer size of the loan compared to Greece’s contribution to the fund, called its quota, indicates how scared the IMF is about Greece’s failure affecting the euro zone.

http://blogs.wsj.com/economics/2011/06/10/record-imf-greek-lending-may-intensify-favoritism-concerns/?mod=wsj_share_twitter

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Jim Rogers: "Bernanke Is A Disaster" Who Will "Bring QE Back" | zero hedge

Jim Rogers spoke to a very dramatic and even more hoarse Bartiromo, touching on old and well-known themes, namely that the administration is essentially using up its last stimulus bullet with the current recession: "When the problems arisenext time what arethey going to do? They can’t quadruple the debt again. They cannot print that much more money. It’s gonna be worse the next time around." Alas,as Obama appears to be preparing, "they" will simply do more of thesame: the same payroll tax that was supposed to cure all evilsin December. The fact thatnobody anticipated something so stupid is probably indicative of the administration's genius. Or lunacy. Followed by more dollar printing of course. On what needs to be done to avoid the debt ceiling breach which will shut down the government, Faber believes that nothing short of Draconian measures will be relevant: "We’ve got troops in 150 countries around the world. They’re not doing us any good, they’re making enemies. They’re costing us a fortune." On the other hand he acknowledges: "we can never pay off these debts." Asusual,Rogerssaved the best for Bernanke: "Since the first day Mr Benanke went to Washington I knew he was going to be a disaster. He has never been right about anything in the 7 or 8 years he has been there. I hope he doesn't come back with QE3 but that's all he knows. The only thing he knows to do is to print money. He doesn't understand finance, he doesn't understand currencies, he doesn't understand economics. He understandsprinting money. It's the wrong thing to do but that's what he'll do... They're gonna bring QE back because he will be terrified and Washington will be terrified," he said

http://www.zerohedge.com/article/marc-rogers-bernanke-disaster-who-will-bring-qe-back

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The American Spectator : Truth, Lies, and Euros

As Europe's financial crisis worsens, it's increasingly apparent that the economic woes of countries like Portugal, Spain, and Greece have resulted from more than just bad policy. With each passing day, evidence mounts that one dynamic driving the crisis is that of untruth: a disturbing European pattern of fabrication about levels of public spending and debt.

The latest proof for this thesis is the discovery by newly-elected Spanish regional and local governments of concealed debts run up by their predecessors. This contradicts claims by Spain's Socialist Finance Minister, Elena Salgado, that Spain's regions had no "hidden deficits" on their accounts. Spain's business community, however, has long complained about local governments pressuring private companies to do business with them "off the books."

One reason for such behavior is that Spain's government knows that the greater Spain's real overall-public debt, the higher will be the interest-rates demanded by financial markets and the more stringent will be the conditions attached to any "financial assistance package" (i.e., bailout) that Spain might, like Portugal and Greece, eventually need.

Unfortunately, financial sleight-of-hand in today's EU has a longer history than the present turmoil. It's characterized the entire monetary union project from the start

http://spectator.org/archives/2011/06/08/truth-lies-and-euros

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Decline and fall of the American empire - Business - Mail & Guardian Online

The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.

Empires decline for many different reasons but certain factors recur. There is an initial reluctance to admit that there is much to fret about, and there is the arrival of a challenger (or several challengers) to the settled international order. In Spain's case, the rival was Britain. In Britain's case, it was America. In America's case, the threat comes from China.

http://mg.co.za/article/2011-06-06-decline-and-fall-of-the-american-empire/

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allAfrica.com: Africa: Time to Bury the IMF (Page 1 of 3)

t was a fitting metaphor as Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF) was arrested on charges ofassault, attempted rape and sexual abuse. The charges were brought after Strauss-Kahn assaulted an African woman from Guinea, who worked as a housekeeper in a hotel in New York City.

The image of Strauss-Kahn in handcuffs was fitting insofar as this is the image that should be presented of the entire international financial system thatis anchored in the Bretton Woods Institutions. For over 60 years, these institutions (the IMF and the World Bank) raped citizens of the world, especially the citizens of the poor countries, on behalf the United States and the top capitalist nations in Europe.

The IMF has been a front for the lords of finance of Wall Streetin the USA, and the linkages between the IMF/Wall Street and the US Treasury ensured that the poor of the world subsidised the US military. As junior partners in the imperial chain of domination, the Europeans worked with the Wall Street-Treasury alliance to ensure that despite presenting arguments about free market competition, agriculture in Europe andthe USA was subsidised. In pursuit of the alliance of financial rapists and economic terrorists, it was an unwritten rule that the managing director of the IMF should be a European.

The current French finance minister is campaigning hard to becoming the next managing director and has received the support of an institution that is as moribund as the IMF, the Group of 8 (G8). It is a measure of the disrespect that the capitalists have for Africa that they could propose Christine Lagarde as the candidate to be the next managing director

http://allafrica.com/stories/201106040033.html

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US house price fall 'beats Great Depression slide' - Business News, Business - The Independent

The ailing US housing market passed a grim milestone in the first quarter of this year, posting a further deterioration that means the fall in house prices is now greater than that suffered during the Great Depression. The brief recovery in prices in 2009, spurred by government aid to first-time buyers, has now been entirely snuffed out, and the average American home now costs 33 per cent less than it did at the peak of the housing bubble in 2007. The peak-to-trough fall in house prices in the 1930s Depression was 31 per cent – and prices took 19 years to recover after that downturn. The latest Case-Shiller house price index was just one of a slew of disappointing economic data from the US yesterday, which suggested ebbing confidence in the recovery of the world's largest economy. The Chicago PMI manufacturing index showed a sharp slowdown in the pace of expansion in May, missing Wall Street forecasts and sending the index to its lowest since November 2009. And in the latest Conference Board consumer confidence survey more people expressed uncertainty over their future economic prospects. The confidence index fell unexpectedly to 60.8 from a revised 66.0, when economists had expected it to rise to 67.0. Falling house prices and negative equity combined with high petrol and food prices and a still-weak jobs market to raise consumers' fears for the future.

http://www.independent.co.uk/news/business/news/us-house-price-fall-beats-great-depression-slide-2291491.html

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The American Spectator : Africa in the Eye of the Beholder

Africa's potential economic development is a staple of commentary in publications on international affairs. What's important about this fact is that it's been this way for years, nay decades. It seems that Africa -- by which is meant sub-Saharan Africa -- is always filled with potential. Unfortunately there is very little analysis showing that potential realized.

There seems to be a very effective effort to place the ultimate blame for Africa's inability to progress in economic and political terms on what William Wallis, the experienced Financial Times editor on African affairs, refers to as "the relative failure of Europe's mission during colonial times, and more recently through development aid, to introduce rules-based systems."

In stating this, Wallis has sought to explain why some observers believe that China and industrial powers of the developing world, such as Brazil and India, are more capable of dealing with Africa's needs and desires. One only can surmise that the rough and tumble of African business life, and ultimately its entire economic status, is more suitable to the less complicated and purportedly less sophisticated commercial controls and methodology of these developing industrial countries.

In a certain sense this might be a correct assumption. The Americans, for example, have a host of federal laws (including the Foreign Corrupt Practices Act) that prevent U.S. firms from making the kind of corporate/government commitment that allows host country officials and local politicians to participate in or benefit from the projects under consideration. E.U. nations are now similarly constrained, though former colonial powers among them most often have had local companies operating under less restrictive charters and laws for many decades.

http://spectator.org/archives/2011/06/03/africa-in-the-eye-of-the-behol#

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Home Prices in 20 U.S. Cities Decline to Eight-Year Low, Case-Shiller Says - Bloomberg

Home prices in 20 U.S. cities dropped in March to the lowest level since 2003, showing housing remains mired in a slump almost two years into the economic recovery.

The S&P/Case-Shiller index of property values in 20 cities fell 3.6 percent from March 2010, the biggest year-over-year decline since November 2009, the group said today in New York. At 138.16, the gauge was the weakest since March 2003.

A backlog of foreclosures poised to reach the market means prices may stay depressed, dissuading builders from taking on new-home construction projects. Unemployment at 9 percent and stricter lending conditions are signs that any recovery in housing may take years.

“With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto. “I wouldn’t be surprised to see prices continue to fall this year and maybe into next year.”

http://www.bloomberg.com/news/2011-05-31/home-prices-in-20-u-s-cities-decline-to-eight-year-low-case-shiller-says.html

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