Sunday, November 6, 2011

Three Minutes To Midnight

Israeli Government Reportedly Closer To Attack On Iran

In case no one has noticed, recently there has been a rapid increase in the probability of a preemptive air strike on Iran's nuclear reactors and fuel (or weapons-grade material) processing facilities.

There have been plenty of precedents. The Israeli air force attacked Saadam Hussein's Iraqi reactor outside Baghdad in 1981; in September of 2007, they hit a suspected reactor site in Syria, allegedly constructed with North Korean personnel and assistance.

There have been plentiful warnings to the Iranians (in fact, if airstrikes occur, they will be one of the most 'telegraphed' military punches since the build-up to 'Operation Desert Storm' in 1991 and to 'Iraqi Freedom' in 2003). The UN has been in negotiations with the Iranian government about their attempt to develop nuclear power -- and nuclear weapons -- since the mid-2000's through their International Atomic Energy Agency (IAEA). Wikipedia notes:
After public allegations about Iran's previously undeclared nuclear activities, the IAEA launched an investigation that concluded in November 2003 that Iran had systematically failed to meet its obligations under its [Nuclear Non-Proliferation Treaty] safeguards agreement to report those activities to the IAEA, although it also reported no evidence of links to a nuclear weapons program. The IAEA Board of Governors delayed a formal finding of non-compliance until September 2005, and (in a rare non-consensus decision) reported that non-compliance to the UN Security Council in February 2006.

After the IAEA Board of Governors reported Iran's noncompliance ... to the United Nations Security Council, the Council demanded that Iran suspend its enrichment programs. The Council imposed sanctions after Iran refused to do so.

The sanctions against trade and transfer of technology on Iran went ahead under "Lil' Boots" Bush. In 2004, U.S. intelligence was able to obtain a laptop taken out of Iran which allegedly held data about what has been called "The Green Salt Project", including a design for a missile warhead and information about the Iranian's enrichment program for Uranium.

The UN had asked to have access to this information, but were repeatedly rebuffed until 2008, and the "laptop documents" were provided to the IAEA -- which issued a report on Iran's nuclear activities that year. Still, there was no real smoking gun shown in their reports -- though nuclear physicists at IAEA were clear that Iran had increased its capability to ramp-up quickly to weapons-grade uranium production if they desired.
  • Days ahead of a planned meeting between IAEA and Iranian representatives in Geneva, on September 25, 2009, President Obama and Britain's then-Prime Minister Gordon Brown disclosed the existence of a secret, underground nuclear processing plant near the city of Quom, which the Iranian authorities had built and kept hidden from IAEA inspectors for years.

  • In early October, 2009, Iranian representatives rejected the IAEA's report at their meeting in Geneva. The UN, on a resolution sponsored by the United States and Great Britain, levied additional sanctions on trade and technology transfer against Iran.

  • Also In early October, following possibly fixed and controversial elections for Iran's president (resulting in Mahmoud Ahmadinejad's continuing in power), massive protests erupted across Iran; it looked as if the regime of Iran's Revolutionary Council and Revolutionary Guard was in jeopardy, but the Iranian government brutally suppressed the protests and rejected any complaints that the elections were rigged.

  • In December of 2009, the Saban Center For Middle East Policy (part of the Washington, D.C.-based Brookings Institution) conducted a war game exercise -- one of three simulations held that month (the others were held at Tel Aviv and Harvard universities). The scenario assumed Israel hit and destroyed six out of nine nuclear sites in Iran, and only showed more clearly that there was no way to predict where such a crisis would lead.

  • In June, 2010, a new computer worm called 'Stuxnet' was released and caused some havoc in businesses worldwide -- at the same time, it hit computer networks controlling an unknown number of centrifuges in Iran's nuclear fuel processing facilities, and the centrifuges spun out of control. Iran accused the United States and Israel of developing and delivering the worm. Though there is no conclusive proof (and there may never be), circumstantial evidence about its origins suggests they may be right.

  • On November 29, 2010, Majid Shahriari, an Iranian physicist involved with his country's nuclear program, was killed and his wife injured while on his way to work at a University in Tehran; his attackers rode motorcycles and placed a magnetic bomb on his car. Another Iranian nuclear scientist, Fereydoun Abbasi-Davani, and his wife, survived an identical and almost simultaneous attack.

  • In February, 2011, as the 'Arab Spring' began, demonstrations in Iranian cities, similar to those of the previous Fall, continued into April but were also stepped on heavily by the Iranian authorities.

  • In May, 2011, the New York Times reported that the IAEA, "frustrated by Iran’s refusal to answer questions, revealed that it possesses evidence that Tehran has conducted work on a highly sophisticated nuclear triggering technology that experts said could be used for only one purpose: setting off a nuclear weapon."

  • On July 23, 2011, another physicist in the Iranian nuclear program, Daryoush Rezaie, was shot dead in front of his home in Tehran by gunmen on motorcycles.

  • In August, 2011, U.S. (and presumably, Israeli) intelligence learned that the Iranians were moving the bulk of their nuclear materials processing into the underground facility near the city of Quom, which the U.S. and UK had revealed in 2009.

  • On October 11, the Department Of Justice announced arrests had been made in an alleged plot by high-ranking members of the Iranian Revolutionary Guard, and members of the 'Los Zetas' Mexican drug gang, to assassinate the Saudi ambassador to the U.S.


Obligatory Small Animal Photo In Middle Of Blog Rant: The Rock Hyrax, Sitting On Your Car

This coming Tuesday, November 8, the IAEA will deliver a report -- something it does quarterly -- about Iran's nuclear efforts (it's hard to believe they haven't already read it), and rumors in the British press indicate the report's contents will be "a game-changer" in negotiations with the Iranian government.

However, this past Tuesday, November 2, the Tel Aviv newspaper Haaretz reported that for weeks, Israeli Prime Minister Benjamin Netanyahu has been pressing his cabinet to agree to an attack on Iranian nuclear facilities. Huffington Post UK reported that:
Recent weeks have witnessed an on-going debate within Israel as to the possibility of a unilateral military strike against the Iranian regime, however Haaretz reported that the doves currently hold sway within the cabinet, including interior minister Eli Yishai and finance minister Yuval Steinitz.

On Monday, Netanyahu told the Knesset: "One of those regional powers is Iran, which is continuing its efforts to obtain nuclear weapons. A nuclear Iran would constitute a grave threat to the Middle East and the entire world, and of course it is a direct and grave threat on us."

One day later, defense minister Ehud Barak, struck a similar tone. "A situation could be created in the Middle East in which Israel must defend its vital interests in an independent fashion, without necessarily having to reply on other forces, regional or otherwise,” he said.

In Great Britain, the Guardian UK also reported on Tuesday that the MoD (Ministry of Defense) has reportedly begun to examine "where best to deploy Royal Navy ships and submarines equipped with Tomahawk cruise missiles over the coming months as part of what would be an air and sea campaign".

Remember that during the same ten years we've been discussing, Iran's government -- principally Iran's president, Mahmoud Ahmadinejad -- has denied any efforts to produce a nuclear weapon. This same line has been taken by Iran's representatives with the IAEA.

However, Ahmadinejad has also made a name for himself through public statements such as "[Ayatollah Khomeini] said that the occupying regime [i.e., Israel] must be wiped off the map and this was a very wise statement... I have no doubt that the new wave that has started in Palestine, and we witness it in the Islamic world too, will eliminate this disgraceful stain from the Islamic world" (October, 2005).

His remarks denying the Holocaust (2006), and claiming the massacre of European Jewry was blown out of proportion as a tool for manipulation by 'Zionists' (2009) have been widely reported (though Ahmadinejad continually claims he was mistranslated); and saying if the UN levied additional sanctions against Iran after its secret nuclear processing facility was discovered, it would be a mistake "they would regret making".

Israel has made it absolutely clear that it would not permit Iran's having the ability to create nuclear weapons. Iran already has a missile delivery system.

An attack on Iran's nuclear facilities would have to be a full assault on that nation's air defenses and major command and control facilities. Any attack by Israel would be answered by Iran, and any regional players -- Russia, India, possibly even China -- might get involved. It's a foregone conclusion that the United States would be.

Iran has the ability to close the Straits of Hormuz, through which roughly a quarter of the world's crude oil moves. The Iranians have Chinese-manufactured anti-ship missiles, which can travel at supersonic speeds -- faster than the Exocets used by Argentina against the British navy during the Falkland Islands war.

If our navy guarantees the security of the Straits in the aftermath of an Israeli attack, the Iranians may decide to turn the Persian Gulf into a graveyard for supertankers and U.S. vessels.

An escalating series of confrontations and tragedies, with large loss of American lives, might allow the U.S. to force a resolution in the UN's Security Council allowing serious military action against Iran -- and only preparations for all-out war in the Middle East would allow it. The last time the Security Council approved such a resolution, it was shown to be based on lies created by "Lil' Boots" Bush and his people about the existence of WMD's in order to provide the 'legal' umbrella of authority to invade Iraq. The UN isn't anxious to lose more credibility with a similar mistake.

Remember where we are. America and Western Europe is shuddering under the weight of the greed and avarice of a tiny sliver of its populations. No one down here in the street, among The People, is anxious to begin fighting another war. We can't afford it.

And, there hasn't been any time to prepare the country for the possibility of a conflict. Even an argument about the threat to the existence of the nation of Israel (which I personally agree with) might not be enough to convince a majority of Americans to support another war. We've already had ten years of it -- and the 5,000-plus lives lost in Afghanistan and Iraq, the thousands of wounded, might be the death toll in a single day of combat in the Gulf. Are we prepared for that?

Shiite Iran would like to be the premiere player in the Islamic world, kicking the Sunni Saudis to the curb and ending their influence -- and being a nuclear power would allow it to project its political power in the Middle East; other Islamic nations would be crawling to Tehran to be seen kissing Mahmoud Ahmadinejad's ass shoulder. However, the Iranians are Persians, not Arabs, and they might not get as much support as they believe, particularly if they were losing.

Given even the public evidence, a large number of Israel's leaders don't believe they have any other choice but to try and kill the snake in its nest. Given the public positions taken by Iran's leaders about the continuing existence of Israel, they may not. If Israel does go in, our government will be there with intelligence and logistics, technical and realtime support. And it will paint an even bigger target on the United States in the mind of every Islamist on the planet, who will begin -- as they are in Africa, today -- trying to tie us down in asymmetrical warfare, fifty places across the world at once.

What do you think -- do we have anything to be concerned about?




MEHR: The New York Times: "U.S. Hangs Back as Inspectors Prepare Report on Iran’s Nuclear Program":
An imminent report by United Nations weapons inspectors includes the strongest evidence yet that Iran has worked in recent years on a kind of sophisticated explosives technology that is primarily used to trigger a nuclear weapon, according to Western officials who have been briefed on the intelligence.

But the case is hardly conclusive. Iran’s restrictions on inspectors have muddied the picture. And however suggestive the evidence about what the International Atomic Energy Agency calls “possible military dimensions” of Iran’s program turns out to be, the only sure bet is that the mix of sleuthing, logic and intuition by nuclear investigators will be endlessly compared with the American intelligence agencies’ huge mistakes in Iraq in 2003...

For its part, the Obama administration, acutely aware of how what happened in Iraq undercut American credibility, is deliberately taking a back seat, eager to make the conclusions entirely the I.A.E.A.’s, even as it continues to press for more international sanctions against Iran. When the director of the agency, Yukia Amano, came to the White House 11 days ago to meet top officials of the National Security Council about the coming report, the administration declined to even confirm he had ever walked into the building.

Oh; in much more important news, Heidi Klum appeared at a Halloween party in London this past week, also attended by erstwhile briber Princess Fergie, and showed off her nipples.

Good night, and Good Luck.


Saturday, November 5, 2011

Andy Rooney, 1919 - 2011


Andy Rooney, August 2011 (via the New York Times: CBS / Associated Press)

"You know what I don't like about being dead? It's that you're dead; and everybody else is alive. And you don't get to remind them about what they're missing, and what they take for granted."


Friday, November 4, 2011

Five Minutes To Midnight

Ruh-Roh


Iron Frau (Photo / Michael Sohn / Associated Press): Unser Gott, Bitte Helfst Du Uns

Patrick Wintour and Larry Elliott of the Guardian UK report that the G20 conference in Cannes (usually the place where fantasies of another kind are celebrated each year) has ended in failure.

This matters (For a concise, one-article explanation of why, go here), and as the slow-motion free-fall lurches ahead towards a collapse of the Euro as a common currency and a diminishing of the EU as a political coalition -- both of which online financial commentators have been anticipating -- Wintour and Elliot observed that
A world recession has drawn closer after a fractious G20 summit failed to agree fresh financial help for distressed countries and debt-ridden Italy was forced to agree to the International Monetary Fund monitoring its austerity programme.

Financial markets fell sharply after the two days of talks in Cannes broke up in disarray, amid concerns that Italy will now replace Greece at the centre of Europe's deepening debt crisis.

UK hopes that the Germans would relent and allow the European Central Bank to become the lender of last resort for the euro were also dashed.

On a day of unremitting gloom and yet more market turbulence, the Greek prime minister, George Papandreou, won a late-night confidence vote in his parliament after making a speech in which he promised to start powersharing talks to form a caretaker coalition government...

In a sign that the spread of the debt crisis to Italy could break up the single currency, the [UK] chancellor, George Osborne, admitted the Treasury was undertaking crisis planning for a eurozone collapse.

There had been hopes that the G20 would agree to increase IMF resources by as much as $250B to more than $1T, but disagreements about the wisdom of it, structure, size and contributors to the fund left world leaders forced to pass the issue on to a meeting of G20 finance ministers next February...

Obama, under pressure from Congress, was deeply reluctant to contribute to an expansion of IMF funds... Admitting that he had been given a crash course in European politics, Obama urged Greek and Italian parliaments to take decisive action to control their deficits...

Berlusconi was summoned to a late-night hotel meeting with Merkel, Sarkozy, the IMF director general, Christine Lagarde, and Obama, where he was told that the IMF was to start monitoring to ensure tough austerity measures are implemented. The measures include changes to the labour market, pension reform and the sell-off of state-owned assets.

[French President Nicholas] Sarkozy denied that the demands on Berlusconi represented an IMF coup, saying: "We never wanted to change governments, either in Greece or in Italy. That is not our role, that is not our idea of democracy, but it's clear that there are rules in Europe and if you exonerate yourself from these rules you exclude yourself from Europe."

Berlusconi, facing defections from his own party, insisted he had invited the IMF to offer advice. Berlusconi said on Friday he had rejected an offer of funds from the IMF – "I don't think Italy needs that" – and said his country was more solid than France or the UK...

The EFSF has €440B ($608B) available to lend, of which roughly half is expected to be consumed by bailouts of Ireland, Portugal and Greece. Italy has nearly €2T [i.e., $2.36T US] in debt outstanding.

The European Central Bank has purchased Italian debt since August, but will not carry on doing so indefinitely. The need to bolster the EFSF has led the EU to pursue countries outside the euro zone with surplus cash, such as China [to purchase Italian treasury bonds and finance its debt].

David Randall, in the Sunday edition of the UK Independent, laid out these possible scenarios in the wake of the Cannes G20 conference:

Short term

George Papandreou, having survived a confidence vote on Friday night, must form a new coalition government. This could take about a week, but is already under threat from opposition party calls for snap elections.

Such a move would inevitably delay government approval of the terms of the country's latest international bailout package, worth €130bn. Without those funds, Greece will almost certainly default on its existing loans and go bankrupt next month.

Italy's borrowing costs remain unsustainably high, and the contagion effect of any further disasters in Greece could mean that Silvio Berlusconi will have to rethink turning down the offer of an IMF loan.

Medium term

If Greece is bankrupted, its membership of the euro must surely come to an end.

The cost of borrowing for other countries would soar, which would almost certainly lead to yet another banking crisis – only, this time, one with the potential to dwarf the catastrophic effects of the Lehman Brothers collapse in 2008.

Already it is unclear how Italy is going to refinance €300B [$336B US] next year, though the IMF is sending monitors to Rome to issue quarterly updates on the country's economic progress.

Spain will continue to slash public spending, particularly if, as expected, the PP opposition party wins this month's election. The party has promised to restore Spain's top credit rating, which will require the acceleration of spending cuts.

Long term

Eventually, France will have to stop providing so much money to the bailout funds. Its top credit rating would ultimately go, the consequence being that the European Financial Stability Facility [EFSF]'s lending capacity would fall by at least one-third.

If the rescue fund drops sharply, the worst-hit countries would lose much of the one source of funding that is keeping them afloat. Should confidence in the French economy fall, that would leave just the biggest, most important eurozone country left in the crosshairs of the crisis: Germany.


Jenga II (After Greece Comes Italy)

Buffoono Berlusconi's Italy May Destroy The EU And The World Economy


Barry Ritholtz, October 31st; "Back Of The Envelope On Italy" (Some editing cleanup, because Barry uses word-recognition software to dictate many posts -- not that there's anything wrong with that -- and too, also, paragraphing):
REVISED: Here’s a back of the envelope calculation on Italy, highlighting the impact that a rise in financing costs coupled with a lack of growth can have on their finances.

Italy needs to refinance about 310b euros of debt in 2012. I estimate the average interest rate they are paying on this maturing debt is 2.7% (short term rates collapsed in ’09-’10). With an average debt maturity of 7 years, Italy may be paying 6%+ on the refinancing.

Assuming a 350 bps [3.5%] additional cost times the 310B Euros of maturing debt, this adds 10.9b euros of interest expense to the 54b euros of interest payments scheduled to be made in 2012. At the same time, Italy’s 2T[rillion Euro] economy is expected to grow REAL GDP 0.1% in 2012 and nominal around 3%.

Thus, nominally 60B euros will be added to their economy with all of the incremental gain thus going to service interest expense. This also doesn’t take into account any new debt Italy has to take on over and above what is maturing.

Over time, just to tread water, any country needs to generate nominal GDP growth equal to its financing costs. In the 10 years prior to the sharp ’08-’09 economic contraction, Italy saw nominal GDP growth of 3.7% (REAL averaged 1.3%), [which was] near its financing costs over that time period.

A continuation of nominal GDP growth of 3.5-4% (now mostly consisting of inflation) will no longer cut it for Italy with funding costs at current levels.

Short version: Without more economic growth, Italy's government cannot take in enough revenue to pay the costs of financing it's debt, meaning they have annual deficits, which add to the debt, which they cannot pay the costs of financing; etc.

Cullern Roche (of the blog, Seeking Alpha) noted: "As we know with Greece, growth is the key. If these nations [The PIGS: Portugal, Ireland, Greece, Spain] cannot grow their way out of this crisis, then they are doomed to deteriorating budgets. The worst part about the situation in Italy is that the growth outlook is the absolute worst of the major EMU nations and has been for a very long time."

So in a sense, even if Greece accepts the drastic medicine prescribed by the ECB, it doesn't solve the problem of Italy's inability to grow its economy -- and the so-called "reform" measures that clown Silvio! claims will work were literally thrown together over a weekend and presented by Berlusconi in a letter to the other EU leaders, who were appalled at Silvio's apparent nonchalance.

It's curious -- Berlusconi, an oversexed toad and greedy Oligarch, Italy's "Little Murdoch", has been the first politician in over fifty years to bring some stability to Italy's revolving-door government -- they've had to dissolve fifty governments in 50 years, because no one political party could build a coalition in their Parliament.

Berlusconi could, and did. And he came along -- as leaders of his type do -- just as the international economic engine began to run on Real-Estate-MBS and CDS gasoline (made in the USA). Times were good, and he seemed to hold out to Italians the promise of stable government, economic policies, and a better future.

As a result they let Silvio be Silvio!; the turned a blind eye to his personal life and financial dealings. When times were good, there was plenty of leeway for him to bunga bunga pretty whores women and preen in front of cameras, ridiculous in dyed hair and Botoxed smoothness. He alienated half of Europe as a corrupt businessman, and made the other half sick from laughter. But, then, Berlusconi was something Italy could afford.

But now, in a crisis, when real and decisive leadership is needed to create a coalition to save the EU and stabilize the collapse, Silvio can't cut it. He's vain, weak, and losing power even in the political party he runs like a private club. He's facing potential indictment for money-laundering and bribery; his 'coalition' in the Italian Parliament has dissolved -- weeks ago, his government barely survived a No-Confidence vote, which would have forced him to resign as Prime Minister. Italian lawmakers, seeing what's at stake, want him out even if the price is another round of revolving-door governments.

The best he can do is draw something on the back of an envelope (the source for Ritholtz's post title) and present it to the likes of Merkel and Sarzoky as a serious policy initiative, as he did recently. They weren't amused.

If Greece accepts the deal offered by the other EU countries, at best it's citizens can expect drastically lowered quality of living for a decade -- and then maybe, maybe their economy will return to 2008 levels, when the wheels were already beginning to pop off.

And the same is true for every other badly leveraged, deeply-in-trouble European nation, like Italy.

So, in a sense, even if Greece accepts the deal, there's Italy's mess. Then, if that can be 'solved', it will be someone else's mess -- Spain, perhaps, or even France, and the cycle begins again. We'll see bank bailout after hedge fund failure (MF Global, no?), with news that money has "just vanished" and no one can find hundreds of millions (a bit like the palettes of shrink-wrapped $100 bills shipped to Iraq in 2003, which "just vanished", too: Good Times).

We find ourselves back where we were a couple of months ago. Growth is critical -- if the EU economies don't grow, the cost of financing themselves (the interest on their treasury bonds) goes up, making borrowing difficult if not impossible. Really drastic action -- deficit spending to push the economies forward -- is imperative, but it won't happen on The Iron Lady or Sarkozy's watch. They're strapped to the Austerity Bandwagon, as it rolls straight downhill.

In the meantime, world markets will become more aware of the Recession (which we never crawled out of) growing worse in 2012 -- and as it does, more Austerity measures will kick in. Public services will close or be severely restricted. Banks will announce -- surprise! -- they were holding even more debt than we knew about. Consumer confidence will fall, and so will the markets.

We'll limp along into an uncertain future of scarcity, high unemployment and political instability, power shortages and a gap between The Elite Rich and The Rest Of Us that will astound you; we will resemble Tunisia, or Egypt, more than the United States, and the fact that we're a DINO (Democracy In Name Only) will become more apparent the farther out in time we proceed. And that's the best-case scenario.

We could, I suppose, always have another little war. But even that would do nothing more than raise tensions and shake up nations already living with levels of psychological uncertainty not seen since the height of the Cold War or WW2. It would provide only the most temporary stimulus to Western economies who are too diverse to depend on 'defense' spending to be the solution.

Worst-case, Greece or Italy or someone else implodes, the Eurozone unravels; and the world's banking and finance sector, corrupted and corrupting, holding on by its fingerprints, collapses in a matter of days and drags the international stock markets down with them. And the dark world I described earlier hits us, full force, and all at once. It will be quite a shock to lose generations of security and surety in the nature of things and people, that fast.

And, that's Jenga.



MEHR: In the aftermath of the G20 conference in Cannes, which failed to create additional IMF guarantees to bail out European TBTF banks and temporarily stop the domino-effect collapse of European sovereign debt, Silvio! continued his government's policy of "Laugh, Clown, Laugh!", oogling the Argentinian minister at the Cannes conference and brushing aside all criticism of his reign by saying Italy's economy was "just fine".


Tuesday, November 1, 2011

Jenga (Euro Edition)

Random Barking

Late this past Sunday morning, Germany's Chancellor Angela Merkel and the other 15 leaders of the Eurozone nations, announced that they had reached an agreement to build a framework to create a bailout for both Greece and 'troubled' European banks.

As announced, the agreement states that European banks holding Greek Sovereign debt must agree to a Fifty Per Cent loss on their investment. In addition, they must agree to increase their capitalization by 150-plus billion dollars. Some observers say thios does nothing to fix the structural problems presented by Europe's financial community, since the same sociopathic animals who pushed America and Europe into our current situation are still running the show, calling the shots, and in charge.

Frau Angela also wants to enshrine as policy in the new financial agreements that EU nations must, as a condition of participation, embrace Austerity measures which will be wonderful for banks, just a bump in the Road To More for the wealthy, and condemn everyone else to live with less: A triumph of globalism. Es Ist Alles Wurst.

This was not expected to go down well with the Greek people, who have been protesting and rioting over the Greek parliament's passionate embracing of Austerity as the way towards prosperity. It's a crock, and everyone knows it (except in Great Britain, and in Washington), but Greece's Prime Minister George Papandreou took the news about the EU/ECB getting closer to a bailout deal and made happy noises. His people, meanwhile, took to the streets.

Someone must have been listening: Yesterday, Papandreou announced that the government would host a plebecite by the Greek people -- an up-or-down vote on whether to accept the EU-ECB debt restructuring plan Merkel had announced would be ratified. The UK Guardian noted that
The decision by ...Papandreou to hold a plebiscite will – assuming the Greek government does not collapse in the meantime – mean at least two months of turmoil as the markets fret about the consequences of a no vote.

You don't need to be an economic or political genius to work out what the consequences could be: Greece would lose the bailout cash that has enabled the government to pay its bills; the banking system would collapse; the country would default and either leave or be kicked out of the single currency.

In a sense, this is good news, for the Greeks -- if they return to the Drachma as a currency, it will become incredibly inflated, but they'll pay off their sovereign debt with that same inflated currency and may even be able to return to something like normal levels of growth after a while.

For the EU, the good news is that Greece appears to be voluntarily providing a way for itself to voluntarily leave the common currency, rather than be booted out of the Eurozone altogether for defaulting on the loans made to Greece already.

The bad news, of course, overshadows any good news. The Euro will be put at risk; European banks will begin to tremble, and so will their counterparties among the U.S. and Asian banks. The Italians -- primarily due to the waffling and posturing of the Capo d'Buffoono Berlusconi -- may begin to crumble; ultimately, the Euro would have to be abandoned. That may cause another collapse of the banking structure, this time on a global scale.

And that's Jenga.



MEHR: Barry Ritholtz, who missed the train, mentions:
Here’s a little secret for ya: Greece has already defaulted on its debts. Anytime a creditor declares his intention to not pay back 100 cents on the dollar n a timely basis, it's effectively a default. We are kidding ourselves debating the differences between a 22% and 50% haircut — it's irrelevant to the question of solvency.

The best thing for the Greek people would be to leave the Euro, start printing Drachmas, and make Greek [sic] an inexpensive tourist destination for Europeans, Asians and Americans. Greek exports (olives, olive oil, cheese, lamb, etc.) would be even more competitively priced. Then the Europeans could focus on saving the economies that really matter — like Italy, and to a lesser degree Spain.

My advice for the Europeans: Stop trying to put Humpty Dumpty back together again, and start moving forward, focusing on what matters.




Noch Eimal, Mit Schwein:

Yesterday, Greek Prime Minister George Papandreou met with French President Nicholas Sarkozy and German Chancellor Angela Merkel at the G20 conference to explain: Was it a stroke or tertiary syphilis which prompted him to call for a referendum on a debt resolution deal (which Merkel and Sarkozy had worked so hard to broker) upon which rests the fate of European banks and the global economy and whether we will greet the End Of The World on the Mayan calendar in 2012 living in cardboard boxes under a freeway overpass while the armored limousines of Our Rich Elders and Betters roll by, or not.

Today, Papandreou announced there would be no referendum. It was unnecessary, now; Es war alles ein Traum, ein Cochemar; "Just Kidding!"


Why France and Germany Won't Let Greece Back Out (Chart: BBC)

... and the deal to force even more Austerity down the throats of the people will go through. European Banks can breathe easier.

Meanwhile, workers were seen removing a severed horse's head from the bedroom of Papandreou's hotel suite.




Und Noch Immer Mehr Mehr: I mentioned the 'Godfather' reference before The Great Curmudgeon got to it, for a change. Not that anyone else cares.


All That Glitters

Glenny Loses His Luster
Santa Monica, CA - Goldline International, Inc. announced today that it is the exclusive precious metals sponsor of Glenn Beck's new GBTV Video Network, which launched on September 12.
-- Goldline Website, September 15, 2011

"I don't believe in paper gold [i.e., gold futures certificates] any more."
-- Little Glenny, Telling Listeners Why They
Should Purchase Gold Coins, From Goldline

From Mother Jones:
Goldline International, the California precious metals retailer promoted by Glenn Beck and other right-wing radio hosts, was formally charged with 19 criminal counts — including grand theft by false pretenses, false advertising, and conspiracy ... by the Santa Monica City Attorney's Office. The criminal complaint also implicates Goldline CEO Mark Albarian, along with two other company executives and two salespeople.

...Using aggressive telemarketing tactics, Goldline employees routinely pressured customers to purchase expensive coins with mark-ups so steep that it was very unlikely the consumer would ever make his money back. The company racked up a long list of complaints with the Federal Trade Commission, and at one point was sanctioned by the state of Missouri.

But Beck ... lent an air of legitimacy to the whole operation, sowing fears of a total economic collapse to help make the pitch for Swiss Francs. Beck's pitch went a step further, arguing that in the event of a total financial meltdown, the government would confiscate gold bullion—meaning you should invest your money in coins instead.

Hee hee hee hee hee hee.

Saturday, October 29, 2011

Word

You Want To Know Why?

Via The Great Curmudgeon, very apt analysis -- and why don't we see more writing like this:
There has to be an underlying organizing principle for why they would bail out banksters, and fuck over homeowners, why they would subsidize big Pharma at the expense of their base voters. And I think I've finally gotten some of what's going on.

The president, and the Democrat's Senate leadership, reject movement liberalism. The ideology they follow is grounded in the impact of globalization on world capital and labor markets. They believe the US has to reduce labor costs to be 94 they’re the pros who have risen, through merit and diligence, to their positions.

This rings absolutely true in my own experience. The dominant theme within corporate structures has, for some time now, been about methodologies of organizing. I'm not talking about grunt-level organizing; the GANT charts and ITIL and ISO-9000 or Vann diagrams, RACIs and SIPOC... but a different trend altogether.

I'd argue, based on nothing but gut feelings and common sense, that we're entering a period where the dominant organizing principle of human culture is commerce for its own sake -- above nationalism, partisan politics or ideologies; even religious belief.

Business from a senior management or executive perspective has always been about creating structures to lead and motivate numbers of people to perform tasks which produce value. To them, this is beneficial, desirable, and (for them) the greatest high there is. They create an idea, champion it by negotiating support; build teams and processes; all to reach specific 'outcomes'.

Effectiveness as a manager is measured by how well and how quickly they can move from concept to execution, or go-live, or to market. This has been the case in business for generations.

However, technological development since the early 60's has allowed business to be conducted at light speed. It has opened up new industries (computing, software and and infrastructure, and new modes of commerce) and changes in how established business and markets are conducted.

Because the global, daily flow of money is the engine for corporate business and sovereign finances as well, some of the most profound changes have been in banking and finance. It doesn't mean just faster bank transfer times or quicker reconciliation of journal entries -- it's created entirely new, 'exotic' methods of investment (The past ten years have given us a taste of what that's like: How'd that work out for the world, by the way?).

Briefly put, I don't see the old trinity of business, government and finance as the main arbiters of human society any longer. Governments nearly everywhere have allowed globalization to develop to the point that multinationals now have organized political clout to counter policies by recalcitrant governments: The WTO. They have treaty and trade structures created for their benefit, such as NAFTA.

Consequently, national governments are superfluous to global corporate planning except as potential barriers to competition and acquisition, development, and profit. In this structure, human beings are an afterthought, except as consumers to be influenced by advertising, and 'resources' to be employed or dismissed according to the needs of the corporations.

Above all this is The Great Game of finance and the markets -- and not for individual shareholders and investors. The Great Game is for banking and investment houses, insurance companies, hedge fund and private portfolio managers; all of whom who deal with values in the billions -- and who provide financing for purely business corporations, who are first cousins: Banking and finance has been corporatized now, too.

Governments don't figure into their equations, either, except as something to influence with tiny infusions of campaign cash or free golf trips; paltry gifts for such massive return -- and that form of corruption has become institutionalized between government to a high degree. Politics is business, conducted by other means.

Human beings don't figure into the equations of finance managers, either. Like corporate business managers fascinated with business organization, financiers are lost inside a house of numbers.

Both corporate types believe in abstraction as the key to a terrible illusion controlling the world -- not some bizarre conspiracy theory, but the desire to believe in an illusion of control through labeling and definitions; through what they believe to be true about systems and people -- who exist, ultimately, to be 'motivated' and controlled to provide outcomes measured by other abstractions, like profit and return on investment.

The fundamental difference between corporate managers and, say, the #OccupyWallStreet protestors, isn't about competing systems of organization or goals, or even values. It's a difference between levels of consciousness, about how one perceives the world and approaches the mystery of what all this stuff is.

The corporate mind literally cannot conceive of, or understand, a mindset that believes in ideals which are allegedly the foundations of the human spirit. The concepts enshrined in the Constitution find lip service with corporations who want to market themselves in America.

In business, everything is negotiable, and so there are no firm principles or ideas -- except loyalty to the Brand and a willingness to execute the plans created by your senior leaders.

They might claim to understand how collective action works -- but where corporate organization has consensus-building, it's performed within a hierarchical, top-down structures, which rely on paradigms of direction coming from an acknowledged leader, success/fail or punishment/reward, instead of reaching shared goals through cooperation without penalties or blame.

It really is a collision of worlds: The value and belief structure of the corporate manager and financier, of many business school professors, do not perceive reality in the same terms as the rest of us. We all want to make sense of the world we inhabit -- but not all of us would agree that to build organizations where competition and profit are the highest expression of the human spirit, or what human culture should strive for, now, in the 21st century.


Tuesday, October 25, 2011

Felix Zulauf Spells It Out For Us

At The Big Picture, Barry Ritholtz had a conversation in his offices with hedge fund and independent wealth manager, Felix Zulauf.

Herr Zulauf's opinions are well-regarded in circles that deal with money -- (his success in managing client investments through his hedge fund is one reason why), and he has generally come down in a commonsense way against the 'New Austerity' preached by Ms. Merkel and Mr. Cameron.

Zulauf was in New York City as a contributing attendee to the annual Barron's magazine roundtable discussion. After the meeting, Zulauf went to the offices of the investment company in which Ritholtz is a partner, and made some observations Ritholtz shared.

The first one should catch everyone's attention:
• We are on an inevitable path caused by mass credit creation, excessive borrowing, and the credit crisis. The end result is inevitable, and likely unavoidable.

• The Europeans have their own credit crisis, attributable to the creation, in part, of the EU. They are following a similar path the US did [sic].

• There will be another bailout and QE3 (or more) when the situation gets worse; That can be either in market terms or in economic terms.

• Equities remain in a long term secular bear market dating back to 2000, one that is unlikely to end before 2017...

• Of all the currencies in the world, the US Dollar is the least ugly. That says less about the Greenback than it does about the Euro and Yen.

• The Eurozone was problematic since its inception. You cannot have a monetary union but not simultaneous fiscal union.

• Policy makers inevitably punish savers.

• Germany is the creditor to the rest of Europe. Given their history, their biggest concern is hyperinflation, while nations like Greece, Italy and Ireland are facing deflation.

• Watch for rising populism in response to economic turmoil. It is already happening in Europe, and will eventually come to the US.

• The political situation in Europe is unlikely to improve until the crisis is much worse. The same is likely true in the US.

• There will be an eventual repricing of all currencies.

• Greece may very well will leave the Euro, but Italy is probably to [sic] big to do so.

• Countries that can print & devalue their own currencies get to invite tourists, stimulate economy, and climb out of their morass. Tied to the Euro, [a country] simply cannot.

• There is no currency that will retain its value over the next decade except Gold. Every other currency is in a race to print and devalue, inflating away the debt.

• There is no price target on Gold, but he expects higher prices, and perhaps significantly higher prices over the next decade.

So, no dodging the bullet -- Der Untergang is, as I've said before, all happening in slow motion. No Magic Ponies for us -- only more trouble. And, it ain't over until the fat lady is much thinner.

Also, too, there seem to be a number of Our Wise Job Creator Class who feel the same way.


Saturday, October 22, 2011

The Trouble With Harry: Still Here, Too

World Does Not End; Chtulu Unimpressed



You may recall that this past May 21st, Harold Camping, the 89-year-old leader of the Orthogontal Tirebiter Church Of Chtulu's CheeseWhiz (okay; we made that up, but only a little), was "flabbergasted" that his prediction of the Xtian Rapture and beginning of the end of the world as foretold in the Big Book Of Revelations did not occur on that day.

Camping had originally predicted The Same in 1994; when it did not happen, he went back to his Magic Decoder Ring and found he had been off by seventeen years (Professor Frink: "Hu-HAH! Ahhh; forgot to carry the one").

Through a network of xtian radio stations he owns, Harry spent the next 17 years spreading the Bad News that the world was ending, and that people had better Get Right with god -- because after May 21, 2011, no plea for forgiveness would be answered, and the vast majority of humanity would burn burn burn burn burn forever, and the rest would praise praise sing sing praise the all-loving god amen.

The end did not come in May. Many people, who had sold their possessions and stopped making rent or house payments, were a little peeved. So were others who had sent Harry a lot of money over the past seventeen years. Harry was "flabbergasted"; going back to his Magic Decoder Ring, he told The Faithful that he had been slightly off: "And Moab went down to the Land Of The Canaanites and there was this other thing, and the hey hey hey, and the other thing and Hoooo, boy; are we overtime".

Sadly, on June 9th, Camping had a small stroke, but has recovered to a degree since.

According to Harry, the Rapture had taken place -- but, it was invisible. And, contrary to a whole bunch of scriptural interpretation, the world would just end in fire and Badness on October 21, 2011. Period. The end; no more discussion, or Jiff Peanut Butter, or next week's G20 conference, or naughty thoughts about the girl in the taco commercial. Or, naughty thoughts about the G20 (yeah; they have sites like this).
[The Rapture had been] of the spiritual variety, rather than his original vision of earthquakes and other disasters leading to five months of hell on earth, culminating in a spectacular doomsday on Oct. 21.
And, we're still here. The End would have required something on the order of a full-on thermonuclear exchange between Russia, China, the United States and all the nuclear EU nations -- or, Ronald Reagan's reappearance to become the Right's presidential candidate. Camping had said the Bad People would just expire, leaving the world, presumably, to the Chosen Few:
[In a recent radio broadcast] The tone of his message is more mild than his previous declaration. Shying away from talk of wrath and judgment, he says “the end is going to come very, very quietly probably within the next month . . . by October 21. Probably there will be no pain suffered by anyone because of their rebellion against God...” he said. “We can become more and more sure that they’ll quietly die and that will be the end of their story.”
The Chosen Few would presumably, however, have had to dispose of the rest of us -- before we began to smell up the planet and spoil all the praise singing and hosannas, thanking a merciful god that so many billions of hated liberals and foreign-types and terrorist blasphemers were killed... so that the world was given to them, the "Righteous Ones".

This sounds like a bad, made-for-teevee-movie starring Bert Convy, Garner Ted Armstrong, and "Mr. T". With that, we invite you to enjoy your weekend, brought to you courtesy of the Enlightenment™, and Scientific Proofs ©.


Friday, October 21, 2011

A Reprint: Get Happi Again

I Got Nothin'



C'mon, America: Learn The Secret Known To The Ancients. Or, you know, not.