Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Nobody's crying for you, America.

by r------ Tue Mar 18th, 2008 at 05:10:43 PM EST

Over the past few years, the likelihood of a significant financial crisis in Anglo-American financial markets, and consequent economic stresses centered in both countries, has been a topic of regular commentary and analysis on these pages. In fact, a collaborative topical discussion of the matter and likely outcomes was published here on ET shortly after the long out-of-power Democratic Party was installed in both houses of Congress in the United States. To the surprise of many commentators back then, America's so-called opposition took the reins of power in the halls of its legislative branch. Alas, this power has been used to little, if any, effect on the fiscal, social and economic matters we often discuss.

In light of recent market events, and the first bank failures in decades, first in the UK and then in the US, it would be a good time to revisit that discussion.

Back then, we were discussing how the Euro had surpassed the dollar in terms of circulation. Now, we're observing that the US is no longer the largest economy in the world. All of this quite predictable, and predicted.


How did you get here ?

Now, currencies go up and currencies go down, following the natural path of inflows and outflows of cash observed among intermingled world economies, creating via these equilibriums terms of the tokens of trade and the valuation of resulting liabilities for the debtors in these equilibriums and assets for creditor nations. But we noted 15 months ago a heightened sense of angst among the mainstream business press, a less convincing tone to their cheerleading of this financial capitalism in which they've so much invested, and we note it today in even greater measure.

And with reason.

The US has been running current account deficits on the order of 4-6% per year the past decade. For each dollar of good and services sold by the US economy, roughly five cents of consumption has been financed from abroad. For every twenty bags of cheetohs eaten in front of a right-wing blogger's computer screen, another bag was spotted him by the People's Bank of China, in exchange for, among other things, a serious chunk of IOUs. That's a serious shitload of cheetohs your lot have been eating in the dark in front of your computer terminals

And those IOUs are coming due. The global markets are positioning themselves to serve a series of margin calls on the US economy. What comes next is anyone's guess, but what appears clear, both from the actions of the US central bank, and from its government, is that the ruling US political and economic elite are about as capable of reform as the Brezhnevian holdouts in Gorbachev's Soviet Union.

Argentina, here we come.

The fact is, the United States has evolved, fiscally, economically, and financially, into one big Argentina. Its central banker  prints money by the hundreds of billions, in just the past week printing $400 billions, first $200 bn to prop up a sagging US stock market and help out his portfolio manager buddies who need to produce good Q1 numbers to get bonuses big enough to pay for their multi-million dollar yachts. $200 billion buys about 5,000 yachts at $40M each, and my sources tell me that this basically covers Tribeca. Then, less than a week later, Mr Bernanke prints off another $200 billion to make sure his buddies at Bear Stearns keep their Maseratis and avoid SEC reporting of their shenanigans, not only avoiding the failure of the bank but also some untoward Enron-style investigations in the aftermath. $30 billion of the total specifically earmarked for JP Morgan for them to help cover the crimes at Bear. It's a tough slog for most working Americans, but if you're in a suit and you have Ben's ear, you are probably making out ok.

3% of US GDP, printed by the Bernanke Federal Reserve, injected into the economy, in less than one week, to pay for Bear Stearns executives' Maseratis, and Wall Street portfolio managers' $40 million custom yachts.

Wall Street Gang Bang.

Ok, how exactly is this stacking up, who's got who's back, and why? In short, who among your political elite is sucking whom, while you get fucked, and how does the piper providing the soundtrack get paid?

Well, we know that Ben Bernanke, like most wealthy people in America, is looking out for number one, and he knows who's going to "butter his bread," as they say in America, when he "resigns to spend more time with his family". The same backs who he is busy covering (while not scratching) now, ones covered by Marks and Spencer suits in lower Manhattan. That much is simple, money speaks for money and the devil for his own.

But what's that sound track the piper is piping in? Is it Ross Perot's sound of sucking, money out of your wallet and into those of executives on the Street? Or is it the basic sounds from a tacky American porn film, filled with as many fake tits and penile enlargements as a new suburban development which, like mushrooms on a log, sprung up with all that easy money Ben's busy covering today, filled with all the same fake charm and neighborly goodness. Probably some combination of the two?

Fainter still, but definitely discernable, is the sound of one hand scratching another's back, from the Fed to Wall Street and all the money conduits in between.

But how do you get fucked in all of this? And to the Americans in the audience, lets be clear what's going on here, you are about to get fucked, really fucked. This is somewhat complicated and I know most of you didn't get this in school, especially those who went to business school to learn how to be cheerleaders for Anglo-American capitalism, so bear with me.

News you can use: A short discussion of monetary theory and how it fucks you today.

Helicopter Ben is printing money today. He's basically just printing dollars. Ink's in the injection cartridge, the press is rolling, and Ben Franklins are rolling off the cylinder and into bags loaded into proverbial electronic trucks being shipped to Wall Street at this very instant. No corresponding wealth is being created from this money today. Nor is he printing money to finance future generation of wealth. He's not printing money to lend it to your neighbor to build a successful business which generates a tax base, pays its workers well and respects their rights. He's printing money to cover for prior destruction of wealth, that his buddies in Washington and on Wall Street colluded to pull off.

And, for lefties here, forgive me if I ask your indulgence, as a committed socialist, to trust me on this one, but one of the few things the vile Milton Friedman got right in his life (and in fact got the Nobel in Economics for) is this: when you print money and do not generate credible wealth, you pay for this via a tax called inflation.

Now, if you must have a market economy, a little inflation can be a good thing. As long as it accompanies extension of credit which in turn creates equitably distributed wealth and  jobs, it's a good thing. When it accompanies credit to generate wealth used to finance $40M yachts, it's less good.  But when inflation is no longer the grease to create wealth, but rather, as today, the whiskey to forget about past sins behind the alter at the moneychanger's temple, there's only one way to pay the piper. And that's by paying him more than you had to before.

Typically, this is done by increasing the interest rate you are required to pay the piper tomorrow for the tune he or she is playing for you today.

Think of it this way: your mortgage rate today might be at 6%. Two years from now (and this is a very plausible situation) it might be 12%. Hell, it might even be more than that for a while, significantly more, ask any Argentine about the past decade.

No problem, you say? Well, good for you, you get to sit tight in your house, you don't have to move, you have a secure job, and the value of your house, source of wealth for the vast majority of the American middle class, is of no matter to you.

But if you are really worrying about your net worth, you might have to sell your house, you might be near retirement and planning on a move to a condo or smaller home somewhere warmer, things virtually all of us sooner or later think about, this is of concern to you. Because a home's value, like that of a long bond, is simply a function of its yield, expressed in market rates for long term mortgages. In other words, your house is only worth the monthly payment that the sort of person who might be interested in buying it can afford. After all, markets are a signal of value, even in our Socialist worker's paradise where Cheney gets an unheated cell in the Wyoming re-education camp gulag, even if we must vigorously seek to minimize and manage the deleterious effects of their fluctuations.

And how does this work in mathematical terms? Let's examine. Let's say you own a home, which today, after taking a bit of a drop in value, you can sell for $250K to someone who has the credit and documentable income profile (a dwindling class in America, alas) to qualify for a 6% loan.

Now, imagine mortgage rates at 12%, which is a conservative estimate of where they might need to be to stabilise the US Dollar in the aftermath of the crisis upon which we are now embarking. (Ask your parents about mortgage rates in the late `70's or early `80's for American-style details.)

Given the afforded monthly payment that a 12% mortgage rate implies, your asset is now worth $145K, or 40% less than what it is worth today. Same mortgage payment on a fully financed asset, $1,500, that`s what a home buyer making a bit more than the median household income can afford.

Imagine that - you thought you were doing good  at 60% loan to val, and next thing you know it, you too, like all those crazy people flipping McMansions in Rancho Cucamonga, are tits up and underwater on your house.

Make no mistake, you are being fucked, and a rough estimate of the fucked-itude might be to estimate the current value of your assets and multiply by 0.4. That's $4,000 on every $10,000 you have in net worth, and Ben Bernanke is taking it from you and giving it to his buddies on Wall Street so they can make their yacht and Maserati payments.

Where do the Democrats figure into this unfolding crisis

While Wall Street sure knows who's buttering their toast, what Americans of limited means do not know is who is looking out for them , and unfortunately, the answer is virtually no one. The Republicans are the party of Wealth, so these actions are of a pair with their policy goals and priorities.

And certainly not the Democrats, unfortunately. Given the magnitude of the unfolding financial crisis, it is truly disheartening to see the Presidential candidates effectively silent on the subject. But even worse than that, exhibit A in the Democrats failing to protect working Americans, all the while pretending to be of an opposition party: Powerful Democratic chairman of the U.S. congressional Joint Economic Committee Senator Charles Schumer.  Here's what he had to say yesterday when Bernanke fired up his vacuum cleaner to clean out your pockets and dump them on Wall Street:

WASHINGTON (Reuters) - The chairman of the U.S. congressional Joint Economic Committee on Monday endorsed the actions of the Federal Reserve to broker JPMorgan Chase's purchase of Bear Stearns to fend off what he said was "the closest thing to a bank panic since the Great Depression."

"The Fed's move was smart, timely and threads the needle just the right way. There is no moral hazard argument here against this action," Sen. Charles Schumer, a New York Democrat, said in a statement. "This was a totally necessary move to prevent these serious problems from spreading, and to avert a possible meltdown of the financial system."

Moral hazard is the concept that investors might take greater risks on the belief that government policy will protect them from suffering losses...

Schumer also sits on the Senate Banking Committee, which has jurisdiction over issues involving the financial services sector. He said regulation of investment banks is something that needs to be considered.

"Our financial markets have evolved so that we now have three types of entities: We have banks and they are pretty well regulated. (!!!) We have investment banks, which were not regulated very much; and now we have hedge funds," the lawmaker said in a separate interview on CNBC...

Later on a call with reporters, Schumer said it was hard to believe that major complicated credit instruments that affect the health of the financial system are opaque and unregulated.

(That last phrase the Senator from New York makes is truly Bushesque in its disingenuousness. Schumer of course forgets that the last Democratic President signed into law the repeal of Glass-Steagall act which hitherto had largely provided the regulatory framework whose absence Schumer now bemoans. And he has reason to forget: he voted for that repeal.)

With friends like Democratic Senator Schumer, a working man doesn't need enemies. For those of you who wondered what the hell Nader was talking about when he said there was essentially no difference, where it counted, between Democrats and Republicans, it was precisely this. It might be a good idea to stop blaming the Naders of our political spectrum, who may be megalomaniacs but are on our side, and start seeing the real enemies also include folks like Charles Schumer, who may look like pragmatic politicians on our side, but are really fucking us.

Back to Astor Piazzolla's Buenos Aires
 

Today, economic policy makers are deep into disaster planning scenarios. That's why Helicopter Ben is printing money to help his wealthy friends. We are well past talking about tipping points. And Argentina in the 1990's tells us a thing or two about tipping points in a more or less stable geopolitical environment.

Back then, everyone knew Argentina's position in the '90's was unsustainable. Damn near every issue of the Economist talked about it. Mendoza state was printing money (essentially issuing debt) to pay its public service workers. The country ran twin deficits, just like America, public and trade. The public deficits were in the 2% of GDP range, less than America of course, but then, the Argentine peso was hardly a reserve currency anymore, so there was no effective zero-interest financing available to it either. And the trade deficit was, like America's, pretty structural as well, for the most part in the 3-5% of gdp range throughout the 90's, again roughly half that run in America today. And masked, like America, by offsetting capital inflows, as it sold off (mostly public) assets to foreigners, like the IMF told it to do, to fund its spending spree without getting the wealthy to pay their taxes.

Sound familiar?

And, just like America, the federal public deficit seen at first glance masked even deeper structural flaws - its states were also running up debt, as is the case in the US (witness California's recent bonding in order pay essentially operating expenses which, being denominated in USD, were backed by the US Central Bank, not terribly dissimilar to the situation of Mendoza state issuing its own currency).

Such imbalances are accidents waiting to happen, and like the situation in the US, there were many, in particular American and Spanish banks, who had an interest in making sure that when the accident came to pass, it happened in an orderly fashion in a manner which protected their assets, all the while reserving for losses on those assets. Accordingly, Banco Santander and Banco Bilbao Vizcaya both foresaw the risk (that is what risk managers do) and, when the boom finally got lowered, when the Argentine Peso lost 40% of its value overnight, exposing the banks collectively to approximately EUR 1.5 billion in losses in nominal terms, their reserves were sufficiently large as to not even warrant an analyst downgrade. Such was not, of course, the case for a large segment of the Argentine population, and when they started going hungry, they began to riot, bringing down the government.

When the whip comes down

America is no Argentina. For one thing, its economy is far bigger and, well at least historically, is far more diversified. For another, America still has a lot of interest-free creditors, though their willingness to so remain lessens with each passing Bernanke action. The inherent advantage of the faith and credit of a government whose central bank issues the world's premier reserve currency is not an advantage to be treated lightly, but treat it lightly America's political elite have done for the past two decades.

It's still probably likely that America's economic standing will observe a long, gradual, secular decline, and its currency will continue to weaken, in fits and starts. Working Americans, with no real protections from the inflationary effects of all this, and no safety net other than the ruling class ideology of "personal responsibility for rubes, subsidies for me," will suffer every bit as much as working Argentines earlier this decade, despite the far greater wealth which surrounds them. The tent cities are already growing, in metro Los Anegeles and beyond.

And a serious run on the dollar is not out of the question. Major issues with inflation are now pretty much a given, and eventually, as stated before, this situation will need to be dealt with via draconian measures, namely double digit interest rates and, if America's wealthy can't come to pay their fair share, a gradual bankrupting of the treasury.

The reasons for this are multiple. First, US twin deficits are not only unsustainable, they are, in nominal terms, roughly double those in Argentina. Second, lenders to America have already signaled their unwillingness to continue to throw good money after bad simply to maintain the value of their existing USD-denominated holdings. Third, like in Argentina's case, foreign banks have already begun the write-down of US assets in earnest; that the boom will fall is now only a matter of time, the losses having already been priced into expectations, it is as if the boom has already taken place, after all. Recall that $1.5 billions were enough to cover foreign bank exposure to losses in Argentina,  prompting the IMF to pull the plug on Buenos Aires, sending Argentina into a depressionary spiral. Possible exposure to US losses? Bloomberg's latest tally is well over 100 times that.

Unsurprisingly, the dollar tumbles against the Euro. But the real pain hits when the same things happen with the renminbi and the yen. And then what? The US produces less and less stuff, so it's not like it can export itself out of this. Again, like Argentina, when the boom falls, it will be painful to average citizens. And I think we all remember what happened in Argentina: middle class soup kitchens, homelessness, hunger.

Of course, the good news is that only after such a crisis and misery befalling Argentina's middle class was real reform possible, and poverty rates are falling, economic growth robust, and the neo-liberal orthodoxy has been chucked away like the cheap, ill-fitting suit it always was.

But is Amerika capable of reforming like Argentina?

In any event, one thing is clear. The US economy has nowhere to go but down. It has already begun. All bubbles come to an end, credit bubbles especially. And while it is impossible to predict day the bubble definitively bursts, it is also impossible to avoid the fact that one day it will. And when it does, Americans, middle-class on up, be forced to live within their means. The middle class will suffer greatly. The rich will simply be less rich. And the poor, well, they've been suffering under one-party neo-liberalism for the better part of three decades, so there's nothing left to lose for many among their ranks. The day will come, and probably sooner than later - that much is easy to predict - and in you are in the US with assets there now, you're going to notice it much more than you do already.

Unpredictable is what follows, both in terms of global economic impact, and internal political impact in the US.

Unfortunately, it's doubtful America has the ideological wherewithal to actually push proper reforms to remedy the structural situation its economy finds itself in, hamstrung by extremist neo-liberal ideology. This is because that orthodoxy is practised by the only two political parties in that country, resulting in a one-party neo-liberal state for all matters fiscal and economic. And without a voice for economic and fiscal alternatives, with the virtual absence of a credible opposition, with press organs controlled by the same interests which fund both political parties, it is simply hard to imagine a proper case being given wide berth, and even made, for the sorts of economic reforms Argentina put in place after its collapse. Reforms which have put Argentina back on the road to shared prosperity, long road though it be.

Nobody's crying for America these days

Saint Barack Obama may have put folks on notice that over-vociferous criticism of Amerika is uncool, but the fact is, if you live outside of Amerika, the sorts of commentaries to which, when voiced by his close friend, he objects, enjoy wide currency outside its borders. Folks may not have all cried at Evita, hell I hated it, but most did cry for Argentina when it went broke. Given the arrogance of the United States on the global stage over the past fifteen years, it's doubtful anyone will be crying for America. You're going to be on your own to sort out this mess, I'm afraid.

When the boom falls on the US economy (and in truth, its not a matter of if, it's a matter of when, how, and how severely), it is likely that the currency will inexorably forfeit its role as premier reserve currency. It may happen as it did to Sterling - over a long period of time. Or it may, somewhat less probably, happen via a shock or two.

Will the Euro take its place? In my opinion, probably not. Rather, what will begin to emerge will be more multilaterally-managed reserves, much like the modern multinational corporation manages currency risk. This involves baskets of currencies on reserve, in direct proportion to the currency inflows and outflows forecast in the future with ones' major trading partners. And, given that the EU is the leading trader in the world, the Euro will be a major reserve currency. But so will Chinese yuan, Japanese yen, a less-weighted US dollar, and perhaps Indian rupees as well. The Euro may get a favorable bias in your typical central banker's allocation model, much like Swiss francs get today, on the basis of its historically tight monetary policy (and whether this is a good thing or not is a topic for a different discussion). But given the increasingly multilateral nature of trade, it is likely that the days of massively preferential terms of reserve for one currency or the other are going to be over, probably sooner rather than later.

Poll
How much USD will you be able to buy with one Euro on 12/31/2008?
. Less than 1.50 4%
. $1.50 - $1.60 2%
. $1.60 - $1.75 10%
. $1.75 - $2.00 53%
. $2.00 - $2.50 19%
. More than $2.50 8%
. I'm moving to Canada. 2%

Votes: 47
Results | Other Polls
Display:
Tempted to post over on the orange monster, though that's a bit against my principles...

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 05:19:13 PM EST
I don't know why you would need an editor - it all makes enraging sense to me.

You can't be me, I'm taken
by Sven Triloqvist on Tue Mar 18th, 2008 at 05:29:26 PM EST
[ Parent ]
thanks man!

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 06:12:38 PM EST
[ Parent ]
I see you edited out the (incorrect) repetition of the tribeca joke. My job as an editor is done here.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:26:06 PM EST
[ Parent ]
It's impossible, as with any forecast of bubbles bursting, to predict day that Americans, middle-class on up, be forced to live within their means, but the day will come, and soon - that much is easy to predict.

Another sentence to edit.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:30:34 PM EST
[ Parent ]
the losses having already been priced into expectations, it is as if the boom has already taken place, after all

as if the fall has already

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:35:42 PM EST
[ Parent ]
i meant the boom, as in lowering the boom, as in an adult comes in and suddenly stopping children from doing what they shouldn't be doing.

changed the wording a bit.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 07:18:42 PM EST
[ Parent ]
Go on, post it, you know you want to.

</devil on shoulder>

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Tue Mar 18th, 2008 at 05:35:36 PM EST
[ Parent ]
as to break them.

Go on.

Redstar, this is superb stuff. I'll go and read it a second time now.

by Nomad on Tue Mar 18th, 2008 at 05:42:10 PM EST
[ Parent ]
thanks!

hopefully i can get mig to do it...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 06:13:02 PM EST
[ Parent ]
To do what, to post this on Kos?

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:20:58 PM EST
[ Parent ]
yeah.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 06:31:03 PM EST
[ Parent ]
You must post it.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 05:51:42 PM EST
[ Parent ]


The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 06:09:59 PM EST
[ Parent ]
If we get to work on those MBS valuation models...

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:23:32 PM EST
[ Parent ]
heh. ok. i'm going to sit on this a day or two anyhow.

everyone's bleating about an Obama speech today (didn't hear so don't know if its worth the bleating) in US centre-right blogostan, anyhow...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 06:35:19 PM EST
[ Parent ]
The speech is discussed in the open thread.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:47:03 PM EST
[ Parent ]
Man, I live here, I am American (well, half I guess, technically) but I sure don't get America.

Maybe my grandparents would've.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 07:08:10 PM EST
[ Parent ]
redstar:
I sure don't get America.

Well if the dollar keeps falling perhaps a nice European can get it for you. ;-)

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Tue Mar 18th, 2008 at 07:25:48 PM EST
[ Parent ]
To the surprise of many commentators, America's so-called opposition took the reins of power in the halls of its legislative branch, alas to little, if any, effect on the fiscal, social and economic matters we often discuss.

You need to edit that sentence.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:08:20 PM EST
[ Parent ]
Done. Thanks.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 06:10:15 PM EST
[ Parent ]
You don't need an editor.

You do need to post this.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 18th, 2008 at 06:15:12 PM EST
[ Parent ]
Okay, you dropped the 'g' off 'Bloomberg.'

But other than that - maybe wait a day or two for the quivering Obama-thon to come to its moist sycophantic conclusion.

Then post it.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 18th, 2008 at 06:27:46 PM EST
[ Parent ]
I corrected that and also a stray ober.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:32:37 PM EST
[ Parent ]
America still has a lot of interest-free creditors, though their willingness to so remain lessens with each passing Bernanke action

To do so? Or something else?

Do post it!

by nanne (zwaerdenmaecker@gmail.com) on Tue Mar 18th, 2008 at 06:41:50 PM EST
[ Parent ]
It's not a standard locution but it is correct and intended that way, kind of like "and in so doing..."

Thanks for checking it over!

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 07:23:06 PM EST
[ Parent ]
There should be plenty of room for it, as all they seem to be doing over there today is having a competitive sobfest over how "moved" they were by Obama's big speech.

Sigh.  Another day, another "Obama's big speech" while the economy goes to hell . . .

by keikekaze on Tue Mar 18th, 2008 at 08:26:55 PM EST
[ Parent ]
Do it. It's an obligation, I think- the thing may drop into the Kosvoid without a whisper, --but at least you tried.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Wed Mar 19th, 2008 at 05:00:50 AM EST
[ Parent ]
not will Indian rupees. What are they backed by? Would you trust the authorities behind them with your money? I sure won't.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Mar 18th, 2008 at 05:37:36 PM EST
The rupee? No way. Renminbi? As long as the economy is still managed by the present authorities, I have faith. Also, as a natural hedge, countries exporting to the PRC would be advised to have renminbi in their basket of reserves, imho.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 06:11:30 PM EST
[ Parent ]
You jest, American-style.

Last summer I chatted with a fellow fellow, a gentleman from Delhi of exceedingly refined caste and entrepreneurial spirit, who inquired after my employment prospects thus far. I gave him a few examples. He nodded thoughtfully and chuckled.

"I too have met more than a few unscrupulous dealers," he admitted.


Diversity is the key to economic and political evolution.

by Cat on Tue Mar 18th, 2008 at 07:52:06 PM EST
[ Parent ]
Is Senator Schumer clueless, or just affecting it?

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 05:49:05 PM EST
... and the biggest industry (the one with the deepest pockets, by far) in NY is....

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Mar 18th, 2008 at 05:55:41 PM EST
[ Parent ]
Hey, FDR and Elliot Spitzer were governors of NY, too...

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 18th, 2008 at 06:10:03 PM EST
[ Parent ]
principles.

And also, unfortunately, there is no political movement with any power which represents actual living breathing working people and disadvantaged in America anymore.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 06:17:51 PM EST
[ Parent ]
FDR's also been dead for sixty years, and Spitzer blew his political brains out to get some tail.

I'm afraid hoping for anything worth the powder to blow to hell from Schumer is a lost cause.  As soon as this crisis hit, he and Clinton were talking about bailouts for the finance industry and industries connected with it.  Without finance, New York is just Ohio with less space and more Puerto Ricans.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 19th, 2008 at 06:11:51 AM EST
[ Parent ]
And what's wrong with Ohio, or Puerto Ricans for that matter? ;-)

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Mar 19th, 2008 at 07:52:51 AM EST
[ Parent ]
Nothing at all.  And I quite prefer them to New Yorkers, actually. ;)

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 19th, 2008 at 07:55:29 AM EST
[ Parent ]
He's not clueless. He's just not on our side.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 06:11:56 PM EST
[ Parent ]
My best friend had Schumer as a roommate at Harvard.  He assures me that Schumer is indeed, clueless--a typical overachiever who used his marginal intelligence to learn the details of the conventional wisdom.

"Remember the I35W bridge--who needs terrorists when there are Republicans"
by techno (reply@elegant-technology.com) on Wed Mar 19th, 2008 at 03:26:34 AM EST
[ Parent ]
Excellent: brilliant in fact.

And the dollar is fucked for sure.

But (stag)flation or deflation? I think that's an interesting discussion point....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Mar 18th, 2008 at 06:02:49 PM EST
Both imho. Significant asset deflation, significant PPI and CPI inflation.

Worst of both worlds.

Just like Argentina six years ago.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Tue Mar 18th, 2008 at 06:16:33 PM EST
[ Parent ]
Thank you very much, sir. "News you can use: A short discussion of monetary theory and how it fucks you today" is my favorite bit. And I was just waddling through with my own version with respect to deflation, not-stagflation, earlier today. Bloomberg headlines set me off, yes, they did.

Diversity is the key to economic and political evolution.
by Cat on Tue Mar 18th, 2008 at 07:34:03 PM EST


The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Tue Mar 18th, 2008 at 07:47:05 PM EST
[ Parent ]
A little thank you for that. Good mix of righteous anger and economic concepts pitched at the proper level. Do you think that many Americans will change their economic views due to this crisis? or will it possibly go back to business as usual in a couple of years?

Member of the Anti-Fabulousness League since 1987.
by Ephemera on Tue Mar 18th, 2008 at 07:49:28 PM EST
The dollar going down in value is mentioned in the media, well at least on TDS/Colbert. If it's spinned properly it should hit home.

A 'centrist' is someone who's neither on the left, nor on the left.
by nicta (nico&#65312;altiva&#8228;fr) on Tue Mar 18th, 2008 at 08:34:20 PM EST
[ Parent ]
My uncomfortable bet is that some conservative gentlemen will suggest that, since a big war solved the Great Depression, another war could be just the much needed solution.

Of course, it was not the WWII war effort who solved the economical problems, but social programmes which also created infrastructures, prudent laws and (not often mentioned)both the immigration to the US of very qualified people from Central Europe - freedom-loving, creative people - and finally the (temporary) destruction of other advanced industrialised nations.

I hope that McCain  does not win the election because several of those gentlemen will have his ear. As for H. Clinton, she's ruthless.

by findmeaDoorIntoSummer on Tue Mar 18th, 2008 at 10:40:31 PM EST
[ Parent ]
I liked this diary, Red!

You should definitely post it on dKos.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Tue Mar 18th, 2008 at 07:51:53 PM EST
Left I on the News got de storeee.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Tue Mar 18th, 2008 at 10:28:02 PM EST
... for lefties here, forgive me if I ask your indulgence, as a committed socialist, to trust me on this one, but one of the few things the vile Milton Friedman got right... is this: when you print money and do not generate credible wealth, you pay for this via a tax called inflation.

Sonny, some of us lefties already knew that (and other deep profundities) when you were in swaddling clothes and little Milton Friedman was smearing his diatribes in finger paints.

For those of you who wondered what the hell Nader was talking about when he said there was essentially no difference, where it counted, between Democrats and Republicans, it was precisely this.

Nader detested the political pressure Democratic Party hacks put on him in 2000. At that time he was saying that the US would be better off to learn a few things about reality during a crazed right-wing George W Bush administration. Watching the Neocons bankrupt the US was a high price to pay for such public knowledge. Still, if the gravity of the current situation has finally penetrated a few cheetos-stuffed skulls over here, I suppose it was worth waiting for.

by Ralph on Wed Mar 19th, 2008 at 02:27:38 AM EST
Nader may have been reasonably right about Dems and GOP (though they have different roles in the show run by oligarchs), but he was less right about Gore then. Even if Mr Gore shared established illusions for NAFTA and all free market myths, he was not the man of power players at Wall Street and TV, judging from the astoundingly asymetric media campaign in 2000. They used every frantic trick, from ridiculing made up quotes to messing up Florida voting, to bring down Gore. Gore was not even the man of his own party - it is easy to rely "too much" on campaign advisers when those advisers objectively let you down. Gore would probably had not withstood well hostile media and big business had he won in 2000, and we may be a bit dissatisfied with Gore's political will since then. But his rather than George W's presidency (at least for 4 years) would had made a big difference on alternative lives of many working and home seeking families.

Even if Gore would not had changed the overall direction of financial trickery and cheap globalization, the tempo and scale of stressful changes matters a lot when it comes to adaptation of anyone, be it regular folks or, gasp, natural environment.

by das monde on Wed Mar 19th, 2008 at 09:43:18 PM EST
[ Parent ]
The significance of the 2000 shift can be appreciated from this world's scariest chart:


by das monde on Wed Mar 19th, 2008 at 09:48:11 PM EST
[ Parent ]
Great diary, but Europeans will be fleeced too: remember the German banks among the first victims of the subprime crisis. It will be for us to cry over our losers and our losses, never mind those who were paid to know better. They and many others around the world have been propping the US accounts under the guise of financial investment. The fall of the dollar is already eating into the value of their dollar-denominated assets. And we are no strangers to inflation either.

You're clearly a dangerous pinko commie pragmatist.
by Vagulus on Wed Mar 19th, 2008 at 03:41:10 AM EST
Europeans (mostly Spaniards via some major banks) were also "fleeced" in Argentina.

Far less than the Americans will be, though.

I don't know if this is a fact, but I suspect major European banks have already reserved what they needed to - it's not a liquidity issue for them, so why hide the magnitude?

OTOH, in the US, this isn't necessarily true. I note Lehman Bros started off a rally y'day announcing better than expected earnings, but also tht their operating cash flow was nearly negative 50 billions (thru Nov.). They have 30 billions cash les, another 60 billions equivalent securities they could sell off to stay afloat, so I don't know what the cheering's about - they might be less than a year from going tits up like Bear.

It's not a liquidiy issue in the Eurozone. For USD, it surely is.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 05:10:40 AM EST
[ Parent ]
I don't believe the Spanish banks and corporations were "fleeced" by Argentina: they went in and bought assets, and invested, and they're still there as far as I can tell. Losing $1.5bn was the cost of doing business, I guess.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 05:24:57 AM EST
[ Parent ]
You are quite right, though I seem to remember that whoever got large chunks of Argentine Telcoms via the IMF firesale also took a big bath, it was more than just the 1.5.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Wed Mar 19th, 2008 at 05:32:57 AM EST
[ Parent ]
Best summary I have yet read of the meltdown-

"The Chickens come Home to Roost"--and find the vultures already in residence.

Sincere thanks and admiration, redstar.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Wed Mar 19th, 2008 at 04:57:58 AM EST
Thanks!

I may have to quote you on vultures and chickens...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 06:35:17 AM EST
[ Parent ]
Good- just credit.

Capitalism searches out the darkest corners of human potential, and mainlines them.
by geezer in Paris (risico at wanadoo(flypoop)fr) on Fri Mar 21st, 2008 at 07:29:03 AM EST
[ Parent ]
I have some offhand observations from talking with my friends, who range from hard right to ordinary left (Swedish style, so move everything one step to the left for the European equivalent and two steps to the left for the American).

First, there is a very strong anger against the US, both for the accumulated Bush foreign policy stuff and the way they are hurting our economy by fucking up their own. There is horror when they understand how the subprime crisis happened, how the financial industry has behaved and how real wages have developed in America.

Still, no one is crying. Indeed, several people wouldn't mind suffering through a recession as long as the Americans suffer worse. Not looking very good for future US-EU relations, even of the removal of Bush will change a lot...

Further, strict regulation, state intervention, socialism and even Marxism is begining to look rather attractive. So does the death penalty for "bank treason". Who said moral hazard was a problem?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 19th, 2008 at 05:47:26 AM EST
Your friends probably remember when the Swedish bank crisis cost them their school milk, right?

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 06:04:07 AM EST
[ Parent ]
That was a long time ago.

And that one actually resulted in real effects on the guilty, and on the side of the financial industry it mainly had to do with incompetence and inexperience (no one knew what a credit loss was, ot exaggerate it a bit), not calculated greedy malice and class war.

In the end, the banks were nationalized, the old soc dems (who were responsible to a large degree) were thrown out, the right screwed around a bit and lost lots of money on defending the fixed currency rate, new soc dems were brought in and the minister of finance was so succesful that he ended up being prime minister for pretty much forever.

He even gave us back the milk. Eventually.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 19th, 2008 at 06:21:54 AM EST
[ Parent ]
It seems they're either lactose or lachrymose intolerant

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Mar 19th, 2008 at 07:59:29 AM EST
[ Parent ]
European Tribune - Nobody's crying for you, America.

Think of it this way: your mortgage rate today might be at 6%. Two years from now (and this is a very plausible situation) it might be 12%. Hell, it might even be more than that for a while, significantly more, ask any Argentine about the past decade.

No problem, you say? Well, good for you, you get to sit tight in your house, you don't have to move, you have a secure job, and the value of your house, source of wealth for the vast majority of the American middle class, is of no matter to you.

But if you are really worrying about your net worth, you might have to sell your house, you might be near retirement and planning on a move to a condo or smaller home somewhere warmer, things virtually all of us sooner or later think about, this is of concern to you. Because a home's value, like that of a long bond, is simply a function of its yield, expressed in market rates for long term mortgages. In other words, your house is only worth the monthly payment that the sort of person who might be interested in buying it can afford. After all, markets are a signal of value, even in our Socialist worker's paradise where Cheney gets an unheated cell in the Wyoming re-education camp gulag, even if we must vigorously seek to minimize and manage the deleterious effects of their fluctuations.

If you own your house outright then the value of your house is of no concern to you, even if you're hoping to retire to a condo or a warmer place. If the value of your house takes a 40% haircut because of double-digit interest rates, so does the value of the house or condo you hoped to move to, and you break even.

However, if you're worried about loan-to-value of your house, that is, if you're leveraged...

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 07:59:36 AM EST
The American real estate market has always been very volatile, and I'm not sure that it's hugely different this time around.

  • I bought a house in 1982 for $87000, sold it in 1987 for $67000. Oops. Market collapse. Employer relocation plan helped me cover the loss.
  • Bought one in 1987 for $127,000, appraised in 1995 for $90,000. Huge market collapse in progress, especially in condo market, so we didn't move.
  • Sold in 2000 for $250,000. Boing, the market jumps up!
  • Bought in 2003 for $230,000, now worth maybe $200,000. If I could sell it at all. Luckily, I have no desire to move right now. (Colorado Springs is so nice! :-) )

So, at least over here, gigantic short term price changes are an EXPECTED CHARACTERISTIC of the real estate market. When prices go up, everybody shifts their situation around, and when they go down, they hunker down and cross fingers and pay the mortgage. And some people--usually those who take larger risks--can get stuck in the middle. But remember, those sub-prime mortgages were enabling people to live in much bigger houses than they would otherwise have been able to afford, and to many Americans, big house = good. They were getting value (to them) from the deal. They will move to apartments, save another $10,000 down payment, and in a couple of years get another "creative" loan.

It seems to me that if the European market is going to be highly risk-averse, then it might be worth it for European bankers to figure out how to simultaneously engage in the globalism thing and at the same time protect against wild swings in the market. Doesn't look to me like you've done that, particularly if your market responds in a more negative fashion to our problems than does our market...

by asdf on Wed Mar 19th, 2008 at 08:32:24 AM EST
[ Parent ]
Any explanation, in your formulation, for the relatively new (well, since the 1930's anyhow) phenomenon of the tent city?

It's a groqing phenomenon.

Not everyone can get into apartments for now and then get "creative financing" the next time around. And a lot of them have kids; educational development issues? Certainly/

Understood that the more comfortable layers of American society are immune to (and therefore clueless about) the growing incidence of homelessness among the working poor. Your point speaks well to that immunity.

But is limited only to that comfortable layer.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 08:40:02 AM EST
[ Parent ]
There are indeed homeless people in the U.S., just like everywhere else. And we do a lousy job of supporting them. But in a city of 10,000,000 people a tent city of a few hundred is pretty small. Ratio-wise, we probably have more people sleeping under the bridge here in Colorado Springs.

Unemployment is not (yet) a big problem here. It's pretty easy to get a job even if you have low skills, and apartment rents are quite low. There is certainly a threshold of employability that you must meet, but assuming reasonable health, one can cover the rent. A two-bedroom apartment goes for about $600 a month. If you're making ten bucks an hour as a laborer, you can cover it...

In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc. Unemployment is a personal financial disaster, and a big jump in the unemployment rate is about the only thing that's going to move us towards 1930s-style quasi-socialism...

by asdf on Wed Mar 19th, 2008 at 08:53:00 AM EST
[ Parent ]
Which other industrialized country has homeless families out on the street? Which other industrialized country has seen a 50% increase in homelessness over the past ten years, during economic "good times" supposedly?

Nope, you're engaging in typical US bourgeois denial of what's going on, the sort of ideological cluelessness which is a part of the problem.  

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 08:58:30 AM EST
[ Parent ]
I think you might be taking a sort of a narrow view of the rest of the world's approach to these sort of problems. For example, there are squatters in Paris, which is something that essentially doesn't exist in the U.S. And there are homeless people in Britain, and Roma who would be categorized as homeless in the U.S. It's a problem everywhere.

http://www.networkeurope.org/feature/under-priveleged-roma-children-of-south-east-europe

I'm not going to argue with you about my personal viewpoint, but I don't think I fall completely into the bourgeois denialist category...

by asdf on Wed Mar 19th, 2008 at 09:20:48 AM EST
[ Parent ]
asdf:
For example, there are squatters in Paris, which is something that essentially doesn't exist in the U.S.
Yes, the US does have stronger enforcement of the rights of absentee owners. I personally am sympathetic of squatters - call me a dangerous pinko communistanarchist.

In any case, Paris actually has its fair share of people sleeping under bridges in tents. Many of the tents were provided by humanitarian NGOs. Geezer in Paris may have written about that in his diaries or comments.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 09:24:23 AM EST
[ Parent ]
You are a dangerous pinko.

However, I was in Panama not too long ago, where land tenure issues are a big problem, and the lack of landlord rights has a bunch of really obvious and bad side effects of its own. Maybe the thing to do is have strong protection of land ownership, and then approach the problem of homelessness in some other way.

by asdf on Wed Mar 19th, 2008 at 09:36:58 AM EST
[ Parent ]
Squatting can prevent some of the worst aspects of property speculation. City houses are meant for living, not capital accumulation. If you mean to invest in property, you should at least let it.
by nanne (zwaerdenmaecker@gmail.com) on Wed Mar 19th, 2008 at 10:26:39 AM EST
[ Parent ]
There are homeless people all over the world, including under bridges, in Paris, especially in London, in Berlin.

What there do not tend to be are homeless families, particularly, homeless single women and their children, like onee sees in America. There were, before this financial crisis began last summer, over a million homeless women and children in America. This is paternalism combined with calvinism and it is a particularly toxic stew for women and children, something you just don't see anywhere else in the industrialized "west".

If you can show me homeless people like that anywhere in the industrialized world outside of America, please I'd like to see the evidence.

And excuse me, but I lived near a Roma camp for some time in France, and it was anything but what you describe. I am aware of terrible conditions for Roma, especially in new entrants (ie developing entrants) to the EU and also in Greece especially due to the olympics and construction there. A tent village in Sacramento, housing families, is not the same. Not by a long shot. The comparable thing I've seen in my life? Temporary refugee camps along the border of Pakistan and Afghanistan.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:11:13 AM EST
[ Parent ]
I'd like to learn more about squatter's rights in the US because I recently met a woman who squatted with artist friends in a building on the lower East side in Manhattan back in the 1970s. They ended up getting the rights to the building for a dollar. By the 90s, they had become involved with the city's arts community (gainfully employed) and managed to secure a multimillion loan with the building as collateral, and with that money they started a very successful non-profit arts organization.
by Upstate NY on Wed Mar 19th, 2008 at 01:57:34 PM EST
[ Parent ]
All of them have those problems, as far as I know. to some extent or the other. It seems to me that you're letting anger cloud your view of the evidence. The increase in homelessness is another matter.

The core difference is the extent to which the countries see those problems as a failure of government and the country as opposed to a personal failure of the people involved: often the personal failure is put on them by calling them gypsies, or depending on their unfortunate ethnic origins. It the US it just seems to be mainstream thought that anyone who finds themselves in that position is to blame for it.

by Colman (colman at eurotrib.com) on Wed Mar 19th, 2008 at 09:26:46 AM EST
[ Parent ]
"It the US it just seems to be mainstream thought that anyone who finds themselves in that position is to blame for it."

Maybe that's a bit of an overstatement, because there is lots of sympathy for people who are sick or unemployable or mentally ill. What there isn't is wide support for governmental intervention.

by asdf on Wed Mar 19th, 2008 at 09:33:36 AM EST
[ Parent ]
Sympathy != support.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 20th, 2008 at 08:05:54 AM EST
[ Parent ]
With attention directed to the evidence on the composition of homeless in America: the face of homelessness in today's US.

Homelessness in the EU, particularly the Eurozone, is largely limited to the mentally ill, the chemically dependent, and new, unauthorized migrant workers.

That's decidedly not the face of homeless in the US, as anyone who's worked at a Dorothy Day center can tell you in a heartbeat.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:14:37 AM EST
[ Parent ]
You probably have a point on the homeless mothers and children: I'm not aware of them being left by the side of the road here, though I understand that they can end up in a pretty hellish sequence of (state-funded) bed-and-breakfast accommodation and temporary hostels since there is inadequate provision for proper support and accommodation.
by Colman (colman at eurotrib.com) on Wed Mar 19th, 2008 at 10:22:19 AM EST
[ Parent ]
I understand that they can end up in a pretty hellish sequence of (state-funded) bed-and-breakfast accommodation and temporary hostels since there is inadequate provision for proper support and accommodation.

State funding? Bed and breakfasts?

That's gotta be Ireland, cuz that ain't how it works in America. Shelters go out hat in hand and rely largely on charity, just like in the 19th century for most of Europe. That's actually one of my sisters' job, going out with the hat.

OTOH, refugees in France do tend to be lodged in hotels, often for long periods of time.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:44:16 AM EST
[ Parent ]
Obviously, I was talking about Ireland.
by Colman (colman at eurotrib.com) on Wed Mar 19th, 2008 at 10:49:07 AM EST
[ Parent ]
Oh shit, my bad...I didn't see the word here.

I must have gotten my Irish up overmuch. Sore subject for me, hits very close to home.

Sorry.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 11:21:19 AM EST
[ Parent ]
I listen to this denial drivel all the time, it goes with the territory of what I do for a living.

I was polite the first time, but when the interlocutor is persistent in pressing the mistaken and insouciantly inconsiderate view of "its all the same everywhere" which is, let's be honest about it, a variant on the theme of "sucks to be them," my patience wears pretty thin.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 10:17:00 AM EST
[ Parent ]
Yup, a conversation I too had on several occasions in the US.

Them: It is the same everywhere. The problem can't be solved.
Me: No, we don't have homeless in Sweden, beyond the few drunks or drug addicts.
Them: Ahh! But you have such high taxes!!
Me: Yeah. Welfare isn't free, you know. But the problem is solvable. Saying it isn't because it requires high taxes pretty much just makes you a greedy bastard.
Them: No, no, no. We believe private charity can do the job better. I give to private charity! I'm not a heartless, greedy bastard.
Me: Really, yes you are. Clearly the problem requires funding beyond your token private charity provisions. Or it wouldn't exist anymore. As we have a concrete example of it being done better by government elsewhere, your belief in private charity is pretty much demonstrated false.
Them: Yeah, but your taxes. They are so high...

by someone (s0me1smail(a)gmail(d)com) on Wed Mar 19th, 2008 at 11:42:40 AM EST
[ Parent ]
Well, they are going down, thank god.

The latest thing is that the EU blocked tax cuts for service workers (thank Brussels, that was a really stupid tax cut) so instead the government will cut employment tax (hidden income tax) from 21 % to 15 % for people under 26. Everyone else pay something like 30 % employment tax (and on top of that the ordinary taxes of 30-50 %).

So yes, it's a good day to be under 26 in Sweden. :)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 19th, 2008 at 11:51:32 AM EST
[ Parent ]
In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc.

And that's a big problem. Sure, there should be a very big financial differnce between having a job and not. People shouldn't have any incentives to live on benefits.

But why should corporations do pensions, healt care, insurance and another ten thousand things? In neoliberal utopia(tm) those things should be financed by the individual. In a more reasonable world, most of those things are done by the state and financed via taxes.

The current US system is just stupid, putting strain on the competitivity of firms while utterly ignoring the needs of the unemployed.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 19th, 2008 at 09:05:38 AM EST
[ Parent ]
I agree with you that the U.S. system has some pretty huge shortcomings, particularly in the lousy support of the unemployed, the sick, and the elderly. I'm not defending it...
by asdf on Wed Mar 19th, 2008 at 09:14:33 AM EST
[ Parent ]
asdf:
In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc. Unemployment is a personal financial disaster, and a big jump in the unemployment rate is about the only thing that's going to move us towards 1930s-style quasi-socialism...
I thought the lesson of the 1930's was that unemployment should not be a personal financial disaster, and moreover the New Deal showed that it was possible to make it so it wouldn't be.

How was that forgotten?

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 09:18:37 AM EST
[ Parent ]
Because the New Deal was a plot by the Communists to take over the world? Because Americans have short memories? Because there's a theory of making it on your own?

I think the bottom line is that America has not yet had as big of a disaster as Europe had in the mid-20th century.

by asdf on Wed Mar 19th, 2008 at 09:23:31 AM EST
[ Parent ]
I think you hit something right on the head, there.

"I said, 'Wait a minute, Chester, You know I'm a peaceful man...'" Robbie Robertson
by NearlyNormal on Wed Mar 19th, 2008 at 06:17:58 PM EST
[ Parent ]
If you're making ten bucks an hour as a laborer, you can cover it...

In the U.S. economy, being employed is key. That's how you get your insurance, your credit cards, your car and house loan, etc.

And if you're not making ten bucks an hour? If you're not getting benefits?

See What The Jobful Get for a non-mythical look at US employment.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Mar 19th, 2008 at 11:47:30 AM EST
[ Parent ]
Any explanation, in your formulation, for the relatively new (well, since the 1930's anyhow) phenomenon of the tent city?

"Survivor: Outer Los Angeles," coming this fall to CBS.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Mar 19th, 2008 at 02:33:32 PM EST
[ Parent ]
Right.

In technical terms, redstar's saying that a house is (typically) a 30-year 100%-coupon bond. Interestingly, the interest-rate sensitivity of the price of a bond is called its duration and a 30-year bond has... well... a long duration and therefore a large interest rate sensitivity. For his chosen example of a 30-year mortgage at 6% the duration is something like 21 years.

So, if your interest rate goes up by 0.1% per year, you multiply that by 21 years and you get 2.1% as an estimate of the drop in the value of the house. If you have an ARM not only the value of your house goes down, but your interest payments also go up. Not nice. But you only care about small movements like this if you're speculating in real state. IMHO a first home is not an investment, it's a home, but a mortgage does have this kind of risk which I don't think is quantified in just this way by mortgage advisorssalesmen. It might be obvious that the term of the mortgage is roughly equal to the interest rate sensitivity of the resale value, but ordinary mortgagees are not generally aware or made aware of this fact. [Fortunately for mortgagees, duration decreases as interest rates rise, so by the time you've moved from 6% to 12% you're no longer talking about 21 years' duration but something like 9 years - again, duration is only directly applicable to small movements]

It is interesting that for a 30-year mortgage going from 6% to 12% is a 40% drop in price to 3 significant figures. Anyway, regardless of how accurate it is, redstar uses the 40% haircut to great effect.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris

by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 09:10:58 AM EST
[ Parent ]
I've seen two viewpoints on residential real estate. Some people buy a house to live in, and work to get it paid off. Maybe 10% of buyers do this. The rest push the envelope and get the biggest loan they can (usually the max mortgage payment is about 30% of your monthly gross income), based on some theory about selling it later; this is the "real estate ladder" theory, although that term isn't used here.

But the critical difference, perhaps, is that in the U.S. it's widely recognized that the real estate market is very volatile. Everybody knows this, and it's just factored into the personal financial risk calculation that everybody makes.

by asdf on Wed Mar 19th, 2008 at 09:28:44 AM EST
[ Parent ]
We should cry for the working and unemployed Americans. We should cry for Americans that are not part of the "belt-way" elite or the corporate class. Americans are duped by their own culture to accept the harshness of the Anglo-American system.

Anglo-American culture of "rugged individualism" is to blame, along with the selfish culture and punishment for economic failure that is a result of laissez faire capitalist, Social Darwinism is to blame...

The real root is the American culture of "rugged individualism" and the notion of "pull yourself up by your bootstraps." Americans are duped into embracing these notions through the hearkening back to the early 1900's, when immigrants really could make something of their lives in America. Today, the "immigrants' myth" is now being used to displace American workers. Before this happened, the American worker had to be demonized as "lazy, fat and demanding of high salaries."

Personal failure, especially economic failure, such as the inability to get decent employment, is brutally punished in American culture. There is no social safety net to catch Americans that economically fail - and this is purposefully crafted this way.

The lack of responsible concern on the part of the "richest nation of Earth" should be viewed by the international community as irresponsible governance. Even poor nations would help their own people if they had resources or at least allow help to enter their nations. Find out what happened to the Hurricane Katrina aid sent from Europe to America, especially food aid.

It should be regarded as irresponsible governance, especially in the "richest nation on Earth" to allow your own people to sleep in the streets and suffer just for the inhuman Anglo-American, lassez faire notions of "rugged individualism" and cruel punishment for failure.

The only hope is that America CRASH and that Americans wake up to the self-destructive and dehumanizing nature of their social-economic system. It is hoped that, as far fetched as it is, America adapt the social market principles and a kinder and gentle system for human beings to live under.

by euamerican on Wed Mar 19th, 2008 at 10:07:46 AM EST
If I haven't alrady pissed you off, thank you for your support...

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Wed Mar 19th, 2008 at 11:34:33 AM EST
Wonder how the votes are going to spread there rather than here?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Mar 19th, 2008 at 12:04:35 PM EST
[ Parent ]
Dollar/euro: please make a record of the vote tallies here and at the orange place after the dust has settled, so we can take a look back at it on 31 Dec. 2008. The year is still young.

You're clearly a dangerous pinko commie pragmatist.
by Vagulus on Thu Mar 20th, 2008 at 07:01:21 PM EST
[ Parent ]
There is going to be a big realignment in world finance, but this blip is not it.

I suppose it depends upon your horizon, but for those who haven't experienced similar dislocations this one seems to be earth shattering. It isn't.

This will pass in a couple of years, just as the dot com bubble did. At the end of the crisis there will be a bit more foreign ownership of US assets, there will be a few ex-millionaires and the concentration of ownership by large firms will have increased.

The super wealthy who set much of economic and social policy will still be super wealthy. The politicians who they buy will still be bought. In the US a big win for the Dems may lead to a new cycle of consumer protection and some improvements in the safety net. That's about it.

The US will  still  depend upon militarism to (attempt) to rule the world. The EU will continue to get a free ride from this militarism and continue to dodge its responsibilities when it comes to dealing with failed states. China and India will continue to grow, but internal strife will increase and the path will be less smooth than they now believe.

The climate change (both the real one and the metaphorical one), will occur towards the middle of century. How this will play out is beyond by predictive abilities, but unless there are bold steps taken now, it won't be pretty.

Right now some sharp investors are buying up oversold assets and will be seen as wise and foresighted in 2010.

As I always say, "Don't Panic".

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Wed Mar 19th, 2008 at 12:20:29 PM EST
Maybe I should have put up a chart on the CA deficit, and explained that. Maybe I should have put up a chart on CNY v USD and compared it to CNY v EUR to show the PBOC is already in the process of re-orienting.

But the fact of the matter is, when these financial crises to which you allude occurred, the US was a creditor nation with an industrial base to export its way out of the mess. Now, the US is a heavily indebted nation with an enfeebled industrial base, specialized in the sorts of services which cannot easily be exported.

Nope, this might not be the big one, and there certainly are levers to pull the US out of this. Namely, re-institute a progressive federal income tax like before JFK, increase interest rates like Volcker did, or both.

Either way, there are hard times ahead, and unlike all other significant downturns since the '30's, the safety net has also been gutted.

I admire your optimism though.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 12:29:18 PM EST
[ Parent ]
And by the way, I think more than just I object to the "free ride" comment you make. I'd just as soon the US didn't piss away valuable resources on milatary hardware which has been proven useless in Iraq and, ultimately, Afghanistan too.

All that hardware, and the US has made the EU less safe. Nobody's asking the US for anything around these parts, as far as I can see, maybe you can try that argument out on the Canadians.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Wed Mar 19th, 2008 at 12:43:26 PM EST
[ Parent ]
The EU will continue to get a free ride from this militarism

So true, a free ride to - hell.

and continue to dodge its responsibilities when it comes to dealing with failed states

As in the failed state of Irak, I suppose.
What exactly are Europe's or the US - or anyone's for that matter - duties towards failed states ?

by balbuz on Wed Mar 19th, 2008 at 03:53:06 PM EST
[ Parent ]
Actually I was think more of the failed states in Europe like the bits of the former Yugoslavia, Cyprus and many of the former Soviet republics.

The migration from North Africa which is causing consternation in places like Spain might also be better handled if meaningful aid was given to the places the migrants are coming from.

Isolationism has a tendency not to work as desired over the long run. A lesson both Europe and America fail to learn.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Wed Mar 19th, 2008 at 06:26:30 PM EST
[ Parent ]
rdf:
The migration from North Africa which is causing consternation in places like Spain might also be better handled if meaningful aid was given to the places the migrants are coming from.
Spain has already negotiated with North-West African states and pledged development aid to try to stem the flow of economic migrants.

afrol News - Migration produces EU deal for Mali; Bissau next

The European Union (EU) has granted substantial extra aid to Mali to assure a faster social development of the country and thus halting its large illegal migration outflow. Mali has turned into the largest source of irregular migrant to Spain and Europe, mostly due to rampant poverty and lack of vision for the country's large youthful population. Meanwhile, Guinea-Bissau seems set to be the next to achieve a lucrative EU deal as migrants have started departing from that country.

...

Spanish diplomats, who have travelled frenetically over most of West Africa during the last year, have been able to secure EU assistance in signing migration control and development aid agreements with the main sources of irregular migrants. Especially Morocco, Mauritania and Senegal - the main countries of departure - have already signed agreements worth hundreds of millions of euros, in addition to receiving logistic aid in controlling borders.

...

Spanish and EU authorities have so far been rather successful in closing the main migration routes into Europe. Economic and diplomatic concessions to Morocco assured Rabat's harsh crack-down on Africans trying to use the country as a base to migrate to Spain. Libya and Tunisia are equally tough on those heading for Italy.

Whether these combined enforcement and development aid efforts will be sufficient or not is an open question, but in any case you might want to inform yourself before makign sweeping statements about what Europe has or hasn't done or has considered doing.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Wed Mar 19th, 2008 at 06:56:56 PM EST
[ Parent ]
Well eurozone-member Cyprus is many things, but a failed state it ain't. The Northern part is still under Turkish military occupation, but efforts are ongoing for reunification.
The failed states in Yugoslavia, one could argue, were (at least partially) the result of US and EU idiocies, crimes and whatever else is part of the construction kit for spheres of influence.

And, in Greece that I know of, the majority of illegals nowadays crossing the Aegean are from Iraq, Afghanistan and Pakistan. In other words the recent upsurge in incoming illegal immigrants is in no small part due to the very energetic policies of the US in various parts of the world.

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Thu Mar 20th, 2008 at 09:21:43 AM EST
[ Parent ]
Thank you for posting this interesting diary and triggering a useful discussion...
by asdf on Wed Mar 19th, 2008 at 09:09:02 PM EST


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