Financial Collapse and the Icelandic Solution
Many financial analysts agree that a financial meltdown is practically inevitable. Analyst Steve Denning writes in the prominent financial magazine Forbes in his article: “Big Banks and Derivatives: Why Another Financial Crisis Is Inevitable” that while corruption and a number of financial scandals are certainly a grave danger to the stability of the world financial system, a far worse problem is something else:
… the risk that is still staring us in the face: the lack of transparency in derivative trading that now totals in notional amount more than $700 trillion. That is more than ten times the size of the entire world economy. Yet incredibly, we have little information about it or its implications for the financial strength of any of the big banks.Moreover the derivatives market is steadily growing. “The total notional value, or face value, of the global derivatives market when the housing bubble popped in 2007 stood at around $500 trillion… The Over-The-Counter derivatives market alone had grown to a notional value of at least $648 trillion as of the end of 2011… the market is likely worth closer to $707 trillion and perhaps more,” writes analyst Jenny Walsh in The Paper Boat. “The market has grown so unfathomably vast, the global economy is at risk of massive damage should even a small percentage of contracts go sour. Its size and potential influence are difficult just to comprehend, let alone assess.”The bulk of this derivative trading is conducted by the big banks. Bankers generally assume that the likely risk of gain or loss on derivatives is much smaller than their “notional amount.” Wells Fargo for instance says the concept “is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments” and “many of its derivatives offset each other”.However as we learned in 2008, it is possible to lose a large portion of the “notional amount” of a derivatives trade if the bet goes terribly wrong, particularly if the bet is linked to other bets, resulting in losses by other organizations occurring at the same time. The ripple effects can be massive and unpredictable.Banks don’t tell investors how much of the “notional amount” that they could lose in a worst-case scenario, nor are they required to. Even a savvy investor who reads the footnotes can only guess at what a bank’s potential risk exposure from the complicated interactions of derivatives might be. And when experts can’t assess risk, and large bets go wrong simultaneously, the whole financial system can freeze and lead to a global financial meltdown.
Eventually some bets will go bad, a global financial meltdown is only a matter of time. Knowing that the inevitable will come in the end, what is it that could be done to prevent large-scale suffering, when this 700 Trillion mega-bubble of derivatives finally will burst?
The answer is simple: just let it happen and let the banks go down with it, especially the big ones and together with the whole financial system!
Don’t be afraid. A total financial collapse does not inevitably lead to a total economic collapse.
How do I know that? Because I’ve seen it exactly here where I live, in Iceland.
When the three giant banks collapsed, (for Icelandic standards they were truly giants many times larger than the whole country’s economy) the Icelandic government and its economy had no capacity whatsoever to bail them out. So what the Icelandic government did was to let the banks go bankrupt together with their international business and all the speculative parts, and then take over the local branches, the ATMs and the ordinary personnel and create new banks out of them. And while share-holders’ equity was wiped out, all regular depositor accounts within the country were guaranteed by refinancing those new banks by basically “printing” (rather electronically creating) the money that had been destroyed.
This meant that in spite of a systemic crash ordinary banking business for most customers inside the country went on just as before.
Of course, this was the only possible course of action for the Icelandic government, but during the first weeks after the crash it led to a total boycott by the international banking establishment. The country was set on the list of terrorist supporting rogue states. Electronic money transfers to the outside world were no longer possible, not even in foreign currency.
In spite of the enormous short term damages for the Icelandic economy due to this boycott it still was not destroyed by it.
The fish were still in the sea and could be caught, the sheep were still eating grass and having lambs and the potatoes were still growing in the fields. The energy plants were still working (though deeply in debt to foreign banks), cold and hot water was still coming from the ground.
When the total boycott was over, the Icelandic fishing industry could sell their products again just as before and the tourism industry was booming, since with the dive of Icelandic krona it had become more affordable for foreigners to visit our beautiful country here.
In other words, while the financial system had crashed, the real economy was still alive and thriving and fully capable of production. And the government made sure that the necessary financial services to facilitate trade were performed by the now government owned banks.
Sure there were economic repercussions, even non-financial companies went bankrupt, since their owners had taken on too much debt, especially debt in foreign currencies. And some homeowners who had taken out foreign loans lost their homes. Unemployment rose from barely 2% to nearly 10%, but with the unemployment benefits people survived.
While those who were highly in debt sometimes had to make use of food-distribution centers and soup kitchens, still nobody starved or went hungry and nobody, except for long-term alcoholics and drug-abusers, had ever to sleep on the street.
In 2009 and 2010 the economy severely contracted. This was no surprise since a good part of it had been built on the financial sector in the previous five years. The construction industry also had a deep low, for ordinary people, companies and the government could not afford to build too many new houses. But since 2011 the economy has started growing again and the unemployment rate went sharply down. In April of this year (2013) the rate was only 4.9% and in July it had gone down to 3.9%. Only half of those people had been unemployed for longer than six months.
Let’s compare those numbers to those in any other European country, especially the southern European countries who all have tried to bail out their too big to fail banks:
The euro area seasonally-adjusted unemployment rate was 12.1 % in July 2013, stable compared with June; it was 11.5 % in July 2012. The EU-28 unemployment rate was 11.0 % in July 2013, stable compared with June; it was 10.5 % in July 2012.Among the Member States, the lowest unemployment rates were recorded in Austria (4.8 %), Germany (5.3 %) and Luxembourg (5.7 %), and the highest rates in Greece (27.6 % in May 2013) and Spain (26.3 %).Luxembourg, which has about a two-third higher population (about 522.000), never suffered a total financial meltdown, although at the moment doing rather well compared to other European countries, has still an unemployment rate 2% higher than Iceland’s today.Cyprus with a population of about 1.1 million, an island state like Iceland, suffers today from 15,6% unemployment, a rate Iceland never reached after its own financial melt-down.
And here are the numbers for the United States, where enormous amounts of debt-money was used to bail out failed banks:
… as of July 2013, the unemployment rate in the United States was 7.4% or 12.0 million people, while the government’s broader U-6 unemployment rate, which includes the part-time underemployed, was 14.3% or 22.2 million people.
While part of its fast recovery might have something to do with Iceland being a small country, it still looks to me as if the Icelandic solution to the financial crisis might have been the better one.
The Icelandic way shows clear evidence that even a total financial collapse does not have to lead to an economic collapse, since the two of them are not the same thing.
If the basic financial services, which serve individual people and the real productive sector are taken over by the state, even if only temporarily (under international pressure 2 of the 3 major Icelandic banks have only months after their nationalization been privatized again) the economy will slump a little but will not be destroyed.
The near paranoid fear of a financial melt-down so many, especially American people, seem to have is not based on facts. America could survive and recover well without its speculative financial system.
Public banking and/or a monetary reform, like in the US a return to the government created green-back Dollar, would be a viable solution to counter the instability of today’s financial system as well as overcoming the enormous public debt problem.
The main obstacle for economic recovery America and most western countries have are governments beholden to the financial establishment.
And this is why financial collapses lead to economic collapses and the suffering of millions upon millions of people.
Once this has changed and western democracies have gotten themselves truly governments for and by the people, there are many feasible ideas out there of how to make countries like the United States economically independent from global markets, so that a default or a cut-down of unpayable public debt would not lead to resource shortages and economic suffering for the people.
I have collected a few of those ideas and will write about them next time.
This year, Iceland will become the first European country that hit crisis in 2008 to beat its pre-crisis peak of economic output.ReplyDelete
Special case, Iceland was an island, people couldn't just walk their money out of there.Delete
No man is an island,Delete
Entire of itself,
Every man is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thy friend's
Or of thine own were:
Any man's death diminishes me,
Because I am involved in mankind,
And therefore never send to know for whom the bell tolls;
It tolls for thee.
This year the International Monetary Fund declared that Iceland had achieved economic recovery 'without compromising its welfare model' of universal healthcare and education.ReplyDelete
Other measures of progress like the country’s unemployment rate, compare just as well with countries like the US.
Iceland’s unemployment rate is 4%Delete
Iceland is bigger than Corpus Christi, Texas!Delete
Iceland is smaller than Santa Ana, California!
Microeconomics defines a bottom up approach to economics. Macro looks at things from the aggregate, top down. There is relevancy in looking at Icelandic experience, certainly as it applies to Greece.Delete
Iceland frowns upon those that want to export jobs:ReplyDelete
Iceland’s finance minister has announced a 39 per cent tax on investors looking to take their money overseas.
National debt of Iceland in relation to gross domestic product (GDP) 2015 is 74% and declining at an annual rate of 5-6%.ReplyDelete
Monday, October 29, 2012ReplyDelete
Iceland: Democracy in action, arrest the bankers, throw out the politicians and tell the IMF to piss off
In an interview with German newspaper Die Zeit, economist Thomas Piketty had strong words for Germany, calling their moral stance on Greece’s debt “a huge joke” and criticizing Germany’s short memory:ReplyDelete
What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.
Banks in Greece will remain closed until Wednesday, and withdrawals are still limited to 60 euros a day. The European Central Bank has just added extra pressure to Greek banks by raising haircuts (the discount on Greek collateral posted in order to access emergency funding), which affects the amount of emergency liquidity assistance—which is the only source of financing for Greek banks at the moment.
60 euros a day, but with only 500 million of Euros in liquidity, Greek banks go belly up this week.Delete
Greece’s financial woes could spark a wider geo-political crisis for the West, Greek Prime Minister Alexis Tsipras yesterday held talks by phone with Russian President Vladimir Putin.ReplyDelete
Moscow said the call had been arranged ‘at the request’ of Mr Tsipras, with the two men discussing the outcome of the referendum. Some observers believe Moscow could agree to bail out Greece in return for Athens blocking further EU sanctions against Russia.
Read more: http://www.dailymail.co.uk/news/article-3151560/Greek-deal-blow-euro-apart-Merkel-refuses-write-Athens-debts.html#ixzz3fA6Lp8Vm
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I'd like to see that happen. Because Europe will then proceed to boot Greece and put the sanctions back in place anyway, and Putin would then cut off the gravy train.Delete
Greece has an unemployment rate of 27%. What else is there to know?ReplyDelete
Youth unemployment over 50%,I believe. Pensions for everyone! One of the benefits of EU membership is mobility if labor is it not?Delete
An interesting story a week or so ago was migrants trying to hop trains through the Chunnel to England in search if work...
Obama Outlines New strategies to Address ISIS Threat
America's battle against ISIS, dominated so far by airstrikes and training opposition forces, must also include a campaign against the group's "twisted thinking," President Obama said Monday.
"This is not simply a military effort," Obama said in remarks after getting briefed on the anti-ISIS effort at the Pentagon. "Ideologies are not defeated by guns. They're defeated with better ideas."
To that end, Obama said the United States was stepping up efforts to counteract ISIS' online recruitment operations, and encourage other countries with large Muslim populations to increase economic opportunities for young people who are exploited by the terror group into joining their radical, violent cause.
"This larger battle for hearts and minds is going to be a generational struggle," Obama said...
Iranian-American Nuclear Project
by Caroline Glick (JP)
The article points out all the reasons, from Israel's POV, why the Iran nuclear negotiations are bad for Israel and the US. Of course, anyone who has read Ms.Glick over the years realizes that her real concerns are limited to Israeli interests and that what concern she has for the US is limited to what the US can do for Israel. That being said, even though I disagree with some of her points, there are some that to me seem legitimate.
Despite some of the shortcomings of the deal, it is highly unlikely that Obama will let this agreement falter given the effort that has been put in already and the short time he has left on the job.
Glick mentions Israel's options. Although she mentions Israel bombing the Iran facilities, even she doesn't seem to take that option too seriously. She also mentions what is likely Israel's only option, mustering Israeli influence in the US to try to kill the deal in Congress. Since it would take a two-thirds vote to kill the deal that second option will be difficult.
Israel has the option to bomb Iran and prove to Iran, once and for all, in the clearest of terms that Iran needs a nuclear weapon to protect itself from Israel. It is the best opportunity to ensure that Israel will drag the US mercenary forces into a war that will make Viet Nam, Iraq, Syria and Libya look like a walk in the park.Delete
It will ensure that the American public will finally figure out who is the biggest threat to US security and it will not be Iran.
HERE IS A THREAT TO US SANITY AND SECURITY: THE GOPDelete
Chris Christie is starting his presidential bid in a tough spot. The race already features too many candidates like him, who are polling higher than him, for him to climb into contention without lobbing some major hail marys in hopes that he can gain enough attention to make something stick.
That strategy was on full display this morning, when in an interview on Morning Joe he insinuated that future terror attacks on American soil would be the fault of those who worked to force the expiration of the PATRIOT Act, namely Rand Paul.
By the way, Christie polling numbers are in the gutter because he has been a lousy governor.
GOOD OLD MORNING JOE;Delete
Friday, July 20th, 2001, the body of Lori Klausutis, 28, was found slumped next to a desk on the floor of Florida Republican Congressman Joe Scarborough’s Fort Walton Beach office where Lori had served as a constituent services coordinator since May, 1999. Her body was found around 8:00 a.m. on Friday morning by a couple arriving for an appointment. She had been dead for some time. A second employee, who would have normally arrived for work at around the same time, was away on vacation. Police cordoned off the area for investigation, later announcing that there was no reason to suspect foul play, nor were there signs of suicide.
Scarborough's office released a statement several hours after the discovery:
"My staff and family are greatly saddened by the loss of Lori Klausutis. I know Lori will be missed by the thousands of citizens who regularly contact my office to seek assistance with a variety of problems. May God grant Lori's family the grace, comfort and hope that will get them through this difficult time."
The Congressman returned to Florida that same day, and his office was quick to point out that it was not unusual for him to fly home for the weekend.
There was a great deal of ambiguity over whether Lori had suffered past medical problems. Scarborough's press secretary, Miguel Serrano, made mention of health problems in Lori's past, but could not be more specific. In response, Fort Walton Beach Police Chief Steve Hogue is quoted as saying "That's part of our investigation, checking into her medical history." Associate Medical Examiner Dr. Michael Berkland said "She had a past medical history that was significant, but it remains to be seen whether that played a role in her death". Soon after a member of the immediate family rejected out of hand that Lori had any significant medical problems. She was, in fact, quite an athlete, having recently run an 8K with a very respectable time and she belonged to the Northwest Florida Track Club.
The results of the mandated autopsy, however, were deemed "inconclusive" by Dr. Berkland, who ordered more specific toxicology tests. These results were expected by the middle of the following week, around the first or second day of August. Dr. Berkland commented at the time "This turns over several puzzle pieces in the case of her death and reveals more of the picture".
Welcome to the Wheel of Fortune.
Michael Berkland, it turns out, has a very interesting background himself. Recently relocated to Florida, it is a matter of public record that Dr. Berkland's medical license in the state of Missouri was revoked in 1998 as a result of Berkland reporting false information regarding brain tissue samples in a 1996 autopsy report. Berkland does not deny the charges.
It's also a matter of public record that he was suspended from his position as Medical Examiner in the State of Florida in July, 1999.
WHERE DID DR. BERKLAND COME FROM YOU ASK?Delete
Repeated requests to Dr. Stephen Nelson, Chairman of the Medical Examiners Commission, Florida Department of Law Enforcement, have failed to verify that Dr. Berkland's suspension was lifted and that his licensure and disciplinary record are clear at the present time. Dr. Nelson was appointed Chairman of the Commission by Governor Jeb Bush.
Josh Earnest argues that it is the GOP's fault that the illegal alien, an illegal alien that had been previously been deported five times, was allowed to kill the lady in California.
AVILA: I hear your reluctance to comment on this case, but this case is being used by opponents of the administration to say that your policy is not working and that repeat criminals are coming across the border.
EARNEST: And what I’m saying is that those critics are individuals who oppose legislation that would have actually made a historic investment in border security. So I recognize that people want to play politics with this, but if you take a simple look at the facts, the fact is the President has done everything within his power to make sure that we’re focusing our law enforcement resources on criminals and those who pose a threat to public safety. And it’s because of the political efforts of Republicans that we have not been able to make the kind of investment that we would like to make in securing our border and keeping our communities safe...
Milton Friedman in 1997, argued that Europe was a poor case for a common currency. The value of a common currency, he wrote…ReplyDelete
Depends primarily on the adjustment mechanisms that are available to absorb the economic shocks and dislocations that impinge on the various entities that are considering a common currency. Flexible exchange rates are a powerful adjustment mechanism for shocks that affect the entities differently. It is worth dispensing with this mechanism to gain the advantage of lower transaction costs and external discipline only if there are adequate alternative adjustment mechanisms.
HONG KONG (MarketWatch) -- Amid a heavy market selloff, 203 mainland-China-traded companies announced separately Tuesday that trading in their shares had been suspended. This brought the total number of shares in trading halt over the past seven days to 651, or about 23% of the entire pool of 2,808 listed stocks, the Securities Daily reported Tuesday.
Many of the companies didn't reveal the reasons behind the trading suspensions, though some cited reasons including the consideration of unspecified significant events, asset restructuring, or private share placements, the report said. Many market observers saw the exodus into trading halts as a way for companies to protect their stocks from the current sharp drop for Chinese markets, according to the report, with the Shanghai Composite Index SHCOMP, -3.02% having plunged 12.1% last week. Reuters reported separately that the companies would face fines if they were discovered to have requested trading suspensions without good reason. Among the 615 issues, 37% came from the Shenzhen Stock Exchange's Small and Medium-sized Enterprise board (SME), while more than 22% were from the ChiNext 399006, -5.68% of start-ups, according to the the Securities Daily.
We did win WWII in 1945 and The Cold War ended in 1991 did it not?ReplyDelete
How absurd is the US Empire?
In 1968 I transferred from a Nato base in Larissa, Greece to RAF Lakenheath outside of Cambridge, England.
The Pentagon announced that it needs more funding for reenlistment bonuses for 600 F-15C positions. The adjustment enables the Air Force to continue the F-15C mission at RAF Lakenheath.
The Air Force plans to more than double the number of enlisted career fields eligible to receive re-enlistment bonuses, from 10 to 23.
Mercenary armies are expensive.
We still have air bases in England 70 years after VE Day on Europe.Delete
In response to the threat by the Soviet Union, by the 1948 Berlin blockade, President Truman decided to realign USAFE into a permanent combat-capable force. In July, B-29 Superfortresses of the SAC 2nd Bombardment Group were deployed to Lakenheath for a 90-day temporary deployment.Delete
Mercenary armies are expensive.
Not if you consider they buy you the willful indulgence of the populace and that the populace pays for them anyway.
From Lakenheath, I was reassigned for two years to a US Army facility, Rothwesten Kaserne, Kassel Germany, which was used primarily as an intelligence facility, Army Security Agency (ASA) and Hawk Missile batteries. Kassel was home of the Elephant Bar which is long closed but revived in memory in 2008:Delete
Hey 2164th - where'd the title (Elephant bar) of your blog come from? Is there a story there?
A long time ago in another life-time, in Kassel Germany was an art-deco bar frequented late at night by an international crowd. The mahogany bar had red up-lighting but was always in a blue haze of cigarette smoke. The woman, Nordic beauties and the music Marlene Dietrich style from the forties and fifties. The Elephant Bar, always fascinating, and only disappointing enough to keep it interesting.
desert ratSun May 04, 01:44:00 PM EDTDelete
Thank you guys, duece and whit, especially. But all of you that participate and those of you that merely read the threads.
I'm not sure it was me, though, that gave the duece the moniker, but ...
TeresitaSun May 04, 01:56:00 PM EDT
One of the best attractions here at the Elephant Bar are the pinup girls, and I've made it a goal when I have more time to go diving through all the old threads back to the beginning and linking to those images.
There are times when the Belmont Club is running at a low ebb, and all the action is here. Don't sell the EB short just because Hugh Hewitt doesn't have us on his blogroll. Some of the ones he does have, like Kudlow, no longer even accept comments, or never did. And that's where the fun is.
Whit, when you brought back all those wunnerful memories of past barflies you forgot my chief nemesis, a one "Catherine", who seemed to have enough spare time to do opposition research on Your's Truly. I don't know how many yawns that triggered. She had more nicks than Habu and I suspect that she finally morphed into Nahncee and went with that. I didn't like her very much but she was a critical peanut shell on the floor of that crazy watering hole for idiots we call the Elephant Bar.
trishSun May 04, 02:10:00 PM EDT
"Thank you guys, duece and whit, especially."
And here's to all you undertakers. And one seriously pissed off chihuahua.
I'll have a Club Col-O-mbia today.
whitSun May 04, 02:13:00 PM EDT
One Club Columbia coming right up.
rufusSun May 04, 02:26:00 PM EDT
Well, I don't know about all that sentimental shit; but, you did keep the beer cold, and the prices down.
SO, how bout that "Big Brown," huh?
Oh, I think it wuz me that first muttered them immortul words, "Can I call you Deuce?"
2164thSun May 04, 02:28:00 PM EDT
whitSun May 04, 02:29:00 PM EDT
Sorry Rufus, my apologies. I stand corrected.
Iran and major powers will continue negotiations on an historic nuclear deal past Tuesday's deadline for a long-term agreement, European Union foreign policy chief Federica Mogherini said.ReplyDelete
"We are continuing to negotiate for the next couple of days. This does not mean we are extending our deadline," Mogherini told reporters.
The deal under discussion between Iran, Britain, China, France, Germany, Russia and the United States is aimed at curbing Tehran's most sensitive nuclear work for a decade or more, in exchange for relief from sanctions that have slashed Iran's oil exports and crippled its economy.
A deal will be reached and nothing will slow Iran's pursuit of nuclear weapons down.Delete
A feel good deal will not change Iran's view of the world, in fact it will show weakness and appeasement.
Iran has already said that even if a deal is reached? America will continue to be the Great Satan and IRan's enemy..
We still have air bases in England 70 years after VE Day on Europe.ReplyDelete
Just think of Old Blighty as an unsinkable aircraft carrier.
Troops in England? Fine, just as long as they aren't in Texas!Delete
Ash what do you care? You live in Canada..Delete
"It’s not the first time the U.S. military has conducted a training exercise on home soil. But Jade Helm stands out for its scope and ambition – and because it has become a lightning rod for a smorgasbord of suspicious critics, from Tea Party supporters to libertarians to members of the web vigilante group, Anonymous. At the fringes, the conspiracy theories strain plausibility past breaking point, framing the military exercise as part of an effort by a vaguely defined group of global elites to pave the way for martial law, send unco-operative Americans to what some conspiracy buffs darkly call “socialist re-education camps,” allow a federal takeover of Texas and ultimately instigate civil war.Delete
Many of the wildest Jade Helm theories spring from an old U.S. tradition of deep distrust of big government and from the same extreme margins that more recently produced the “birther” conspiracies that question President Barack Obama’s religion and birthplace. Yet the frenzy in anticipation of the the eight-week training exercise illustrates not only the swelling ranks of America’s disillusioned fringe but also the unprecedented political influence it now commands."
I love the picture that goes with the article where the lady at a protest is wearing a George Bush "Miss me yet?" T-shirt.
Deuce ☂Tue Jul 07, 12:49:00 AM EDTReplyDelete
Israel has the option to bomb Iran and prove to Iran, once and for all, in the clearest of terms that Iran needs a nuclear weapon to protect itself from Israel.
Israel has not bombed Iran. Although from your logic, maybe Israel SHOULD nuke Iran to prove once and for all it's needs nukes to counter nations set to their destruction as rich and as large as Iran.
Iran doesn't NEED nukes to protect it's self from Israel, Israel has not launched a war against Iran, now Iran? has launched wars against Israel using it's proxies.
Iran's pursuit of nukes is much bigger than Israel, it's Iran's dream of a iranian hegemony of the entire middle east, that is why they are destabilizing and taking over governments in the world. A Shiite dream of conquest…
Ignoring the reality that the Iranians are seeking an Islamic revolution across the globe ignores reality and history…
Deuce ☂Tue Jul 07, 12:49:00 AM EDTReplyDelete
It will ensure that the American public will finally figure out who is the biggest threat to US security and it will not be Iran.
keep telling yourself that…
But the american public can smell a rat and it's persian…
No matter your mud slings, your blood libels and your character assassinations of Israel and those that support her, Americans get that the islamists of the world are the enemy….
However things play out from here — I find it hard to see a path other than Grexit — the troika’s program for Greece represents one of history’s epic policy failures. Even if you ignore the economic and human toll, it was an utter failure in terms of restoring solvency. In 2009, before the program, Greek debt was 126 percent of GDP. After five years, debt was … 177 percent of GDP.ReplyDelete
How did that happen? Did the Greeks continue massive borrowing? As the chart shows, the answer is a definite no. Greek debt at the end of 2014 was only 6 percent higher than it was at the end of 2009. Admittedly, that number reflects a significant haircut on private debt along the way, but it was still nothing like the continued borrowing binge some imagine.
What happened instead was, of course, the collapse of GDP — itself largely the result of the austerity program.
What this suggests is that the troika program was simply infeasible, and would have been infeasible no matter how willing the Greeks had been to make sacrifices. The more they cut, the worse things got, because of Fisherian debt deflation.
I suppose you can argue that structural reforms might have delivered a boost in competitiveness, but the truth is that there’s very little evidence supporting the conventional faith in such reforms.
Some of my more conventional contacts like to insist that Greek austerity was unavoidable, and it’s true that one way or another Greece was going to have to achieve a primary surplus. If currency devaluation had been an option, this would have required much less austerity, because of the boost from easier monetary policy; but within the euro a lot of austerity was indeed something that had to happen. But the key point is that the austerity ended up being not just incredibly painful but completely futile, because it wasn’t accompanied by massive debt relief.
Is this kind of futility always the case? Not necessarily; if you try to do the arithmetic here, it becomes clear that a lot depends on the initial level of debt. If Greece had received major debt forgiveness, it would still have gone through hell, but with at least some hint of an eventual exit. Instead it was pushed into a cycle of ever-worse pain without hope.
Defense Secretary Ash Carter when asked how many Syrian militants the US is currently training, answered "60".
Ash says the US is encountering problems with motivation and finding recruits.
It's that damn long form questionnaire they insist be filled out, in English, detailing their past history in religious and military affiliations...Delete
Perhaps, it is a case that these guys instead of just taking money from the US as everyone in the ME does these days, have decided that recently the cost/benefit associated with taking that baksheesh has shifted to the negative.
About 3 weeks ago Carter was saying we were training about 90 militants. Tree weeks and we lost a third?
IMO, Obama is merely allowing this thing to play out until he is out of office. Leave it for the next guy.
The shooting in San Fransisco and Obama's responsibility.
A 32 year old women walking with her family down the San Fransisco pier was shot by an illegal immigrant guilty of seven felonies and having been deported from the US five previous times. He was recently released from jail under San Francisco's 'Sanctuary City' policy.
Yesterday, I put up a quote from Josh Earnest trying to shift the blame for the killing to the GOP for failing to pass Obama's 'comprehensive' immigration policies. To which I say, "Bullshit".
The Immigration situation in the US is a bipartisan problem. Bush was as bad as Obama as evidenced by many of his administration's actions including the inordinate lengths they went to to prosecute border patrol officers who were actually doing their jobs. Bush did it to appease the Mexican government. Obama does it to appease activists on the left.
However, though both sides share culpability, Obama is the current president and needs to (but certainly won't) take ultimate responsibility for the death in San Francisco and others like it.
The precipitate cause of the crime in SF was the release onto the street of an illegal alien guilty of numerous felonies even though ICE had requested that he be detained. This is not all that unusual in SF. Two weeks before the release the sheriff issued a ruling instructing that no person could be held for or released to ICE on immigration charges. Sanchez was summarily released after being transferred there. It is estimated that tens of thousands have been released in California under these type of policies.
There is no way the sheriff, or the City of San Fransisco, or Governor Jerry Brown who issued an executive order allowing 'Sanctuary Cities' in California can escape responsibility and blame for the murder of the young women. The main responsibility of government is to protect the lives and health of their citizens. They all failed that responsibility miserably.
However, the ultimate responsibility lies with the federal government and Obama. While the Obama administration tries to blame incidents like that in SF on the GOP in fact they result from Obama's schizophrenic approach.
The states ultimately bear the burdens of US immigration policy, yet when a state takes it upon themselves to follow 'actual' US laws as opposed to administration policies that can change at the whim of the president, they are taken to court and admonished. When states move in the opposite direction they are blamed. At the end of it all, Obama as is his wont will blame the problems on anyone he can find as long as it is not himself.
In the case of the SF shooting, ICE transferred the shooter, Sanchez, from Los Angeles to San Fransisco. Why? They knew that SF was a sanctuary city. They knew what to expect. They sent with him with a simple 'detain order' even though the city government in SF has said they will not hold anyone on a detain order. The only way they will detain them is if a warrant is issued.
No one in the Obama administration will be punished. They never are. Will anyone in ICE be punished for sending Sanchez to SF without a warrant? Not likely. What the SF sheriff did was a felony under federal law. Will he or anyone in city government be prosecuted by the Feds. No way. Especially, with an election coming up.
It's all politics. Screw the public.
Chalk up one for Donald Trump.
With Greek banks down to their last few days of cash and the European Central Bank tightening the noose on their funding, Tsipras tried to convince the bloc's other 18 leaders to authorise a new loan swiftly.ReplyDelete
Da fuck? I though they just voted no on the bailout deal.
They want the loans without the paired 'austerity' measures.Delete
If wishes were horses every beggar would ride.Delete
...and the deal they actually voted on was a deal that was off the table (the government had rejected it already and missed a payment) plus it only covered 4 months providing enough money to pay the service costs on the existing debt.Delete
Italy, which had virtually no exposure to Greece in 2010 now has a massive one: €39 billion... Spain has also seen its exposure rocket from nearly nothing in 2009 to €25 billion today....In short, France has managed to use the Greek bailout to offload €8 billion in junk debt onto its neighbors and burden them with tens of billions more in debt they could have avoided had Greece simply been allowed to default in 2010. The upshot is that Italy and Spain are much closer to financial crisis today than they should be.ReplyDelete
I think the 'troika' (IMF ECB and EU Commission) plus national governments took the exposure out of the hands of most of the private folk over the last number of years as they kicked the can down the road.Delete
In the grand scheme of things I don't think the numbers are all that large. The boyz at the EU can absorb the losses easily enough (they control the printing press dontcha know) but other weak links (Spain, Italy...) feel a tad nervous and the Greek people, well, they be hurtin' big time.Delete
If it is our pocket book one is worried about the tanking Chinese behemoth should cause some consternation.
The blog sure has been pleasant reading, today. Congratulations, Deuce (and, Thanks.) :)ReplyDelete