“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Friday, February 05, 2010

A 'Lehman-style' tsunami hits Spain and Portugal

Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal

The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.

By Ambrose Evans-Pritchard Telegraph
Published: 7:29PM GMT 04 Feb 2010

Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”

Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.

Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. “What is at stake is the credibility of the Portuguese state,” he said.

Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year. This is rapidly turning into a market crisis as well as investors digest a revised budget deficit of 9.3pc of GDP for 2009, much higher than thought. A €500m debt auction failed on Wednesday. The yield spread on 10-year Portuguese bonds has risen to 155 basis points over German bunds.

Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. “This is what is making the markets so nervous,” he said.

In Spain, default insurance surged 16 basis points after Nobel economist Paul Krugman said that “the biggest trouble spot isn’t Greece, it’s Spain”. He blamed EMU’s one-size-fits-all monetary system, which has left the country with no defence against an adverse shock. The Madrid’s IBEX index fell 6pc.

Finance minister Elena Salgado said Professor Krugman did not “understand” the eurozone, but reserved her full wrath for the EU economics commissioner, Joaquin Almunia, who helped trigger the panic flight from Iberian debt by blurting out that Spain and Portugal were in much the same mess as Greece.

Mrs Salgado called the comparison simplistic and imprudent. “In Spain we have time for measures to overcome the crisis,” she said. It is precisely this assumption that is now in doubt. The budget deficit exploded to 11.4pc last year, yet the economy is still contracting.

Jacques Cailloux, Europe economist at RBS, said markets want the EU to spell out exactly how it is going to shore up Club Med states. “They are working on a different time-horizon from the EU. They don’t think words are enough: they want action now. They are basically testing the solidarity of monetary union. That is why contagion risk is growing,” he said.

“In my view they underestimate the political cohesion of the EMU Project. What the Commission did this week in calling for surveillance of Greece has never been done before,” he said.

Mr Callow of Barclays said EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of “brinkmanship”. The core issue is that EMU’s credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn). This compares with 87pc for Greece (€208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.

Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral. The ultra-hawkish ECB has instead let the M3 money supply contract over recent months.

Mr Trichet said euro members drew down their benefits in advance -- "ex ante" -- when they joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect "ex post" help if they get into trouble later. These are the rules of the club.


  1. Iceland, Greece, Spain, Portugal.

    The list certainly is growing.

    "contagion", an apt description of the economic challenge?

    Are these economies and countries just taken ill, or systematically flawed?

    Should we remove Iceland's feeding tube?

  2. They're screwed. Germany's got to be thinking, "Why did we do this?" "How much longer are we going to do this?"

    But, the French will probably be the first to bolt. They always are, right?

  3. Hey, here's a great idea for the Germans. Make an agreement to co-sign all of the Italians, Spaniard, Irish, and Portuguese notes. What could go wrong with that?

  4. Credit Default Swaps have got to be outlawed.

  5. Risk should be reflected in the Interest rates, not some made-up, phony-balony hedge that isn't ever going to get paid. It's just silly.

  6. It's like Deuce says to Rat, "Hey Rat, I've got a Great Idea. Let's loan all of our money to that crazy, drunken hillbilly, Rufus.

    Then I'll sell you a hedge on your loan, and you can sell me a hedge on my loan, and WE CAN'T LOSE!"

  7. Poof!

    It was reported last year that one Bank in Germany had more toxic assets than the GDP of Germany...

    Rolling thunder....

    Watch for more to come...

    Russia GDP -7.9

    America Commercial Real Estate....

    Home foreclosures that have been held back...


    China ...

  8. Felix Salmon at

    Shorting reserves
    Feb 3, 2010 09:18 EST
    china | economics

    Michael Pettis does a good job of systematically dismantling this idiotic line from Tom Friedman:

    "First, a simple rule of investing that has always served me well: Never short a country with $2 trillion in foreign currency reserves."

    In fact, if you decided to short only countries whose foreign exchange reserves reached some large proportion of gross world product, you’d be batting 2 for 2 right now as you started shorting China. First you would have shorted the USA in the 1920s, and then you would have shorted Japan in the 1980s.

    Writes Pettis:

    "It was the very process of generating massive reserves that created the risks which subsequently devastated the US and Japan. Both countries had accumulated reserves over a decade during which they experienced sharply undervalued currencies, rapid urbanization, and rapid growth in worker productivity (sound familiar?). These three factors led to large and rising trade surpluses which, when combined with capital inflows seeking advantage of the rapid economic growth, forced a too-quick expansion of domestic money and credit.

    "It was this money and credit expansion that created the excess capacity that ultimately led to the lost decades for the US and Japan. High reserves in both cases were symptoms of terrible underlying imbalances, and they were consequently useless in protecting those countries from the risks those imbalances posed."

    One of the scariest aspects of the most recent financial crisis is that far from addressing the biggest and most potentially destabilizing global imbalances, it actually exacerbated them. If and when those imbalances unwind chaotically, the global effects will be highly unpredictable. But it’s far from clear that China will be any kind of safe haven.

    Tyler Cowen, who provides the link, adds: You can make a lot of mistakes by analogizing governments to countries, but every now and then it is worth doing. If I were a major investor, I would get nervous each time I saw a company with massive cash reserves on its balance sheet. That's often a sign that discipline is headed out the window.

    [See: Google]

  9. The NYT:

    December 16, 2009
    Never Listen to Céline? Radio Meter Begs to Differ

    American men have a naughty little secret. Sometimes, they like to relax with a little Céline Dion. Professed classical music fans have one, too: as it turns out, they don’t tune into classical radio nearly as much as they claim.

    These are two of many findings shaking up the radio industry as it converts from measuring ratings through surveys to monitoring listeners electronically using so-called Portable People Meters.

    As radio executives are discovering, what people say they do and what they actually do is different — especially where “My Heart Will Go On” is concerned.

    That more men are mellowing out to Air Supply than are willing to admit it is a curious discovery, but the new system has serious repercussions, especially for classical radio. When 12 major areas, including New York and Los Angeles, switched to the system last year, classical radio’s market share fell 10.7 percent in those areas, a significant drop, according to a study by Research Director, a ratings consultancy.

    The numbers are part of what an industry consultant, Marc Hand, calls “a smorgasbord of issues” facing commercial classical music stations. In the last year, major commercial stations including WCRB in Boston and WQXR in New York were sold to public radio operators, while KFUO in St. Louis was sold to a Christian broadcaster. (WQXR was owned by The New York Times Company.) There are now only about 20 commercial classical stations in the country, said Mr. Hand, the managing director of Public Radio Capital, which advises nonprofit stations on acquisitions.

    The decline has concerned classical fans, who see radio as an important civilizing force.

    “It’s education but also expanding horizons, understanding the existence of a whole host of art forms that are extremely related and important to our cultural history,” Joseph W. Polisi, president of the Juilliard School, said.

    Talk radio, a largely conservative format, turns out to have fewer fans than previously thought. Talk radio’s market share declined 2.6 percent in the study of areas where the meters were used. Talk radio (excluding sports and news) is about 80 percent conservative, says Michael Harrison, publisher of the trade magazine Talkers. He cautioned that the sample size in markets using meters was relatively small.

    The new ratings have contributed to other shifts. Mainstream formats like oldies, news and country have fared better.

    Meanwhile, smooth jazz has hit a low note. Clear Channel jettisoned such programming from eight of its stations after dismal ratings. Some Spanish-language stations’ ratings declined sharply — at Univision’s KLVE in Los Angeles, for example, ratings fell 54 percent in the first quarter of 2009 from the same period the year before, leading it and other broadcasters to testify before Congress on Dec. 2 that the new system is discriminatory.

    The television industry had switched from diary entries to metered ratings in 1987 and had seen similarly surprising changes — young men, for instance, watched cartoons much more heavily than they had reported doing, said Gary Holmes, a spokesman for Nielsen. But it took the radio industry almost two decades to catch up.


    And thank God for Family Guy.

  10. War is coming to the Middle East..

    Russia is setting up Iran to be destroyed by Israel

    Oil prices going up can only help Russia....

    China, on the other hand, likes cheap oil but supplies weapons to iran (and others) and supports Nkor

    Hezbollah, Syria and Hamas are resupplied and stocked to the ceiling with weapons, rockets, missiles and more and are all signed together with Iran in a mutual defensive pact...

    what could go wrong?

    iran is on the path of joining the nuke club and according to obama, America is doing what he wants it to do... NOTHING...

    That's America's new policy...


    Thanks Obumbler...

    SO in the end, Israel is being pushed into a corner and will fight for it's survival...

    Rat, Jimmy Carter and Obama all agree, Israel has no right to destroy those that seek her destruction and will lead the fight in the UN to punish Israel for any and all aggressive behaviors she might do to pre-emptively to stop the axis of shitheads....

    But in the end $10,000,000,000 (10 BILLION) in arms bought and paid for by Iran to fund, supply, update, organize & train thousands of fighters that now surround Israel was not for nothing...

    Iran & North Korea are well along the path to have projection with nukes (the now disgraced NIE has reversed it'self from 2007 and now sites Iran going hot)

    Why does this matter to America?

    You figure it out....

    It's going to be a very messy year...

    and that doesnt even talk about Pakistan & China against India...

    Nor Russia

    Nor North Korea

  11. Long a fan of Anthony Bourdain, I often recall the Beirut episode of his food and travel series, No Reservations - especially its final segment. For some reason I did so again this morning.

    Sure, DOS plays to stereotype - and there is the credulity-begging newfound-innocence-lost bit at the very end - but who doesn't like a warm-hearted USMC/USN story, especially on a cold winter's day?

  12. The Song of the Omelette (a drinking song)

    O Melody once
    We were an hard boiled egg
    An oval coherence
    My yolk hardened
    In thy enfolding whites
    Until the gods jealously
    Divided us twain in half
    Exactly two, half by half
    Right down the middle with a hair
    Just as Plato said they should
    Creating desire
    This judgment of the gods
    I faithfully admire
    And thee will always be to me
    My hard boiled better half
    That I seek longingly

  13. amended

    The Song of the Omelette (a drinking song)

    O Melody once
    Lifetimes ago
    We were an hard boiled egg
    An oval coherence
    My yolk hardened
    In thy enfolding whites
    Until the gods jealously
    Divided us twain in half
    Exactly two, half by half
    Right down the middle with a hair
    Just as Plato said they should
    Creating desire
    This judgment of the gods
    I faithfully admire
    And thee will always be to me
    My hard boiled better half
    That I seek longingly


    To make an Omelette you must break an egg
    To make an Omelette you must break an egg
    O, to make an Omelette you must break an egg

    And repeat

  14. Michael Pettis makes a good point. China wouldn't be my idea of a "safe haven."

    The Safe Haven is the U.S. To the extent that there is a "safe" haven.

  15. Catchy tune, Bob.

    I'll probably be singing it to myself all day.

  16. The World of Light

    The last stage of the core experience seems to fulfill the premise implied by the encounter with the brilliant golden light. Here one appears to move through that light and into a “world of light”. At this point, the individual perceives a realm of surpassing beauty and splendor and is sometimes aware of the “spirits” of deceased relatives or loved ones.

    What is this world?

    In holographic terms, it is another frequency domain—a realm of “higher” frequencies. Consciousness continues to function holographically so that it interprets these frequencies in object terms. Thus, another “world of appearances” (just as the physical world, according to holographic theory, is a world of appearances) is constructed. At the same time, this world of appearances is fully “real” (just as our physical world is real); it is just that reality is relative to one's state of consciousness.

    In esoteric terms, this is the—or one—level of the so-called astral plane. As I have mentioned, the esoteric literature is replete with descriptions of this world of light.

    If one reads the literature that purports to describe this realm or if one simply rereads the accounts of Stage V provided by our respondents (or some of Moody's in Reflections on Life After Life, one quickly forms the impression that everything in this world is immeasurably enhanced in beauty compared to the things of our physical world. That is why it is often characterized as a world of “higher vibrations”.

    That such talk isn't mere metaphor was suggested by the comment of one of our respondents (20), who, in attempting to describe the music of this realm, likened it to “a combination of vibrations....many vibrations”. Of course, music does consist of vibrations, but it isn't ordinarily spoken of in that way. Such observations again hint that these near-death survivors who reach this stage are responding directly to a frequency (vibratory) domain of holographic reality.

    I have one speculative answer to these questions to offer—a holographic interpretation of the astral plane. I believe that this is a realm that is created by interacting thought structures. These structures or “thought-forms” combine to form patterns, just as interference waves form patterns on a holographic plate. And just as the holographic image appears to be fully real when illuminated by a laser beam, so the images produced by interacting thought-forms appear to be real.

  17. There might appear to be a serious imperfection in this holographic analogy: The pattern produced on the physical holographic plate is, after all, only a meaningless swirl. It only becomes coherent when a coherent beam of light (that is, a laser) is used to illuminate the swirl. What, then, is the equivalent of the laser in the Stage V realm?

    The logic of my speculation seemingly leads to a single conclusion: It is the mind itself. If the brain functions holographically to give us our picture of physical reality, then the mind must function similarily when the physical brain can no longer do so. Of course, it would be much simpler if one merely assumed, as some brain researchers (for example, Sir John Eccles, and Wilder Penfield) appear to have done, that the mind works through the brain during physical life but is not reducible to brain function. If the mind can be supposed to exist independent of the brain, it could presumably function holographically without a brain. If one is not willing to grant this assumption, one would seem forced to postulate a non-physical brain of some kind that operates on this “astral” level. At this point, we would have passed over the limit of tolerable speculation. In my view, it is preferable merely to assume that sensory like impressions at his level are functionally organized in a way similar to sensory impressions of the physical world, that is, holographically.

    If we can assume this (leaving the question of the “mechanism” open), then the attributes of Stage V would fall neatly into place. Since individual minds “create” this world (out of thoughts and images) this reality reflects, to a degree, the “thought structures” of individuals used to the world of physical reality. Thus, the “forms” of the Stage V world are similar to those of the physical world. However, since this is a realm that is also (presumably) composed of minds that are more clearly attuned of accustomed to this higher frequency domain, those minds can shape the impressions of the “newly arrived”. The holographic result—and interaction of these thought patterns—thus tends to create a “higher gloss” to the perceived forms of this realm—that is, they are experienced in an enhanced way. One is tempted to say that what is seen is, at least at first, largely determined by preexisting shemata of near-death survivors, but that how (finely or beautifully) it appears is influenced primarily by minds used to that frequency domain.

    The gist of this specualtive holographic interpretation, then, is that “the world of light” is indeed a mind-created world fashioned of interacting (or interfacing) thought patterns. Nevertheless, that world is fully as real-seeming as is our physical world. Presumably—and this is an admitted and obvious extrapolation—as one becomes increasingly accustomed to this holographic domain and to “how it works”, the correspondences between the physical world and this realm grow increasingly tenuous. Eventually one would suppose that an individual's consciousness would become anchored in the four-dimensional reality of the holographic domain and the familiar structures of our world would be radically changed there in ways we can only surmise.

  18. Got in a few blissful hours of antique-ing before the snow started accumulating. I think they've upped the predicted total.

    My brother just made it to my parents' house. Barely. The six of us are prepared - what with a nightmare of a driveway sealing our fates - to be stuck with one another until sometime tomorrow afternoon.

    Boozes have been resupplied and we've enough in the way vittles to function as our own Red Cross station.

    We are expecting our first shipment of household goods down there are on Monday. What're the odds?

    Last time we had a household goods shipment scheduled to be delivered in the States: 9/11. (I pleaded with them to stay and unload; I HAD been waiting two months. No joy.)

    This time, it's "snowmageddon."

  19. I'm with you, Trish. Everything is in place...well most things. And your shipment is heading for 2 feet of snow. That's a shame. Do you have a move date?

  20. Sounds like a hell of snowstorm back there.

  21. I don't mind being stuck in but just the thought that I CAN'T go makes me feel trapped and I don't like that feeling. I've been having anxiety all day.

  22. Do you have a move date?

    Fri Feb 05, 07:35:00 PM EST

    We planned on beginning to move in Monday, with the first shipment. Don't think that's going to happen.

    We have another shipment scheduled for delivery Wednesday and another we're just waiting on.

    And our only 4WD is sitting in Orlando, still waiting to make the journey up after the Customs guys are satisfied.

    It's all good.

  23. I feel for you, Trish, I really do. I hate when I have plans and they are ruined for one thing or another especially weather. Do you need a lift?

  24. While here the hills are greening up and the meadowlarks are beginning to sing, in this low valley 750 ft above sea level.

  25. "I hate when I have plans and they are ruined for one thing or another..."

    Story of our lives. Thus the enduring appeal of not bothering to make any or taking them too seriously to begin with. We rather count on the Shit Happens rule.

    We should be okay getting down there Sunday night.

    Should be. : )