[QUOTE=garo;275398]Super post by Karl and a nice antidote to the shit that the likes of Andrew Sorkin have been putting out.[/QUOTE]

Yep.

So what has caused the recent climb in equity markets???

Bob,
Your guess is as good as mine but I will note that Barry Ritholtz of the Big Picture blog fame - someone who I have been reading for three years now and respect immensely - went long last week. His reasons are threefold: seasonality [url]http://www.ritholtz.com/blog/2011/10/a-tale-of-2-seasonal-investors/[/url] , his proprietary quantitative indicators and an oversold bounce/Europe getting a bit closer to a solution. To this I would add renewed chatter from Fed honchos about QE i.e. debasing the dollar.

But this is a Bear Market rally and could fail anywhere from 1275 to 1360. A marginal new high like in 2007 should not be ruled out.

[QUOTE=R.D. Silverman;275512]Yep.

So what has caused the recent climb in equity markets???[/QUOTE]

Something is causing the upswing and I don't understand it, especially
in light of the following:

[url]http://finance.yahoo.com/news/US-rating-likely-to-be-rb-2758513190.html?x=0[/url]

[url]http://finance.yahoo.com/blogs/daily-ticker/wrong-economy-fix-181308391.html[/url]

The U.S. economy is still is deep trouble, Greece is about to default,
foreclosures are still "though the roof", Goldman-Sachs just announced a
quarterly loss for only the second time, and Congress is getting ready
to play another of its "debt reduction" deadlock games in November,
yields on bonds in Europe have risen dramatically (accompanied by the
proce drop, of course!) etc. etc. Yet U.S. equities are rising steadily.
It makes no sense.

[QUOTE=R.D. Silverman;275556]Something is causing the upswing and I don't understand it, especially
in light of the following:

[url]http://finance.yahoo.com/news/US-rating-likely-to-be-rb-2758513190.html?x=0[/url]

[url]http://finance.yahoo.com/blogs/daily-ticker/wrong-economy-fix-181308391.html[/url]

The U.S. economy is still is deep trouble, Greece is about to default,
foreclosures are still "though the roof", Goldman-Sachs just announced a
quarterly loss for only the second time, and Congress is getting ready
to play another of its "debt reduction" deadlock games in November,
yields on bonds in Europe have risen dramatically (accompanied by the
proce drop, of course!) etc. etc. Yet U.S. equities are rising steadily.
It makes no sense.[/QUOTE]

And check out the following list. This is what OWS is complaining about.

[url]http://247wallst.com/2011/10/20/america%E2%80%99s-most-overpaid-ceos/[/url]

Repeat after me:

There is no correlation between the stock market and the economy over periods less than a quarter or two.

[QUOTE=garo;275563]Repeat after me:

There is no correlation between the stock market and the economy over periods less than a quarter or two.[/QUOTE]

Of course there is. The market has a psychological knee-jerk reaction
to every hiccup and sound-bite.

[QUOTE=garo;275555]Bob,
Your guess is as good as mine but I will note that Barry Ritholtz of the Big Picture blog fame - someone who I have been reading for three years now and respect immensely - went long last week. His reasons are threefold: seasonality [url]http://www.ritholtz.com/blog/2011/10/a-tale-of-2-seasonal-investors/[/url] , his proprietary quantitative indicators and an oversold bounce/Europe getting a bit closer to a solution. To this I would add renewed chatter from Fed honchos about QE i.e. debasing the dollar.

But this is a Bear Market rally and could fail anywhere from 1275 to 1360. A marginal new high like in 2007 should not be ruled out.[/QUOTE]

The article and chart you refer to is fascinating, with a huge, lopsided difference in investing during one 6-month period of each year versus the "opposing" six months. I may not be understanding it correctly, but since both sets of investments show an increase over the time period in question, doesn't that mean that simply leaving the money invested continuously would have produced an even larger profit, rather than investing on Nov. 1, pulling it back out on April 30, then re-investing on Nov. 1 over and over again? Even if it does, this much of a seasonality to the S&P500 is still fascinatingly large.

Norm

Invested money offer taxes reductions?
Money earned (by investissement) before 31 december is counted for the *current* year and after that for the next?
*please don't quote me, i'm no expert in this field, but if they do, there is a reason, either to get more money or to pay less taxes*

[QUOTE=Spherical Cow;275593]The article and chart you refer to is fascinating, with a huge, lopsided difference in investing during one 6-month period of each year versus the "opposing" six months. I may not be understanding it correctly, but since both sets of investments show an increase over the time period in question, doesn't that mean that simply leaving the money invested continuously would have produced an even larger profit, rather than investing on Nov. 1, pulling it back out on April 30, then re-investing on Nov. 1 over and over again? Even if it does, this much of a seasonality to the S&P500 is still fascinatingly large.

Norm[/QUOTE]

I am still going to wait to see what Congress does in Nov. vis-a-vis
deficits before diving back in.

[QUOTE=R.D. Silverman;275600]I am still going to wait to see what Congress does in Nov. vis-a-vis
deficits before diving back in.[/QUOTE]

I'm betting (again, a certain bridge built by the master himself, John Roebling) they'll do nothing except produce fireworks. Things are going to get worse before they get better.

[QUOTE=Christenson;275632]I'm betting (again, a certain bridge built by the master himself, John Roebling) they'll do nothing except produce fireworks. Things are going to get worse before they get better.[/QUOTE]

Yep. But I expect the fireworks will have a negative influence on the
markets.

[QUOTE=Spherical Cow;275593]The article and chart you refer to is fascinating, with a huge, lopsided difference in investing during one 6-month period of each year versus the "opposing" six months. I may not be understanding it correctly, but since both sets of investments show an increase over the time period in question, doesn't that mean that simply leaving the money invested continuously would have produced an even larger profit, rather than investing on Nov. 1, pulling it back out on April 30, then re-investing on Nov. 1 over and over again? Even if it does, this much of a seasonality to the S&P500 is still fascinatingly large.

Norm[/QUOTE]

You are correct. And it also does not take into account cap gains taxes and transaction charges you would have had to pay by going in and out the market twice a year. But look at the chart closely and you see that most of the returns for the "low" season came during the long 1982-2000 bull. And being out of the market in those six months would have resulted in a much less volatile portfolio and been good for peace of mind.

Shoes are dropping all over the EU today with announcements that Merkel and Sarkozy want up to 60% shaved off Greek debts. In return, affected banks will receive $150 Billion in protection money. (Yes, I know it is mixing metaphors, but it is somehow apropos) Long story short, they still need to boost the EFSF to at least 3 Trillion just to stay ahead of the curve with Italy and Spain. Any way you slice or dice this, the result is the same. The EU will continue to be pressured so long as fiscally weak members remain in the union. That means ongoing intervention by stronger economies.

I noted that the offer of support to the banks was extended to EU banks. Wonder what they plan on doing for banks outside the EU that hold Greek debt?

DarJones

Mish on the "There will be no leveraged EFSF - Oh wait, there will be!" Bank-bailout-Greek-haircut soap opera season-ending (or maybe not) cliffhanger episode:

[url=http://globaleconomicanalysis.blogspot.com/2011/10/good-news-for-bears-torture-by-rumor.html]Good News for Bears: Torture by Rumor Ends[/url]
[quote]A deal has been reached. While many decisions are yet to be made the agreed upon deal looks something like this:

o A "voluntary" haircut of 50% on Greek debt
o Bank recapitalization set at 106 billion euros
o EFSF will use leverage to get to at least 1 trillion Euros
o Leverage will be via a combination SIV plus Insurance plan
o Banks get an additional 21 billion Euros in "official aid"
o The ECB is going to continue to buy Italian bonds come hell or high water

A group of 70 European banks will need to raise 106 billion euros in the next eight months.

Recapitalization Breakdown

o Greek banks need 30 billion euros
o Spanish banks need 26.2 billion euros
o French banks need 8.8 billion euros
o Italian banks need 14.8 billion euros
o Remaining countries 26.6

Banks that fail to raise enough capital on the markets will first tap national governments, falling back on the EFSF rescue fund only as a last resort.

The above details pieced together from [url=http://www.bloomberg.com/news/2011-10-27/europe-leaders-set-50-greek-writedown-1-4-trillion-in-debt-crisis-fight.html]EU Sets 50% Greek Writedown, $1.4T in Fund[/url] and [url=http://www.bloomberg.com/news/2011-10-26/european-summit-talks-on-greek-debt-relief-at-impasse-on-bondholder-losses.html]Impasse on Greek Debt Relief Threatens EU Crisis Summit Deal[/url]

The fuzziest point in the deal is in regards to what banks get the additional 21 billion Euros in "official aid", with what strings, and where the money comes from.

Good News for Bears

Although many details are yet to be resolved, the bulls got everything they wanted except endless printing by the ECB. However, the sad fundamental situation remains unchanged

1. No structural problems have been solved
2. Banks most assuredly need more than 106 billion in recapitalization efforts. The idea that French banks only need to raise 8.8 billion is preposterous.
3. No investors in their right mind will fund Greek and Spanish banks to the tune of 56.2 billion euros
4. The haircuts were not voluntary

Instead of the rumor mill of potential actions working to lift the market 24 hours a day for three straight weeks, it will be up to the EU to make the plan work. However, the plan won't work because of point number one above: not a single structural problem has been solved.

Although this rally may run for a while longer on fumes of past rumors and blind hope, it will eventually wear itself out.

Bear market rallies tend to end on good news. What more good news is coming?

The bulls got nearly everything they wanted, putting an end to torture by rumor. What could possibly be better news for the bears?[/quote]
[i]My Comment:[/i] I am especially curious as to how they pulled off (or intend to pull off) the Greek-bondholder haircuts without it triggering a CDS default event as judged by the ratings agencies charged with setting the rules for such things. (Not that I have any particular faith in the RAs being upstanding citizens and uninfluencible by politicians, but they do seem to have been doing a semi-credible job this past year with respect to sovereign-debt issues.)
[i]
[Edit: Mish has an update on the [url=http://globaleconomicanalysis.blogspot.com/2011/10/credit-default-swaps-useless-as-hedge.html]CDS issue[/url] - Note that it's not the ratings agencies which have say here, but an outfit known as the International Swaps & Derivatives Association. That makes more sense, because it means "one stop shopping" as far as the EU FinMins having to threaten/bribe/cajole someone into declaring that a 50% haircut on bonds is a "voluntary restructuring" with the blessing of the bondholders.]
[/i]

Also, Germany`s Merkel clearly, blatantly flat-out [url=http://globaleconomicanalysis.blogspot.com/2011/10/grateful-for-idiocy-pack-of-lies.html]lied to the German parliament[/url] just a few weeks ago when she promised "there will be no leveraging of the EFSF". Despite this the parliament overwhelmingly voted to allow leveraging of the EFSF, without even demanding details as to how this will accomplished. There are several different Ponzi-financial proposals floating around for how to do this, one is startlingly reminiscent of the lunacy that was going on during the recent housing/debt bubble, involving creative financial engineering of stuffing crap debt instruments into a structured-financial vehicle, giving the whole thing a bogus top-notch ratings based on the perhaps 1% of quality loans inside it, selling it to some poor slobsucker investors, and using the thus-generated capital to make more bad loans. Lather, rinse, repeat. Yeah, that all ended really well, too.


Barry Ritholtz had a funny post yesterday describing market reaction to the rumors of newsishness regarding a proposed accord for a possible hypothetical solution discussion round for fixing Europe all up, and stuff:

[url=http://www.ritholtz.com/blog/2011/10/rally-ugly-fade-reversal-wednesday/]Rally! Ugly Fade! Reversal Wednesday![/url]
[quote]I was all set to write how ugly this morning’s fade was, and how problematic it is for the breakout thesis, when this puppy lit up around noon on some nonsensical rumor out of Europe.

It seems that the European leaders have come to some sort of an agreement about the near term deliberations. They now apparently have mapped out all of the details about their strategy for their next meeting, where they will make a plan to debate what sort of tactics they want too engage in on their next group summit to kick around an agenda for their next symposium, where they may discuss the bank problems. Over breakfast. Or not.

Meanwhile, the S&P trading range has held, and markets are still in breakout mode. Until they fade, in which case they obviously were not in breakout mode, but rather breakdown mode. In which case they will go lower, until they find support (unless that breaks) and then they go lower and find support (that holds) in which case they can reverse. Unless they don’t. If that happens, you might have been caught leaning the wrong way, which helps set the stage for the next turnaround. Unless it doesn’t. Which goes to show you how dangerous crowded trades can be. Unless they continue, cause after all we know the trend is your friend and you can’t fight the tape and its tough to be a contrarian and long and strong is the posture you want. Until it all goes into reverse, and then the trend is not your friend and you should not have gone along to get along with a tape that was a bull trap and it looks like we are heading lower. Unless we don’t.[/quote]

Bears got killed today. And look at that Euro go. 1.4247 today's high. Looks like Barry's original breakout thesis was right.

[QUOTE=ewmayer;276000][QUOTE]A deal has been reached. While many decisions are yet to be made the agreed upon deal looks something like this:

o A "voluntary" haircut of 50% on Greek debt
o Bank recapitalization set at 106 billion euros
o EFSF will use leverage to get to at least 1 trillion Euros
o Leverage will be via a combination SIV plus Insurance plan
o Banks get an additional 21 billion Euros in "official aid"
o The ECB is going to continue to buy Italian bonds come hell or high water

A group of 70 European banks will need to raise 106 billion euros in the next eight months.

<snip>

Although many details are yet to be resolved, the bulls got everything they wanted except endless printing by the ECB. However, the sad fundamental situation remains unchanged

1. No structural problems have been solved
2. Banks most assuredly need more than 106 billion in recapitalization efforts. The idea that French banks only need to raise 8.8 billion is preposterous.
3. No investors in their right mind will fund Greek and Spanish banks to the tune of 56.2 billion euros
4. The haircuts were not voluntary

<snip>[/QUOTE][/QUOTE]

My comment:

A haircut of 100 billion €uros: how much is the reduction of annual debt service? How much is this in % of the Greek GDP?


For me it looks like Greek economy is spiraling down faster than the government can set austerity measures - and each austerity measure pushes economy further down. So I think that Greek real economy (i.e. economy producing real goods and not just financial products) desperately needs some funding (e.g. from ESEF?) for stabilization - otherwise Greece will need another "haircut" within a few years.

The fundamentals have not changed. This party will end when reality sets back in. As Andi noted re Greece, There is a real economy that produces goods and services, a government economy that is a burden on the real economy, and a financial economy that moves money around and produces not much of anything. So far they have poured money into the government and financial. That is a waste in the end, it does not go where it is needed.

If you scan all the buzz from Europe, the significant issue is that they are pushing hard to stabilize Italy and Spain. Propping up Greece may be necessary, but it is misdirection because Greece is not large enough to destabilize the EU alone. Sarkozy may complain that Greece should have never been admitted to the EU, but can he make a statement like that about Italy?

Have you ever seen anything done by a government that really worked like it is supposed to? Do you realistically expect that propping up Greece is going to achieve the intended result?

DarJones

[QUOTE=Fusion_power;276149]<snip>
Sarkozy may complain that Greece should have never been admitted to the EU, but can he make a statement like that about Italy?

Have you ever seen anything done by a government that really worked like it is supposed to? Do you realistically expect that propping up Greece is going to achieve the intended result?

DarJones[/QUOTE]

Re: Sarkozy: IIRC he(?) complains that Greece should have never been admitted to the [I]Eurozone[/I]. If Greece would still have its own currency, they would have been able to devalue it and thus cheat out of their debt. With the Euro, this is not that easy.

Italy: According to the Eurozone, yes (not "never", but it has been admitted to the Euro a little bit to early), according to EU no.

Re: propping up Greece: No, I don't expect this - unless they (EU, ESEF) give money to the real economy. Otherwise Greek economy will continue spiraling down while Greek government is struggling to set austerity measures at least as fast as economy crashes... it's a vicious circle.

I think the system is ill in several points (list is not exhaustive):

* banks (and other investment companies) are too mighty - there are too many system-relevant banks which are doing highly speculative stuff. (I don't suggest smashing the banks into pieces - I rather suggest impeding speculation.)
* doing highly speculative stuff is waaaaay tooooooooooooo easy - therefore money goes to stock markets instead of real economy. (In german there is the word "Dienstmädchen-Hausse" (literally translated "hausmaid's hausse", what is the correct translation?) when everybody - even hausmaids - are speculating on stock markets. If "everyone" is taking out loans and speculating with the borrowed money, that's even worse...)
* Maastricht-criteria are too loose. I think making new debt as high as 3% of GDP every year WILL eventually lead into financial desaster - even for nations which are currently (or have been until recently) rated with AAA.

I don't think there's a proper English translation for "Housemaid's market" without an explanation, though "House of cards" might work....

The question is how to ensure that the various financial markets are actually lending money to the "real" economy...that is their non-parasitic purpose. Stocks exist so projects larger than one man can finance can be carried out, with real benefits to the real economy.

We are at a level of speculation not seen since 1929, or maybe the dutch Tulip boom.

There are also some real negatives to borrowing money on the stock market...think of the slavery to quarterly reports, leading lots of companies to forego long-term projects with much larger real gains. Not that borrowing money from venture capital is any better....

[QUOTE=Christenson;276205]
The question is how to ensure that the various financial markets are actually lending money to the "real" economy...that is their non-parasitic purpose. Stocks exist so projects larger than one man can finance can be carried out, with real benefits to the real economy.

We are at a level of speculation not seen since 1929, or maybe the dutch Tulip boom.

There are also some real negatives to borrowing money on the stock market...think of the slavery to quarterly reports, leading lots of companies to forego long-term projects with much larger real gains. Not that borrowing money from venture capital is any better....[/QUOTE]

<laymans thoughts>

I think it needs a bit of regulation - and a (if possible worldwide!) tax on financial transaction: There are (to my eyes dangerous) highly speculative papers "promising" obscenely high yields, but bearing the risk of really bad loss. And to me it seems that stock traders are (or have been) inventing derivatives of derivatives of derivatives... to make even more money at the stock exchange. I mean ... when I just click into a homepage dealing with stocks: what the *peep* are things like (open end) knock out certificates, sprint certificates and such?
When it is too easy to speculate at the stock markets for high yields (but also high risks), this might lead to money going to stock markets (and bubble away) while the real economy is struggling to get out of recession.

</laymans thoughts>

[QUOTE=Christenson;276205]I don't think there's a proper English translation for "Housemaid's market" without an explanation,[/QUOTE]Either of these?

[URL]http://www.investmentmoats.com/stock-market-commentary/andy-xiehousemaid-indicator-says-chinese-bubble-near-to-burst/[/URL]

[URL]http://arabnews.com/saudiarabia/article508532.ece[/URL]

[QUOTE=Christenson;276205]I don't think there's a proper English translation for "Housemaid's market" without an explanation, though "House of cards" might work....[/QUOTE]

Not a literal translation, but the analogous phrase I've heard in English for when you know you're in a speculative bubble is "When the shoeshine boy [cabdriver] is giving you stock market tips."

We have a first today.
[url]http://www.bbc.co.uk/news/15519124[/url]

[QUOTE]Jon Corzine, who took over as chief executive of MF Global last year, made big bets on sovereign bonds issued by European countries, it is claimed.

The unsteady future of the eurozone meant investors downgraded the firm's prospects.

It was first reported at the weekend that Mr Corzine was seeking a buyer for the business.

MF Global's roots go back nearly 230 years to a sugar brokerage on the banks of the River Thames in London.

The firm was spun off from a hedge fund in 2007 and is one of the world's largest players in exchange-traded futures and options. [/QUOTE]

Draw your own conclusions about the cause and effect involved here. You can bet they were leveraged to the hilt and that a ton of their "assets" stink to high heaven because they were chasing high rates of return.

Anyone want to speculate who will be next?
Who's on first?
no, Whats on first. Who's on second.
do you remember the short stop?

DarJones

[QUOTE=Fusion_power;276478]
Anyone want to speculate who will be next?
Who's on first?
no, Whats on first. Who's on second.[/QUOTE]

I don't know.

[QUOTE=wblipp;276499]I don't know.[/QUOTE]Third base!

[QUOTE=cheesehead;276353]Either of these?

[URL]http://www.investmentmoats.com/stock-market-commentary/andy-xiehousemaid-indicator-says-chinese-bubble-near-to-burst/[/URL]

[URL]http://arabnews.com/saudiarabia/article508532.ece[/URL][/QUOTE]
For the first, close -- the "housemaid indicator"
For the second, definitely not: This is the market for housemaids proper in arabia!

[QUOTE=schickel;276502]Third base![/QUOTE]

Shheesh.

Look - the batter hits a grounder, the shortstop picks it up and throws to first base. What's the name of the guy that catches the ball?

[QUOTE=wblipp;276551]Shheesh.

Look - the batter hits a grounder, the shortstop picks it up and throws to first base. What's the name of the guy that catches the ball?[/QUOTE]Who.

[QUOTE=schickel;276556]Who.[/QUOTE]

BUZZZZ. Wrong Answer.

[QUOTE=Fusion_power;276478]We have a first today.
[url]http://www.bbc.co.uk/news/15519124[/url]



Draw your own conclusions about the cause and effect involved here. You can bet they were leveraged to the hilt and that a ton of their "assets" stink to high heaven because they were chasing high rates of return.

Anyone want to speculate who will be next?


DarJones[/QUOTE]

MF was the first domino....

Here is the second:

[url]http://www.cnn.com/2011/11/01/world/europe/greece-debt-referendum/index.html?hpt=hp_t1[/url]


I am betting that Greece defaults.

[QUOTE=R.D. Silverman;276601]MF was the first domino....

Here is the second:

[url]http://www.cnn.com/2011/11/01/world/europe/greece-debt-referendum/index.html?hpt=hp_t1[/url]


I am betting that Greece defaults.[/QUOTE]

And the next domino: Sneaky accounting at MF:

[url]http://money.cnn.com/2011/11/01/news/companies/mf_global_bankruptcy/index.htm[/url]

Who skimmed off the money?

[QUOTE=R.D. Silverman;276602]And the next domino: Sneaky accounting at MF:

[url]http://money.cnn.com/2011/11/01/news/companies/mf_global_bankruptcy/index.htm[/url]

Who skimmed off the money?[/QUOTE]

More fallout:

[url]http://money.cnn.com/2011/10/28/news/companies/mf_global/index.htm[/url]


"A lot of firms are going to incur pain as a result of the European debt crisis," said Sean Egan, managing
director of Egan-Jones, the independent rating agency. "The problem is the transparency is far from acceptable."


[i][b]And here, in a nutshell is what the OWS protests are about:[/b][/i]

A quote from the cited article:

"But Egan said he wouldn't be surprised if buyers just tried to hire MF's talent rather than buying its troubled assets."


The senior managers after thoroughly fucking up still get to keep their high
paying jobs. At another company, of course, but they still keep their jobs.

... or they get a [URL="http://online.wsj.com/article/SB10001424052970204394804577010000947986974.html?=WSJ_hpp_editorsPicks_2"]Golden Parachute[/URL] for poor decisions/losing shareholder value. Call it pay for perfunctory performance.

Mish has a nice news roundup on the fallout from MF Global, including the utter failure (again) of the NYFed to do its job at regulating the firm's risk taking:

[url=http://globaleconomicanalysis.blogspot.com/2011/11/regulators-investigate-mf-global-for.html]Regulators Investigate MF Global for Missing Customer Money; MF Global Goes Bankrupt Before Making 1st Interest Payment; Corzine's Achievement Sheet[/url]
[quote]Jon Corzine’s risk appetite helped destroy his firm. It also provided an object lesson for Paul Volcker’s campaign against proprietary trading on Wall Street.

Nineteen months after former New Jersey Governor Corzine became chairman and chief executive officer, MF Global Holdings Ltd. (MF) yesterday filed for bankruptcy. Corzine’s decision to boost risk-taking, including a $6.3 billion wager with the firm’s own money on European government debt, triggered the collapse.

“In the wake of 2008, when we all should have learned a lesson, Jon Corzine told me himself that it was a relatively staid, not risk-oriented firm and he needed to ratchet up the risk,” William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World,” said on Bloomberg Television. “Well, he does that and it blows up in his face and for the first time he can’t unwind the trade. Honestly I’m still shocked and it should not have happened.”

Corzine, 64, learned the strategy of making big trading bets during his 24 years at New York-based Goldman Sachs, which he ran from 1994 to 1999 before being forced out.[/quote]
Regarding Mr. Cohan's quote: Why would anyone still be surprised? Did the supposed regulators learn anything from the 1987 computer-trading-gone-amok market crash? From the LTCM blowup? From the Japanese housing bubble and bust? From the DotCom implosion? Why would one believe they finally learned something from the 2008 financial crisis, when all they've done as a result is put taxpayers on the hook for the bailouts and losses and allowed risk to concentrate even more in the surviving firms? Heck, just a few weeks ago the (alleged) regulators, in this case the FDIC, [url=http://blogs.reuters.com/felix-salmon/2011/10/20/bofa-puts-taxpayers-on-the-hook-for-merrills-derivatives/]allowed Bank of America[/url] to transfer some unknown (but likely huge) amount of derivatives from its Merrill Lynch unit (where they were not FDIC guaranteed) onto the book of its retail-banking operation, where the taxpayer is on the hook for losses if any of those bets blow up.

As [url=http://market-ticker.org/akcs-www?post=196876]Denninger notes[/url], in this case the regulatory nonfeasance is especially glaring because MF was added to the fed's primary dealer list just last year. So here we have yet another big financial firm enjoying all the perks of primary-dealer status, but being run as a hugely overleveraged hedge fund, recklessly (and illegally) using client money to help fund its proprietary-trading gambling habit, and none of the regulators knew anything. The close ties of Corzine to Obama are also going to provide for some fun (this is froma July story linked n KD's post):
[quote] President Obama is desperately putting his Wall Street stock in an unlikely old buddy.

The beleaguered president has recruited former Goldman Sachs head honcho Jon Corzine to shore up re-election funds from the banking industry, which is furious over Obama's financial regulations.

Corzine, the former governor of New Jersey who was blasted out of office by Republican Chris Christie in 2009, has attended secret meetings with the president and has been working on Obama's 2012 campaign for months, The Post has learned.

The Democrat, who now leads Manhattan-based brokerage MF Global, has been tasked with scraping up the very little banking-industry support Obama can still get.[/quote]

[QUOTE=R.D. Silverman;276603]More fallout:

[url]http://money.cnn.com/2011/10/28/news/companies/mf_global/index.htm[/url]


"A lot of firms are going to incur pain as a result of the European debt crisis," said Sean Egan, managing
director of Egan-Jones, the independent rating agency. "The problem is the transparency is far from acceptable."


[i][b]And here, in a nutshell is what the OWS protests are about:[/b][/i]

A quote from the cited article:

"But Egan said he wouldn't be surprised if buyers just tried to hire MF's talent rather than buying its troubled assets."


The senior managers after thoroughly fucking up still get to keep their high
paying jobs. At another company, of course, but they still keep their jobs.[/QUOTE]

No question, Jim Corzine leads a charmed existence....he won't be wondering just how he will pay for real necessities any time soon.

I'm rooting for him and some other managers to get new addresses, ones they don't have a choice in...and with the value of MF falling by the day, I'd hire their traders in a minute, if I could use one....the traders didn't screw up, the managers did.

[QUOTE=ewmayer;276631]Mish has a nice news roundup on the fallout from MF Global, including the utter failure (again) of the NYFed to do its job at regulating the firm's risk taking:

[url=http://globaleconomicanalysis.blogspot.com/2011/11/regulators-investigate-mf-global-for.html]Regulators Investigate MF Global for Missing Customer Money; MF Global Goes Bankrupt Before Making 1st Interest Payment; Corzine's Achievement Sheet[/url]

Regarding Mr. Cohan's quote: Why would anyone still be surprised? Did the supposed regulators learn anything from the 1987 computer-trading-gone-amok market crash? From the LTCM blowup? From the Japanese housing bubble and bust? From the DotCom implosion? Why would one believe they finally learned something from the 2008 financial crisis, when all they've done as a result is put taxpayers on the hook for the bailouts and losses and allowed risk to concentrate even more in the surviving firms? Heck, just a few weeks ago the (alleged) regulators, in this case the FDIC, [url=http://blogs.reuters.com/felix-salmon/2011/10/20/bofa-puts-taxpayers-on-the-hook-for-merrills-derivatives/]allowed Bank of America[/url] to transfer some unknown (but likely huge) amount of derivatives from its Merrill Lynch unit (where they were not FDIC guaranteed) onto the book of its retail-banking operation, where the taxpayer is on the hook for losses if any of those bets blow up.

As [url=http://market-ticker.org/akcs-www?post=196876]Denninger notes[/url], in this case the regulatory nonfeasance is especially glaring because MF was added to the fed's primary dealer list just last year. So here we have yet another big financial firm enjoying all the perks of primary-dealer status, but being run as a hugely overleveraged hedge fund, recklessly (and illegally) using client money to help fund its proprietary-trading gambling habit, and none of the regulators knew anything. The close ties of Corzine to Obama are also going to provide for some fun (this is froma July story linked n KD's post):[/QUOTE]

For more along these lines see:

[url]http://www.dailyfinance.com/2011/11/02/even-the-1-are-fed-up-with-wall-street/[/url]

Greece is a situation comedy, a soap opera, a circus that does not stop. At least, that is how it looks from here. :popcorn:

[url]http://www.bbc.co.uk/news/world-15575198[/url]


As of this morning, a news story says PM Papandreou will offer to resign. He has already arranged for a referendum to be taken re the EU bailout which has pumped hundreds of billions of Euro's into propping up his economy. In essence, this vote is not whether to take the bailout, it is whether Greece will stay in the EU. France and Germany might almost prefer that Greece leave the union.

DarJones

[QUOTE=Fusion_power;276999]Greece is a situation comedy, a soap opera, a circus that does not stop. At least, that is how it looks from here. :popcorn:

[url]http://www.bbc.co.uk/news/world-15575198[/url]


As of this morning, a news story says PM Papandreou will offer to resign. He has already arranged for a referendum to be taken re the EU bailout which has pumped hundreds of billions of Euro's into propping up his economy. In essence, this vote is not whether to take the bailout, it is whether Greece will stay in the EU. France and Germany might almost prefer that Greece leave the union.

DarJones[/QUOTE]

The market seems to be ignoring this farce; today the Dow is up again.

I'm waiting to see the impact of the congressional "super-committee"
later this month; I will wager they will stalemate on everything.

[QUOTE=Fusion_power;276999]Greece is a situation comedy, a soap opera, a circus that does not stop.

DarJones[/QUOTE]


There are European countries in worse situation than Greece. Although Greece has a huge debt, it may have lot of income from tourists. Just because it is a very attractive country. The problem is that to repay past debts, Greece needs to get new loans.
Imagine any other country, which cannot get loans. The situation would be the same.
The situation worsens since Greece is borrowing money with high interest rates, Tourists refuse to go to Greece etc.
I don't think Greece has any other choice than accept European proposal. They fell into a trap, as Ireland fell and as other Eurpean countries will fall. Everything is ahead.

[QUOTE=R.D. Silverman;277002]The market seems to be ignoring this farce; today the Dow is up again.[/QUOTE]Actually, the market is up because it's following the farce quite closely:

"Greek PM scraps referendum on Greek debt plan"

[URL]http://news.yahoo.com/greek-pm-scraps-referendum-greek-debt-plan-144719929.html[/URL]

"Stocks spike as Greek referendum is scrapped"

[URL]http://news.yahoo.com/stocks-spike-greek-referendum-scrapped-154758266.html[/URL]

[QUOTE=literka;277019]There are European countries in worse situation than Greece. Although Greece has a huge debt, it may have lot of income from tourists. Just because it is a very attractive country. The problem is that to repay past debts, Greece needs to get new loans. [/QUOTE]
Do you see the problem captured in that last sentence? It is the key to the debt death-spiral playing out (at various rates, with different "blowup by 20xx" dates) in overindebted sovereigns the world over. When governments can borrow at rates of interest below what the free markets would demand - whether this is by way of joining a monetary union and benefiting from the better fiscal discipline of the larger members of same, or coordinated debt-buying by a central bank in conjunction with large 'private' banks and investment funds - the end result is nearly always a disincentive for the political leaders of the country to implement painful structural fiscal reforms. The voters of said countries also share blame, because they persistently elect pols who promise the proverbial free lunch, no matter how ludicrously false or long-term-untenable such promises may be.
[quote]Imagine any other country, which cannot get loans. The situation would be the same.
The situation worsens since Greece is borrowing money with high interest rates, Tourists refuse to go to Greece etc.
I don't think Greece has any other choice than accept European proposal. They fell into a trap, as Ireland fell and as other Eurpean countries will fall. Everything is ahead.[/QUOTE]
No other choice? Greece needs to leave the EMU and regain some control of its fiscal destiny via its own currency. Devaluation of one's currency is no panacea - It also amounts to a hefty tax on incomes and outright theft of accumulated capital, but it does allow one to implement austerity on something resembling one's own terms. It is somewhat illogical but a proven historical truth that as long as said devaluation does not end in a hyperinflationary death spiral - which usually is the result of devaluation not accompanied by default on debts demoninated in foreign currencies - it leads to less social unrest and domestic economic disruption that austerity imposed from without, i.e. on the banks' terms. And if the government still does not implement the needed structural fiscal reforms, then the sovereign currency will simply continually debase - think the Italian lira. That is less bad, because the only way to fund a bloated public sector without debt accumuation is to have taxes to match. If ththe e public says "we want all these goodies, but aren't willing to cover them via taxes", well then government simply prints money to civer the shortfall and gets its taxes that way. So Greece needs to leave the Euro and default on Euro-denominated debt. A devalued Greek currency but no near-daily riots and strikes would quickly bring back the needed tourists.

Yes, a default would lead to a near-term crisis of the Euopean credit markets and insolvency of major banks holding Greek debt, not to mention many big financial firms (including the Big 5 in the U.S.) which are making billions per year writing CDSes on sovereign debt and expecting never to have to pay out (so-called naked CDS). That becomes a long-term crisis if governments do as in 2008 and again try to bail out the same banks at taxpayer expense, in essence rewarding the overleveraged gamblers rather than making them face the consequences of their greed. Let them fail, governments should step in to backstop the *productive* credit markets as the crisis plays out, then one will have actually laid the groundwork for a real recovery.

[QUOTE=ewmayer;277132] what the free markets would demand - whether this is by way of joining a monetary union and benefiting from the better fiscal discipline of the larger members of same, or coordinated debt-buying by a central bank in conjunction with large 'private' banks and investment funds[/QUOTE]

European Union is not a free market. Central intervention in the market in Europe is on unprecedented scale. Everywhere subsidies rewarding "good guys" and in consequence punishing "bad guys". This also concerns access to new loans. This time Greece happened to be on a wrong side. Why Greece? I can only quess. Probably because it is a small country and preserved kind of independence.

[QUOTE=ewmayer;277132]Greece needs to leave the EMU and regain some control of its fiscal destiny via its own currency. Devaluation of one's currency is no panacea - It also amounts to a hefty tax on incomes and outright theft of accumulated capital, but it does allow one to implement austerity on something resembling one's own terms.[/QUOTE]


Greece will not leave European Union and will not leave eurozone. And it is not because Greece does not want it but rather because of larger members benefiting from its priviledged position. So you described something which is not an option.

[QUOTE=ewmayer;277132]That becomes a long-term crisis if governments do as in 2008 and again try to bail out the same banks at taxpayer expense, in essence rewarding the overleveraged gamblers rather than making them face the consequences of their greed. Let them fail, governments should step in to backstop the *productive* credit markets as the crisis plays out, then one will have actually laid the groundwork for a real recovery.[/QUOTE]

I think we took a bite out of that shit sandwich back in 2008 when Lehman was allowed to collapse but we didn't like the taste, so it was back to the BLT sandwich with AIG (arguably necessary as the CDS market was a blind man's bluff) et al with the gains benefiting the failures and the pain shared disproportionately among the public. Moral hazard seems to be the one of the big problems. An expectation that one is too vital or too big to fail leaves actors to behave as though they cannot lose. Some of this has been rectified with changes to the CDS market.

In the case of Greece, the credit market may have reached their elastic limits. If allowed to fail, the only way out may be to inflate the existing debt away, hence eventual high to hyper inflation. It seems as though the likelihood of that taking place has been reduced with the Greek government confidence vote favouring the current government. In this case, the Euro Zone will have to make changes, if all goes well, to fiscal policy so that the "beggar-thy-neighbour" problem does not re-occur.

The tragicomedy in Greece continues apace, with one overwhelmed leader abbreviated G-Pap soon to be replaced by an L-Pap who will similarly soon realize he is in way over his head ... meanwhile Italian bond yields are doing interesting things (and U.S. equity markets appear to be thinking that "higher bond yields are, like, good, right?") which indicate that the hopeful talk of "containment" is delusional ... and here in the U.S. it will soon be time to stock up on popcorn and other movie-style snacks because our own domestic sovereign-debt-crisis-dressed-up-as-farce will soon be playing on live nightly TV again:

[url=http://www.nytimes.com/2011/11/08/opinion/staring-into-the-budgets-abyss.html?_r=1&ref=opinion]Staring Into the Budget's Abyss[/url][quote]Republicans, looking for leverage to slash federal spending, created the phony debt-ceiling crisis that led to creation of the Congressional deficit-cutting “supercommittee.” But with the committee close to a deadlock — largely because Republicans will not agree to higher taxes on the rich — and the deadline for an agreement approaching, some Republicans are now talking about undoing the process.

We are no fans of the supercommittee. It is undemocratic, and the deep, automatic cuts the law would impose if the committee fails to reach agreement are gimmicky and potentially dangerous. But walking away at this point would be an embarrassment for Congress and a far-reaching blow to Washington’s financial credibility.[/quote]
Try not to snicker too loudly at the bit about "Washington’s financial credibility" -- it's not polite.

Add to the Greek woes and raise the ante. Today Italy hit 7.36% bond yields on 10 year notes. Seven percent is the tipping point at which a bailout becomes a certainty. The key immediate concern for Italy is @$480 Billion that has to be rolled over in 2012. Longer term concerns are from a total debt in the range of $2.6 Trillion.

The immediate concern for the EU is the EFSF which does not have nearly deep enough pockets at present to resolve the crisis for Italy.

I'd love to make some quip about Spain and shaking in boots, but that might sound like they were doing a lively dance. Come to think of it, I've often read of someone dancing at the end of a rope. That might come close to expressing how they feel. It is no longer a question of "if" but rather "when".

Note for Ewmayer, my alter ego used on several gardening forums is "SnickeringBear". I have a vested interest in living up to the name.

DarJones

[QUOTE](AP) BIRMINGHAM, Ala. - Leaders of Alabama's most populous county have voted to file an estimated $4.1 billion bankruptcy, the largest municipal bankruptcy in U.S. history.

The Birmingham News reports the Jefferson County Commission's action came after spending about six hours over two days meeting with its lawyers to discuss legal options. Those options included a bankruptcy filing and a settlement with creditors on the county's $3.14 billion sewer debt.[/QUOTE]

[url]http://www.cbsnews.com/8301-201_162-57321852/alabamas-largest-county-files-for-bankruptcy/[/url]

Sadly, this is the state I live in. The county was in a bind, federal regulations forced them to upgrade the sewer system. Through a series of stupid decisions, they wound up with over $3 Billion owed to NY financial firms. That far exceeds the revenue potential from the water system. They finally did the only thing that is viable by declaring bankruptcy. This dwarfs all previous U.S. government filings. It is perhaps just a harbinger of things to come.

DarJones

Hey Dar, a couple of questions for you:
Your county has a $3 billion dollar sewer system. Did they get anywhere near that amount of resources for it? What *should* the required physical system have cost? What kind of water rates are they charging?

[QUOTE=Christenson;277759]Hey Dar, a couple of questions for you:
Your county has a $3 billion dollar sewer system. Did they get anywhere near that amount of resources for it? What *should* the required physical system have cost? What kind of water rates are they charging?[/QUOTE][URL="http://en.wikipedia.org/wiki/Jefferson_County,_Alabama#Sewer_construction_and_bond_swap_controversy"]http://en.wikipedia.org/wiki/Jefferson_County,_Alabama#Sewer_construction_and_bond_swap_controversy[/URL] [QUOTE]In February 2011, Lesley Curwen of the BBC World Service, interviewed David Carrington, the newly appointed president of the commission, about the risk of defaulting on bonds issued to finance “what could be the most expensive sewage system in history.” Carrington said there was “no doubt that people from Wall Street offered bribes” and “have to take a huge responsibility for what happened.” The system was repaired and upgraded a few years ago because of environmental problems. Wall Street investment banks including JP Morgan and others arranged complex financial deals using swaps. The fees and penalty charges increased the cost so the county now has $3.2 billion outstanding. [B]Some county officials have been prosecuted for accepting bribes from bankers and are now in prison or awaiting sentence. Carrington said one of the problems was that elected officials had welcomed scheduling with very low early payments so long as peak payments occurred after they left office. [u]The debt structure now was such that there was no way that 700,000 people could pay it back over 30 years[/u]. The job could have been done for somewhere between $1.2 billion and $1.5 billion but shouldn't have cost 3.2 billion.[/B] Those selling the bonds weren't interested in whether they could be repaid as they would have moved on. The county was not able to pay its bills and now needed to restructure its debts to avoid bankruptcy. Investors would lose out but hopefully innocent small investors would get 100%. The SEC has awarded the county $75 million in compensation relation to “unlawful payments” against JP Morgan and in addition the company will forfeit $647 million of future fees. Carrington said citizens had to elect the right people to avoid a repeat disaster. Officials must identify those responsible, including local investment bankers, and root them out. A characteristic symptom of wrongdoing is unaudited books, the county was three years behind with its auditing, new debts cannot be issued until auditing is complete and this could take 1– 2 years.[/QUOTE] (my bold and underline)
I don't have the rates but do have the the rate increases planned in pre-bankruptcy September:
[URL="http://blog.al.com/spotnews/2011/09/jefferson_county_commission_to_15.html"]Jefferson County OKs terms for sewer debt settlement 4-1, averting bankruptcy for now [/URL]
[QUOTE]As part of the refinancing of the county's debt, sewer rate increases will be 8.2 percent for each of the first three years beginning Nov. 1. Projected annual increases after that would be no more than 3.25 percent until the debt is paid off, according the the proposed settlement term sheet.[/QUOTE]

With a maximum of two choices on the ballot for most offices in my county, it's very tough to elect the "right kind of person"as it were...the reform needs to go to the election system itself. (Vermont has taken some excellent steps in that direction, but I'm in VA!)

Wonder what the bankruptcy court is going to do with these bonds? And speaking of water rates, percentages are a way to lie with statistics...for most of us, doubling a $30 monthly water bill isn't even going to equal the variance in other kinds of bills we pay...

Funny how the (former) local officials who took the bribes are being prosecuted, but not one of the banksters who actually offered the bribes has even been indicted, much less prosecuted. Oh wait, we know by now that actually holding a major-bank -crook to account will inevitably cause collapse of the globale economy. Carry on then, all you doers of [url=http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqPYJqlCzOHo]God's work[/url].

I've read the story of these local officials before...not in Birmingham, but in a small town on the Georgia coast, in connection with drugs instead of sewers...I'll try to find the book when I get home. I hope some bankers both go unpaid and end up in jail here.

Bankers are a bit like lawyers - easy to despise, but sometimes you really need one.

Good or bad, I don't know. Case in point:

Reading from [URL="http://www.latimes.com/news/local/la-me-1110-mayor-streets-20111110,0,2586923.story"]Villaraigosa wants to borrow future tax money to fix L.A. streets[/URL]
Measure R in Los Angeles is an existing 1/2 cent sales tax measure that over three decades is intended to supply about 2 billion dollars of revenue for transportation projects.
The Los Angeles Mayor wants to spend $800 million over 18 months borrowed against the $1.4 Billion over 27 years of Measure R revenue (borrowing cost $600 million).
Another $600 million of the original $2 billion revenue as yet untouched (unspent).

So the question now is:

Is BANKRUPTCY for Birmingham a good thing? Keep in mind the major arguments on this board over bailouts for the banks. This time the state of Alabama did NOT bail out the city.

What is the likely outcome of the bankruptcy? The first outcome is that there will be a reduction in the payback on the sewer bonds that were marred by corruption and sweetheart deals. The city will continue to provide goods and services using current tax revenues.

Where things get dicey is the lost revenue from the Occupational Tax that was ruled unconstitutional by the state supreme court. The first such tax was passed back in 1986 when I had just recently moved to the area as part of my job with Nortel. There were various challenges to the tax over the next 20 years eventually resulting in the supreme court strike down. The problem is that Jefferson County had several years with access to about $70 million per year (adjust for inflation of course) which was used to pay for services. So when the sewer imbroglio hit, the county got a double whammy.

The best I can see, there will be loud screaming for more tax revenue in a county that already has some of the highest taxes in the state. There will be equally loud screaming from residents who don't want any more taxes. The bankruptcy judge cannot force new taxes. So at some point in the near future a tax referendum will be held which will be soundly voted down. End result will be a county already stretched to the breaking point cutting services wherever it can.

DarJones

Mish describes the latest we-can-fix-it fad among Europe's political leadership, the installment of economists/international-bankers (both professions which did themselves very proud in the runup to and playing-out of the 2008 global financial crisis - not!) to head various indebted sovereigns and presumably use "the miracle of leverage and Keynesian money-printing" to quickly fix a problem 30 or more years in the making as "Rise of the 'Borg' Technocrats". His latest blog post describes the short-term market euphoria resulting from Borg technocrats taking the helm in Greece and Italy:

[url=http://globaleconomicanalysis.blogspot.com/2011/11/whack-mole-euphoria-reflections-on-6.html]Whack-a-Mole Euphoria; Reflections on 6-Sigma Events[/url]
[quote]Hooray! The Borg Technocrats have saved us already, even though they have yet to lift a metallic finger.

The Borg took a huge whack not at a mole actually, but an Italian Elephant. This event instantaneously brought upon mass-euphoria.

The market has more-or-less been in a continual state of euphoria recently having been saved (by something), for the 83'rd time in the last 63 days.[/quote]

In a lengthy posting immediately preceding the above one, Mish quotes fellow blogger Peter Tenebaum, who has some pithy insights on how far the Eurozone has strayed from its original (stated) purposes:

[url=http://www.acting-man.com/?p=11560]The 'Technocrats' Are Coming[/url]
[quote][b]What's the EU All About?
[/b]
One keeps hearing demands for more centralization – tax 'harmonization', which is new-speak for 'let's impose the highest possible taxes everywhere', more 'redistribution', and above all, 'more regulation', especially of the evil financial markets where all sorts of bad things are happening to sovereign bonds nowadays.

Naturally, fractional reserve banking and the inflationary boom-bust sequences it has brought forth doesn't even rate a mention – since it has also enabled the growth of this huge statist moloch the EU and many of its member nations have become.

What is really needed is some introspection and remembering what the EU was originally about. Its founders wanted to restore 19th century liberalism to Europe – free trade and freedom of movement for people and capital within Europe.

They emphatically did not want to erect some sort of socialist super-state. They wanted to bring back to Europe what the mad socialist and fascist ideologues of the 20th century had destroyed.

Now we have a bureaucratic monster in Brussels that has produced nearly 300,000 new regulations over the past decade, in addition to the hundreds of thousands of pages of 'administrative law' and other regulations the member states themselves produce every year.

It is a miracle we still have a functioning civilization.

If we want the problems to be solved, the most important question should be: what is needed to enable the production of new wealth? What kind of environment will be most conducive to reviving the entrepreneurial spirit? It should be simple enough, but it would of course threaten a great many vested interests.[/quote]

[b]Armistice Day[/b]

The Armistice Day (here in the US it's since been generalized to Veterans Day) commemoration at Cupertino Memorial park near where I live just concluded. In addition to dozens of veterans of various ages there were also sizable contingents of local police and firefighters. The latter had parked 2 large ladder trucks back-to-back with their ends about 10 yards apart, ladders raised and angled so the tips just met, in a firetruck version of the military crossed-swords salute. Nice touch.
[i]
"At the eleventh hour of the eleventh day in the eleventh month of 1918, the guns fell silent."[/i]

European Union is very far away from what it was supposed to be. The assumption was that it was governed by member state different each year. Still it is so, only that now it is a fiction. For example, this year Poland had a leadership. During this period there was not a single decision made by UE leaders. On the contrary, German Parliament voted few issues closely related to UE. They should be voted in Parliament of UE. Solution of the problem of Greece should be considered in the UE Parliament. But all initiatives come from only one country - Germany. UE Parliament became a meaningless institution. Members of this Parliament fly to Brussel early in the morning, they sign a list to get money and rush to airports to be in theirs native countries afternoon. It is not stupid, because there is not anything that they can do in Brussel.
Europe is divided into territories of influence. For example, Germany did not do anything with respect to Ireland, British don't do anything corresponding to Greece. It is not clear where the territory of France is. Probably Spain and Portugal, but it will appear later. Humiliated Italy did not get any provinces, but probably they will fight back.

So are you saying Europe has devolved into fiefdoms?

From what I can see, you appear to have a point that there is not much to be done in Brussels. That appears to be more of a problem with the EU charter than anything else. There are no "rules" for bailing out ailing economies. Greece got to this impasse by wasteful overspending. What do you expect Germany to do? Write a blank check?

The entire EU could hold a very telling conversation about how to deal with economies in a tailspin. The Euro as common currency virtually guarantees that some nations will fall into economic chaos and there must be a regulatory framework to deal with them. Kicking the red headed step children out of the EU is not exactly the right solution.

Maybe Greece needs to hold a "nation sale". Large country for sale, beautiful location, historic buildings, lots of tourism, wonderful people. Purchaser must assume all existing liabilities such as "entitlement people" and tax evaders as well as all debts. There will be no bidders as things stand today.

DarJones

[QUOTE=Fusion_power;278056]So are you saying Europe has devolved into fiefdoms?[/QUOTE]

I wrote only about influence, which has nothing to do with a legal possession. An example of such influence (except examples of my last post) is that in Polish Parliament there is one place reserved for a member representing German ethnic group.


[QUOTE=Fusion_power;278056]From what I can see, you appear to have a point that there is not much to be done in Brussels. That appears to be more of a problem with the EU charter than anything else.[/QUOTE]

It is not a problem of charter, but rather problem with larger member countries, who prefer to make decisions themselves than by voting in EU Parliament.


[QUOTE=Fusion_power;278056]There are no "rules" for bailing out ailing economies.[/QUOTE]


That is why UE Parliament should explore all possibilities to get out and pick up the best.



[QUOTE=Fusion_power;278056]What do you expect Germany to do? Write a blank check? .[/QUOTE]


I can only write what Germany shouldn't do. They shouldn't write neither blank check nor any check. Greece has a commitment with respect to United Europe, but no commitment with respect to Germany. This a problem of and only of United Europe. Of course, Greece may leave UE and then they won't have any commitment to anybody.


[QUOTE=Fusion_power;278056]Kicking the red headed step children out of the EU is not exactly the right solution.[/QUOTE]


Agreed. A solution must be found by UE. This is what UE should be about. Solution not harmful for UE and Greece. It should be announced by authorities of UE, not by any of member country.


[QUOTE=Fusion_power;278056]Maybe Greece needs to hold a "nation sale". Large country for sale, beautiful location, historic buildings, lots of tourism, wonderful people. Purchaser must assume all existing liabilities such as "entitlement people" and tax evaders as well as all debts.[/QUOTE]

There is nothing like "country on sale" and I believe Greeks are not stupid enough to do anything like this. If, at some point, they don't have money, they can always announce that "no debt to repay". This would force Europe to find a solution.

[url]http://ca.news.yahoo.com/berlusconi-quit-parliament-passes-reforms-debate-remains-party-120531313.html[/url]

intro on yahoo:

[QUOTE]Mario Monti's failure could tear apart the 17-nation group and throw U.S., Europe into a recession.[/QUOTE]

always nice when one leader could throw a lot of people in turmoil.

[QUOTE=literka;278061]There is nothing like "country on sale" and I believe Greeks are not stupid enough to do anything like this. If, at some point, they don't have money, they can always announce that "no debt to repay". This would force Europe to find a solution.[/QUOTE]

I see that as criminal. They took money from others, spent it on themselves,
and refuse to pay it back. Can you say "stealing"???

If Greece does reneg, the international courts should round up their
leaders and put them on trial for larceny.

[QUOTE=R.D. Silverman;278264]I see that as criminal. They took money from others, spent it on themselves,
and refuse to pay it back. Can you say "stealing"???

If Greece does reneg, the international courts should round up their
leaders and put them on trial for larceny.[/QUOTE]Be careful of what you wish for, because you may get it.

The British crown is still owed rather a lot from the criminal activities of certain inhabitants of North America.

[QUOTE=R.D. Silverman;278264]
If Greece does reneg, the international courts should round up their
leaders and put them on trial for larceny.[/QUOTE]


I am not sure what country you are from. If you live in the US, then you should have heard about eleventh amendment. It says more or less that if someone has not money, then court cannot order him to pay out his debt. Current leaders of Greece did not borrow money, so they are not responsible to repay debt. Moreover, to repay debt they would have to take, for example, from elderly, hence to steal theirs money. This would be a terrible crime.
Moreover, every government should have priority to protect own citizens. Only puppet governments care about foreigners more than own people.
You can see this from one side only. That someone borrowed, then he must give back. May you please think why banks where lending without limits? I can answer it. They were lending, because they were greedy. Greedy also without limits. They want to give a lesson of honesty. They should get a lesson of honesty. They wanted to seat and see flowing money to theirs pocket. Easy money, everybody happy. Now they can learn that easy money can be only for a short while.

[QUOTE=xilman;278279]Be careful of what you wish for, because you may get it.

The British crown is still owed rather a lot from the criminal activities of certain inhabitants of North America.[/QUOTE]

OH? Can you say "No taxation without representation"? It could be a matter
of debate as to whose activities were criminal. We did not borrow money
then refuse to pay it back. We did dump some tea.

Be that as it may. If you still think we owe you money you can remind
us the next time you are attacked by Germany. Or would you like to
pay back all the food and supplies that we gave you? Can you say
"lend-lease"?

Note: I don'[t believe any of this. I just mention it because you raised the
issue of our owing you money.

[QUOTE=literka;278289]I am not sure what country you are from. If you live in the US, then you should have heard about eleventh amendment. It says more or less that if someone has not money, then court cannot order him to pay out his debt. Current leaders of Greece did not borrow money, so they are not responsible to repay debt.
[/QUOTE]

False. The citizens of Greece collectively borrowed the money through
their government. The citizens of Greece are collectively responsible for
paying it back.

[QUOTE]
Moreover, to repay debt they would have to take, for example, from elderly, hence to steal theirs money. This would be a terrible crime.
[/QUOTE]

False. They collectively benefited, so collectively they must pay. Not
just some sub-part of the population.

[QUOTE]
Moreover, every government should have priority to protect own citizens. Only puppet governments care about foreigners more than own people.
You can see this from one side only.
[/QUOTE]

I am neither Greek nor part of the EU. I speak as an outsider.
Certainly a government's priority is to protect its own citizens.
But it must bear the consequences, if any, for doing so.

I am unfamilar with the rules under which the EU was formed.
Did the individual countries give up sovereignty in currency matters?
Are they subject to common rules? Or is it "each country for itself" and
only agree to the rules when it is convenient?


[QUOTE]
That someone borrowed, then he must give back. May you please think why banks where lending without limits? I can answer it. They were lending, because they were greedy.
[/QUOTE]

The greed of the banks is a given. But two wrongs do not make a right.
And the banks did not hold a gun to the head of Greece to get them to
borrow.

Does [i]integrity[/i] mean nothing anymore? Greece took money under a
contract. People of [i]integrity[/i] stick by their agreements.

[QUOTE=R.D. Silverman;278292]False. The citizens of Greece collectively borrowed the money through
their government. [/QUOTE]

False. Elderly of Greece neither borrowed money not nor benefited from borrowing.


[QUOTE=R.D. Silverman;278292]They collectively benefited, so collectively they must pay.[/QUOTE]


Why do you want to take money , for example, from elderly of Greece. This money the government owes them. They will not survive without this money, while bank will survive?


[QUOTE=R.D. Silverman;278292]Certainly a government's priority is to protect its own citizens. But it must bear the consequences, if any, for doing so.[/QUOTE]


What kind of consequences are you talking about? Foreign assets abroad can be frozen, some restrictions on commerce, maybe something else. I agree that it is nothing good. Still it is better than giving up a country piece by piece.


[QUOTE=R.D. Silverman;278292]I am unfamilar with the rules under which the EU was formed.
Did the individual countries give up sovereignty in currency matters?
Are they subject to common rules? Or is it "each country for itself" and
only agree to the rules when it is convenient?[/QUOTE]


I am not sure about it, but I heard that international law does not foresee the possibility that a country cannot repay debt. I guess you refer to a common rule that borrowed money must be given back. There is also a rule that if someone has no money, then he cannot give money. That is why 11-th amendment was created. It is not convenient for Greece to have this situation.


[QUOTE=R.D. Silverman;278292]Greece took money under a
contract.[/QUOTE]

Greece got money, which was given them in a reckless way, against any rules.

[QUOTE=literka;278297]Why do you want to take money , for example, from elderly of Greece. This money the government owes them. They will not survive without this money, while bank will survive?
[/QUOTE]

Why do you want to allow people to just borrow money without the
consequences of having to pay it back???

Paying it back creates a hardship. So what? I have borrowed money.
Should I not have to pay it back without suffering consequences simply
because it might be a hardship?

Many people in the U.S. took out mortgages they could not afford.
They did not pay back the borrowed money. So they lost their homes.
This is the consequence. Their age does not matter.

[QUOTE]
Greece got money, which was given them in a reckless way, against any rules.[/QUOTE]

Huh? It wasn't a HANDOUT, it was a LOAN under a contract, with an obligation to repay.

I don't believe the claim that it was loaned "against any rules". It was a
contract. Of course there were rules.

[QUOTE=R.D. Silverman;278299]Why do you want to allow people to just borrow money without the
consequences of having to pay it back???
[/QUOTE]



There are enough consequences. Total turmoil, collapse of economy, hardship, cuts. Loans with a yield 17%. How much more you need?



[QUOTE=R.D. Silverman;278299]Many people in the U.S. took out mortgages they could not afford.
They did not pay back the borrowed money. So they lost their homes.[/QUOTE]



Sure they lost homes. But it does not mean they paid theirs loans back. You gave a beautiful example of giving loans in a completely reckless way. Toxic loans brought many banks to the brink of bankruptcy. Some people were borrowing money with a leverage 1:50. Of course they couldn't repay debts even if they sold their homes. Banks don't complain that people did not pay debts back. Banks gave loans and they never recovered them. Banks miscalculated and they had to face consequences. The same situation we have with Greece. Banks miscalculated and now they have losses. This is kind of business they have. Every loan bears some risk. Giving Greece money was an enormous risk. Bank took that risk and they failed. Not first time banks made a bad decision. This is what they are doing - always risking. If they fail, nobody should be blamed.

[QUOTE=R.D. Silverman;278290]OH? Can you say "No taxation without representation"? It could be a matter of debate as to whose activities were criminal. We did not borrow money then refuse to pay it back. We did dump some tea.

Be that as it may. If you still think we owe you money you can remind
us the next time you are attacked by Germany. Or would you like to
pay back all the food and supplies that we gave you? Can you say
"lend-lease"?

Note: I don't believe any of this. I just mention it because you raised the
issue of our owing you money.[/QUOTE]YHBT. YHL. HTH. HAND. [1]

Oh, I do love a good religious argument,. Evidence: the trolling in which I sometimes indulge.

FWIW the UK paid off, in full and with interest, the loans which the US made in consequence of WW2. The final payment was made a year or so ago.

As for taxation without representation, why am I being forced by the Infernal Revenue Service to pay tax on my exceedingly modest earnings from the MSFT stock I acquired though my employment with MSR?


Paul

[1] Only us old farts[2] will instantly recognize the meaning of these (E)TLA's

[2] A technical term, perhaps best translated as "tribal elder".

[QUOTE=R.D. Silverman;278292]False. The citizens of Greece collectively borrowed the money through
their government. The citizens of Greece are collectively responsible for
paying it back.[/QUOTE]

And you call yourself a mathematician? Anyone with an elementary knowledge of compounding knows that the Greeks cannot pay back the loans. What you suggest is a mathematical impossibility.

Perhaps you should take your own advice and stick to what you do best and not opine on matters about which you know little to nothing.

And in the pot calling kettle black department:
FDR - Gold standard
Nixon - Bretton Woods II

[QUOTE=literka;278297]False. Elderly of Greece neither borrowed money not nor benefited from borrowing.[/QUOTE]

Utter rubbish. Greece was only able to maintain its overly-generous (relative to productive capacity of the economy and resulting ability of the government to cash-finance such programs) social-welfare system, bloated public sector and uncompetitive labor markets by way of massive borrowing. Thus, everyone who enjoyed the benefits of the above government goodies benefited from said borrowing, at least in the short run. Now everyone is shocked and dismayed that borrowed money actually comes with strings attached, and all the entitlement addicts are looking for convenient scapegoats, be it "the corrupt/incompetent politicians", "the corrupt/incompetent politicians in the opposition party", the greedy bankers, the evil Germans, what have you.

--------------------------

And in today's lecture on recursive Ponzi finance:

[url=http://globaleconomicanalysis.blogspot.com/2011/11/efsf-bail-out-fund-buys-its-own-debt.html]EFSF Bail-Out Fund Buys Its Own Debt Because Not Enough Others Will[/url]
[quote]The European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.

However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.

Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.

The failure of the EFSF will increase pressure on the European Central Bank to effectively become the lender of last resort for the eurozone, a move it has strongly resisted.[/quote]

[QUOTE=garo;278339]And you call yourself a mathematician? Anyone with an elementary knowledge of compounding knows that the Greeks cannot pay back the loans. What you suggest is a mathematical impossibility.
[/QUOTE]

The [b]ability[/b] to pay back the loan has nothing to do with the [b]responsibility[/b].

Making the leap from a discusion of [b]responsibility[/b]
to one of [b]ability [/b] defies all logic. It is a total nonsequitur.

[QUOTE]
Perhaps you should take your own advice and stick to what you do best and not opine on matters about which you know little to nothing.
[/QUOTE]

And of course, you find it necessary to resort to insults in the process.

I'd say more but there is a clear double standard posed by the mods.

[QUOTE=ewmayer;278343]Utter rubbish. Greece was only able to maintain its overly-generous (relative to productive capacity of the economy and resulting ability of the government to cash-finance such programs) social-welfare system, bloated public sector and uncompetitive labor markets by way of massive borrowing. Thus, everyone who enjoyed the benefits of the above government goodies benefited from said borrowing, at least in the short run. Now everyone is shocked and dismayed that borrowed money actually comes with strings attached, and all the entitlement addicts are looking for convenient scapegoats, be it "the corrupt/incompetent politicians", "the corrupt/incompetent politicians in the opposition party", the greedy bankers, the evil Germans, what have you.
[/QUOTE]


Yup! I have a modest proposal. Let those who gave Greece loans do
what banks do when people reneg on mortgages: they take back the
property.

Greece spent a lot of money that it could not afford on repairing/improving
infrastructure and building new infrastructure (e.g. modern highways).

Let the banks reposess! Call the repo man. Then they can charge fees/tolls
for the use of their property, or they can sell it to private concerns.......

And I love your term "entitlement adicts".

Literka complained about "hurting the elderly". Those elderly benefitted from
social programs that the government could not afford, including retirement
and pensions at an age that would be totally [i]ludicrous[/i] in the U.S.
And I understand that country is under such poor control that an absurdly
large part of the economy is underground and does not pay taxes.

Greece voted itself 'bread and circuses'. Now it is time to pay the piper.

[QUOTE=ewmayer;278343]Utter rubbish. Greece was only able to maintain its overly-generous (relative to productive capacity of the economy and resulting ability of the government to cash-finance such programs) social-welfare system, bloated public sector and uncompetitive labor markets by way of massive borrowing. Thus, everyone who enjoyed the benefits of the above government goodies benefited from said borrowing, at least in the short run. [/QUOTE]

It should be written: as the result of massive lending for Greece, this country maintained its overly-generous social-welfare system, bloated public sector and uncompetitive labor markets.
In other words, all these listed bad things were consequences of massive loans Greece was able to get. This means that there was only one bad thing (lending money) causing all these listed bad things. Banks were responsible for lending, hence also for all listed bad things that took place.
Loans were dirty money, causing disruption of economy. People stopped working, trying to be glued to a stream of money. This was easy money, the worst kind of money ever invented. If someone couldn't be glued to a stream of money, still he could try to glued to the people glued to a stream of money and still he could have some benefits from loans. Vast majority were artificially maintained because old jobs stopped to exist.
Behavior of all governments having access to new loans were always the same. If money was needed than always there was "no problem".
Banks had a full control, where the stream of money was flowing. And they had not any reason to care about jobs, agriculture etc. That is why I consider loans rather as a plot than help.

[QUOTE=literka;278376]It should be written: as the result of massive lending for Greece, this country maintained its overly-generous social-welfare system, bloated public sector and uncompetitive labor markets.
In other words, all these listed bad things were consequences of massive loans Greece was able to get. This means that there was only one bad thing (lending money) causing all these listed bad things.
[/QUOTE]

No! The country borrowed money in order to vote themselves
'bread and circuses'.

Or are you claiming that they were like children in a candy shop:
unable to restrain themselves?

They spent money on things they could not afford. The money was
available, but availability of money did not cause the problem. Their
spendthrift attitude did.


[QUOTE]
Banks were responsible for lending, hence also for all listed bad things that took place.
[/QUOTE]

Fantasy. The 'bad things' that took place happened because Greece
did things IT COULD NOT AFFORD. It was caused by the people who
made bad decisions and spent the money recklessly, and not by those who made it available.

Or do you want to suggest that the banks should have known that
they were lending money to people who would spend without restraint
i.e. that Greeks are [i]children[/i] who can't control themselves?

[QUOTE]
Loans were dirty money, causing disruption of economy.
[/QUOTE]

Huh? 'dirty money'??? Total gibberish. The first part of the gibberish
is the unsubstantiated 'dirty' part. The second part is the idea that
'dirty' money presented as a loan would somehow cause economic
disruption. Would 'clean' money have made any difference?

This nonsense is the worst sort of attitude that I can imagine. It is
total fantasy/denial and a horrible sense of entitlement.

Does anyone else believe this fantasy??

[QUOTE=R.D. Silverman;278378]
Or are you claiming that they were like children in a candy shop:
unable to restrain themselves?
They spent money on things they could not afford. The money was
available, but availability of money did not cause the problem. Their
spendthrift attitude did.[/QUOTE]


Here "they" refers to the special people, who could get loans. Of course, not theirs loans, but other people loans. Usually people in such occasion think if they personally can have some profits. Especially in the case they can do this in a legal way. What if they have an offer to get loans with a condition to buy new Volkswagens for received money? And later to get loans to build new roads so that they can more possibilities to drive new Volkswagens?
Sure there are people who would never agree for such a deal. But they are eliminated quickly. Look, Papandreu didn't agree for European conditions and he was eliminated in one week. By the people who needed new Volkswagens and needed new roads to drive new Volkswagens.


So, don't tell me that it is not dirty money. All easy money is a dirty money.

[QUOTE=literka;278384]Here "they" refers to the special people, who could get loans. Of course, not theirs loans, but other people loans. Usually people in such occasion think if they personally can have some profits. Especially in the case they can do this in a legal way. What if they have an offer to get loans with a condition to buy new Volkswagens for received money? And later to get loans to build new roads so that they can more possibilities to drive new Volkswagens?
Sure there are people who would never agree for such a deal. But they are eliminated quickly. Look, Papandreu didn't agree for European conditions and he was eliminated in one week. By the people who needed new Volkswagens and needed new roads to drive new Volkswagens.


So, don't tell me that it is not dirty money. All easy money is a dirty money.[/QUOTE]

You talk and espouse ideas like a 1960's love child hippy on quaaludes.
Totally separated from reality.

Do you really expect that because my recent car loan was the result
of 'dirty money' simply because the loan was easy to get???? Or that
I am not obliged to pay it back?

The 'special people' who got the loans were the Greek government
acting at the behest of the Greek people who WANTED all the social
programs and infrastructure programs.

[QUOTE=R.D. Silverman;278398]
Do you really expect that because my recent car loan was the result
of 'dirty money' simply because the loan was easy to get???? Or that
I am not obliged to pay it back?[/QUOTE]


If you want to compare two things, you should choose things that can be compared. You took a loan on your name hence it is your responsibility to give money back. People in Greece, they take loans on the name of few millions. Out of these millions there are only few, who know they are taking a loan. This makes a lot of difference and makes these two things uncomparable.



[QUOTE=R.D. Silverman;278398]of the Greek people who WANTED all the social programs and infrastructure programs.[/QUOTE]


Did they want also a total collapse of economy, street demonstrations etc.?
If you knew they wanted social programs then you should know the answer for this question too.
By the way, what kind of infrastructure programs? New roads maybe? New roads are needed for Volkswagens owners. They built huge infrastructure for Olimpiade to have a week of national pride. I do not believe they built anything useful, for example to create new jobs. Not with dirty money.

Seems to me that Europe at this point has already forgiven 50% of a major portion of Greek debt. That is not why there is still a financial crisis. The crisis is that even with that much relief, Greece is still spending more than it receives in taxes. Do some due diligence, see just how much tax they collect vs their socialized obligations. Then look at the methods used to borrow the exorbitant amounts that led to this problem.

The only effective solution is to cut Greece adrift. The alternative is that all of Europe and maybe most of the rest of the world will suffer if they keep waffling around with the problem.

This is apt to be a very touchy subject so I would invite posters to take a deep breath and remember that we are not enemies.

DarJones

A friend forwarded John Mauldin's latest newsletter, which features an excellent analysis of the crisis facing the Eurozone - full piece needs a signup (othewise free), this one is worth it IMO:

[url=http://www.johnmauldin.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline]Where is the ECB Printing Press?[/url]
[quote][b]Where Can I Find €3 Trillion?[/b]

First, for the record, the European issue is not a crisis of confidence, as Merkel and Sarkozy, et al., keep telling us. It is structural. And until the structural issues are dealt with, the problems will not be solved.

The first problem facing Europe is the glaring sore thumb: there is simply too much sovereign debt in Greece, Ireland, Spain, Italy, Portugal, and Belgium. That is not news. What has yet to be absorbed by the markets...[/quote]
Couple brief comments:

- Forget writing off > 90% of Greek debt ... ultimately the EU (or whatever pieces are left of it) will have to write off (or print) a similar proportion of the full 3T-plus in sov debt Mauldin mentions. The only way to fix the structural issues is via deep, long-term austerity, which of course makes things even worse in the short run because it hammers GDP thus impairing ability to service debt. But that's the nature of the debt trap all the insufficiently productive economies of the world have created for themselves - and that includes the US, which will be at or near debt of 120% of GDP in around 2 short years.

- Notice it only took 2 *days* for Italian yileds to again rise above 7%, even with the ECB buying much - but apparenty not all - of it. So much for "the full Monti" saving things. Reshuffling the deck chairs by swapping out a lying pol with a lying economist appears to have had a very short bond-market half-life.

I've been following the MF Global bankruptcy for the last couple of weeks. I am fascinated with masters of the universe, their braggadocio and the bonfire of their vanities.

The Wikipedia entry doesn't mention enough of it; no one article does really.

Today I learned that Appaloosa raised its state in MF Global stock to 8.64% after MF Global's bankruptcy. Appaloosa makes distressed investments but this is still interesting.:
[QUOTE]MF Global had been led by former Goldman Sachs CEO Jon Corzine, with whom Appaloosa chief David Tepper has had a difficult relationship. Corzine, who would go on to become a U.S. senator and governor of New Jersey, passed Tepper over for a partnership at Goldman; Tepper later bought Corzine's former home in the Hamptons and demolished it, commenting that there was "a little justice in the world."[/QUOTE][URL="http://www.finalternatives.com/node/18749"]Appaloosa Loaded Up On MF Global After Bankruptcy[/URL]
Strange stuff all around.

[QUOTE=only_human;278543]I've been following the MF Global bankruptcy for the last couple of weeks. I am fascinated with masters of the universe, their braggadocio and the bonfire of their vanities.

The Wikipedia entry doesn't mention enough of it; no one article does really.

Today I learned that Appaloosa raised its state in MF Global stock to 8.64% after MF Global's bankruptcy. Appaloosa makes distressed investments but this is still interesting.:
[URL="http://www.finalternatives.com/node/18749"]Appaloosa Loaded Up On MF Global After Bankruptcy[/URL]
Strange stuff all around.[/QUOTE]

Well, that looks like revenge in the air...or, as we might say, "Bad Blood". See discussion above about "dirty money", with tempers high. Don't forget, RDS is in a country that is itself nearly bankrupt, and also voted for "bread and circuses"...whether he joined said voting or not.

I'm a bit in the middle: First, "predatory lending" is an acknowledged problem in the US -- there are SUPPOSED to be controls in place to prevent practices where a relatively sophisticated lender lends money to someone they know they will have to repossess on for whatever ulterior purposes. So there is general acknowledgement that making loans to someone with no ability to repay them is at least in part the responsibility of the banker -- at least, until Mr Bush took office....and started an expensive war abroad.

Greece, as an entity is bankrupt....the problem is, as noted, that the economy is producing relatively little of value, the government can't print money (euros), and it can't effectively tax its way out of the situation with direct taxes, either. And if the government of Greece can't spend money, some people are going to begin to starve, get sick, and die. Others will leave the country, whence all those greek diners in the US, further damaging the ability of the greek economy to produce.

Something is going to change, violently, soon, and the theater is going to get really ugly. I'll venture a prediction of next March or so when things get really serious since we've gone a year or three as it is. Any other bets?

[QUOTE=Christenson;278598]I'm a bit in the middle: First, "predatory lending" is an acknowledged problem in the US -- there are SUPPOSED to be controls in place to prevent practices where a relatively sophisticated lender lends money to someone they know they will have to repossess on for whatever ulterior purposes. So there is general acknowledgement that making loans to someone with no ability to repay them is at least in part the responsibility of the banker -- at least, until Mr Bush took office....and started an expensive war abroad.
[/QUOTE]

One can't argue that the recipient of the loan here is being preyed upon.
The Greek govenment has plenty of access to plenty of people with
degrees/PhD's in economics and business. It is quite different from a bank
giving a loan to some uneducated schlemiel off the street here in the U.S.

[QUOTE]
Greece, as an entity is bankrupt....the problem is, as noted, that the economy is producing relatively little of value, the government can't print money (euros), and it can't effectively tax its way out of the situation with direct taxes, either.
[/QUOTE]

Yep! So you do what i proposed. Greece effectively sells assets to pay
its debts. (i.e. the banks call the repo man)

[QUOTE]

Something is going to change, violently, soon, and the theater is going to get really ugly.

[/QUOTE]


AMEN!! Which is a major reason that I am not invested in equities for the
time being.

I'm also waiting to see what the 'GANG of 12' does here in the U.S. about
our debt.

:devil:
There is a third alternative: If you haven't noticed, there's a massive distortion in allocation of physical resources compared to the financial. That is, Greece has spent more MONEY than it has, but somehow, everyone in Greece has managed to eat and get healthcare and other resources anyway. That could continue, with the value of everyone's investments going down.

In the end, I think the problem is actually one of the scale of the society. That is, there's a gal that works for us, and says she is only doing it for the health insurance for her husband. She does a very poor quality job. Somehow, in a company of only 40 employees, although one of those bad solder joints could cost us about $5000 in directly calculable costs, and has about $500 in direct costs against it as of tonight, she is allowed to continue to do this. It might finally reach the company president in a way he understands tomorrow.

Larger ompanies, the connection between individual action and the collective fate gets more and more distant. At the scale of both the EU and the US, it's gotten to the point where the leadership simply has no direct responsiveness -- and big problems, like predatory lending and retirement programs that have to cover 1/3 to 1/2 of a persons working life are starting to happen as a consequence. On a global, historic scale, the US empire has held together for a remarkably long time, Productivity gains have covered up a lot of the distortions, but I promise you they are nonetheless real.

[QUOTE=R.D. Silverman;278347]The [B]ability[/B] to pay back the loan has nothing to do with the [B]responsibility[/B].

Making the leap from a discusion of [B]responsibility[/B]
to one of [B]ability [/B] defies all logic. It is a total nonsequitur.



And of course, you find it necessary to resort to insults in the process.

I'd say more but there is a clear double standard posed by the mods.[/QUOTE]

Bob:
I think the mods *do* pose a double standard. You get the long end of the stick, with a pass for stuff that would get me tossed, on account of having some math in the literature relevant to GIMPS.

The long post from akruppa tonight on the OPN hunt thread is a case in point....the last person I saw get himself tossed from here (crying Mediocrite!) didn't get anywhere near that much effort from the mods.

[QUOTE=Christenson;278614]:devil:
There is a third alternative: If you haven't noticed, there's a massive distortion in allocation of physical resources compared to the financial. That is, Greece has spent more MONEY than it has, but somehow, everyone in Greece has managed to eat and get healthcare and other resources anyway. That could continue, with the value of everyone's investments going down.

In the end, I think the problem is actually one of the scale of the society. That is, there's a gal that works for us, and says she is only doing it for the health insurance for her husband. She does a very poor quality job. Somehow, in a company of only 40 employees, although one of those bad solder joints could cost us about $5000 in directly calculable costs, and has about $500 in direct costs against it as of tonight, she is allowed to continue to do this. It might finally reach the company president in a way he understands tomorrow.

Larger ompanies, the connection between individual action and the collective fate gets more and more distant. At the scale of both the EU and the US, it's gotten to the point where the leadership simply has no direct responsiveness -- and big problems, like predatory lending and retirement programs that have to cover 1/3 to 1/2 of a persons working life are starting to happen as a consequence. On a global, historic scale, the US empire has held together for a remarkably long time, Productivity gains have covered up a lot of the distortions, but I promise you they are nonetheless real.[/QUOTE]

No argument from me.

If it walks like a volcano, talks like a volcano, and dresses like a volcano, it is probably a volcano.

Today there is open speculation about Greece exiting the Eurozone. It is about time. The problem is simple, either toss Greece down the shitter or else let the whole Eurozone go down.

[QUOTE]A growing number of analysts believes those efforts will fail, and that Greece's days in the euro are numbered.

They say Greece would do better to cut and run, avoiding the straitjacket of a decade's worth of austerity.[/QUOTE]

[url]http://www.cbsnews.com/8301-202_162-57325929/nations-mull-possible-greek-exit-from-euro/[/url]

Just want to point out that if this happens, the best thing any Greek can do is to immediately withdraw all of his money from the bank and convert it to something more stable.

DarJones

[QUOTE=Fusion_power;278735]If it walks like a volcano, talks like a volcano, and dresses like a volcano, it is probably a volcano.

Today there is open speculation about Greece exiting the Eurozone. It is about time. The problem is simple, either toss Greece down the shitter or else let the whole Eurozone go down.

Just want to point out that if this happens, the best thing any Greek can do is to immediately withdraw all of his money from the bank and convert it to something more stable.

DarJones[/QUOTE]

A run on the banks! And when the banks run out of currency because there
isn't enough for everyone then............

[QUOTE=R.D. Silverman;278738]A run on the banks! And when the banks run out of currency because there
isn't enough for everyone then............[/QUOTE]

The really smart will pull out before the exit......

But of course pulling out isn't a manly thing to do.

It's as George Carlin said: "Out doesn't sound manly to me; let's
leave it there a while longer and get the job done" [of course this
was in reference to the U.S. pulling out of Vietnam]

The handwriting has been on the wall...the really smart already figured out where to put their investments.

Just wanted to point out that with the magic of fractional reserve lending, the Greek banks technically have only $20 for every $100 in deposits. That means the most they can pay out as Euros is 1/5 of the potential demands.

In the event of a disorderly exit from the Euro:
In an effort to stabilize the economy, the Greek Govt will have to freeze bank deposits and force conversion of Euro's to Drachma's. The Greek people will suddenly be paid in Drachma's and there won't be a standard to establish their real world value. Since Greece is an overall importer of 100% of the oil it consumes, the oil producers will shut down sales to Greece. This will freeze the economy so effectively that it will take 10 years to sort out the mess. Obviously the govt will want to avoid this sequence of events.

[url]http://en.wikipedia.org/wiki/Fractional_reserve_banking[/url]

The Wiki article really glosses over the impact of fractional lending. You have to get half way down through the article before you get the gist of the artificial money creation involved.

DarJones

Todays episode of As The Dollar Burns:

Open Range Communications is bankrupt. It had been awarded a $267 million dollar loan from the Rural Utilities Service of the Agriculture Department. Another $100 million had been invested by JPMorgan Chase. [URL="http://www.politico.com/news/stories/1111/68522.html"]Open Range’s network to nowhere draws fire[/URL]

Open Range Communications was providing internet phone service and WiMax using satellite frequency spectrum licensed to Global Star. In March OPS said it had more than 20,000 subscribers. The FCC rescinded permission to Global Star for that spectrum for land-based signals but seems to have given some waivers for Open Range Communications to continue using it. That was not going to keep working, I guess. ORC looked to switch over to using LTE via LightSquared but that seems to not have worked out either. I haven't looked at it but know that LightSquared has been mentioned regarding GPS interference.

At least the USDA was awake enough to the floundering that was occurring and froze its' loan after disbursing $73.5 million rather than the full $267 million -- the full amount is the largest loan in USDA history per the quote below and also would amount to half a Solyndra, and [I]that[/I], then, would be real money.
[URL="http://www.openrange.us/"]http://www.openrange.us/[/URL]
[QUOTE]Headquartered in Greenwood Village, Colorado, Open Range Communications was approved in 2009 for a loan by the United States Department of Agriculture’s Rural Development Utilities Program (RDUP) to deliver High Speed Wireless Internet to 525 rural communities across 17 states. This Broadband Access Loan of $267 million loan (the largest loan in USDA history) was made possible through the combined efforts of the RUS, FCC and Members of the House of Representatives and United States Senate. Open Range received additional funding on January 9, 2009 an investment of $100 million from One Equity Partners (OEP), the private equity arm of JPMorgan Chase & Co. The OEP investment satisfied the RDUP's loan terms, making the funds available to Open Range. Open Range would like to thank everyone from local and state government who equally share the Open Range vision for rural America and ubiquitous High Speed Internet Service at an affordable price.[/QUOTE]

This sort of thing I find difficult to complain about - it's quite reasonable for a government to hand out loans to new companies trying to do desirable but difficult things, and you would expect that quite a lot of these companies will fail and lose all their money. If it becomes a political catastrophe for any government-loan-receiving company to fail, no politician will provide the loans, and companies that would have survived with the loans will fail quietly.

Solyndra was part of IIRC a $40 billion collection of loans from the DoE; having only one complete disaster in the first year, amounting to 2% of the fund, would be cause for celebration and champagne at your average venture capital fund. And it seems likely there's been only one disaster, since partisan journalists would be slavering to report second and subsequent disasters.

[QUOTE=fivemack;278934]This sort of thing I find difficult to complain about - it's quite reasonable for a government to hand out loans to new companies trying to do desirable but difficult things, and you would expect that quite a lot of these companies will fail and lose all their money. If it becomes a political catastrophe for any government-loan-receiving company to fail, no politician will provide the loans, and companies that would have survived with the loans will fail quietly.

Solyndra was part of IIRC a $40 billion collection of loans from the DoE; having only one complete disaster in the first year, amounting to 2% of the fund, would be cause for celebration and champagne at your average venture capital fund. And it seems likely there's been only one disaster, since partisan journalists would be slavering to report second and subsequent disasters.[/QUOTE]Weeelll, yes, even though the private bank investment and the USDA portion that was disbursed works out to over $8500 per account (20k+ users); it seems a bit much to burn through for non-landline user connections. In this case almost $200 million was held back and that is good when it became clear that there were serious problems. Here are the top 5 of the DOE loans and as you say, all's quiet on that front: [URL="http://energy.aol.com/2011/09/18/top-five-doe-recovery-act-loans/"]Top Five DOE Recovery Act Loans[/URL]

[QUOTE=fivemack;278934]This sort of thing I find difficult to complain about - it's quite reasonable for a government to hand out loans to new companies trying to do desirable but difficult things, and you would expect that quite a lot of these companies will fail and lose all their money. If it becomes a political catastrophe for any government-loan-receiving company to fail, no politician will provide the loans, and companies that would have survived with the loans will fail quietly.[/quote]
But merely asking "is this type of subsidy desirable?" is not good enough - "Is it remotely cost-effective compared to a genuine competitive market solution?" needs to be asked, and alas too seldom is when the govt is involved. In the case of ORC, did anyone even bother to do a [i]Gedankenexperiment[/i] which imagined the intended beneficiaries of the subsidy instead paying for their net access out of pocket, and perhaps had a handful of the targeted communities actually try to work out a private-market solution to see what it would cost? If that had been done and all the credible answers pointed to "ludicrously more expensive than ORC's bid", fine. But at nearly $10K per user (from only_human's post), I have my doubts that any kind of real competition came into play. More likely the execs/backers of ORC are politically well-connected. What we are finding out about [url=http://www.latimes.com/news/nationworld/nation/la-na-energy-loans-20110927,0,3517324,print.story]similar green-tech fed-loans[/url] in the wake of Solyndra strengthens my skepticism - you know when I find myself agreeing with bank-owned twits like Summers and Geithner I have either lost my mind or the issue is so glaringly obvious that only a deluded politician would fail to see a problem:

[i]Long before the politically connected California solar firm Solyndra went bankrupt, President Obama was warned by his top economic advisors about the financial and political risks of the Energy Department loan guarantee program that boosted the company's rapid ascent.

At a White House meeting in late October, Lawrence H. Summers, then director of the National Economic Council, and Timothy F. Geithner, the Treasury secretary, expressed concerns that the selection process for federal loan guarantees wasn't rigorous enough and raised the risk that funds could be going to the wrong companies, including ones that didn't need the help.[/i]

And there is a proliferation of reports revealing the hidden political connections in many such govt-backed projects - [url=http://www.thegatewaypundit.com/2011/09/more-crony-socialism-obama-gives-737-million-to-pelosis-brother-in-laws-solar-firm/]here is a recent example[/url] from my neck of the woods:

[i]It’s as if Solyndra never happened. The Obama Administration is giving $737 million to a Tonopah Solar, a subsidiary of California-based SolarReserve. PCG is an investment partner with SolarReserve. Nancy Pelosi’s brother-in-law happens to be the number two man at PCG.[/i]

The blogger here has a clear political bias, but my point is that this kind of thing is pervasive. One of the few areas where we see genuine "bipartisanship" on Capitol Hill is when it comes to funneling taxpayer monies to political, family and business cronies.

[quote]Solyndra was part of IIRC a $40 billion collection of loans from the DoE; having only one complete disaster in the first year, amounting to 2% of the fund, would be cause for celebration and champagne at your average venture capital fund. And it seems likely there's been only one disaster, since partisan journalists would be slavering to report second and subsequent disasters.[/QUOTE]
One *known* disaster in the first year, and it [url=http://thehill.com/blogs/e2-wire/e2-wire/194293-chu-says-he-did-not-pressure-solyndra-to-delay-layoff-news-until-after-election]just broke this week[/url] that there was tremendous pressure from DOE (apparently at the behest of the White House) on Solyndra execs to delay a pending layoff announcement until after the 2010 midterm election. (Note the linked article has DOE secretary Chu saying *he* did not exert pressure on Solyndra, not that there was not such pressure - the cited internal e-mails from Argonaut Ventures paint a pretty clear picture).

Also, it seems that - as with Wall Street - the real truth about many such ventures never comes out until one fails spectacularly. If MF Global had managed to avoid blowing up, would we have ever been the wiser about their misuse of client funds? And remember Madoff`s decades-long Ponzi only came to light when the 2008 financial crisis caused a sufficient number of his clients to pull their money. If for every Solyndra there were a hundred ventures quietly bleeding cash but managing to avoid highly-public shock bankruptcies, you think your hypothetical venture fund would still be throwing that party?

This one is well worth reading.
[url]http://news.yahoo.com/next-financial-crisis-hellish-way-204303737.html[/url]

[QUOTE]"There is definitely going to be another financial crisis around the corner," says hedge fund legend Mark Mobius, "because we haven't solved any of the things that caused the previous crisis."

We're raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out. We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.[/QUOTE]

Summarizing: the fundamentals have not changed, the music played for a few years, the players danced to the tune, now the music is poised to stop again and there are NOT enough chairs.

DarJones

[QUOTE=only_human;278949]Weeelll, yes, even though the private bank investment and the USDA portion that was disbursed works out to over $8500 per account (20k+ users); it seems a bit much to burn through for non-landline user connections. In this case almost $200 million was held back and that is good when it became clear that there were serious problems. Here are the top 5 of the DOE loans and as you say, all's quiet on that front: [URL="http://energy.aol.com/2011/09/18/top-five-doe-recovery-act-loans/"]Top Five DOE Recovery Act Loans[/URL][/QUOTE]

Enormously large per-account costs are just diagnostic of failed infrastructure companies; we've had satellite-TV companies in the UK which would have lost less money had they bought every viewer a ticket to the matches they watched and a taxi to the stadium, we've had bus companies whose routes cost more than paying for taxis for each user.

[QUOTE=ewmayer;278985]But merely asking "is this type of subsidy desirable?" is not good enough - "Is it remotely cost-effective compared to a genuine competitive market solution?" needs to be asked, and alas too seldom is when the govt is involved. In the case of ORC, did anyone even bother to do a [i]Gedankenexperiment[/i] which imagined the intended beneficiaries of the subsidy instead paying for their net access out of pocket, and perhaps had a handful of the targeted communities actually try to work out a private-market solution to see what it would cost?[/QUOTE]

The Internet has been around for quite a while; I expect that the targeted communities have asked the small number of monopoly providers to provide service, and been told 'not at any cost'. If you believe that universal access is important, then you need to have the cheap-to-cater-for subscribers in dense cities subsidise provision to outlying areas; if the few major country-wide providers aren't doing that off their own backs then you need a non-market solution. I think I'd prefer an obligation-to-provide on Verizon to a government-funded startup, but that seems to be the kind of imposition unpopular in current US politics.

[quote][i]It’s as if Solyndra never happened. The Obama Administration is giving $737 million to a Tonopah Solar, a subsidiary of California-based SolarReserve. PCG is an investment partner with SolarReserve. Nancy Pelosi’s brother-in-law happens to be the number two man at PCG.[/i][/quote]

I think that's just a measure of the small size of the community from which senators are drawn - ruling out every group at less than four degrees of separation from a senior politician rules out pretty much everybody.

We have the same issue with cell coverage...I, being one of the less dense people, find myself often in areas where cell phones just don't work -- for example, in Shenandoah National park, but not on a mountaintop with a view!