Category Archives: Doomsday scenarios

“No People, No Problem”: The Baltic Tigers’ False Prophets of Austerity

By Jeffrey Sommers, an associate professor of political economy in Africology at the University of Wisconsin-Milwaukee and visiting faculty at the Stockholm School of Economics in Riga, Arunas Juska, associate professor of sociology at East Carolina University and an expert on the Baltics, and Michael Hudson is a former Wall Street economist and a rofessor at University of Missouri, Kansas City . Cross posted from Counterpunch.

The Baltic states have discovered a new way to cut unemployment and cut budgets for social services: emigration. If enough people of working age are forced to leave to find work abroad, unemployment and social service budgets will both drop.

This simple mathematics explains what the algebra of austerity-plan advocates are applauding today as the “New Baltic Miracle” for Greece, Spain, and Italy to emulate. The reality, however, is a model predicated on economic shrinkage as a result of wage cuts.

On the Austerity and Rule by Big Finance in Greece

This Real News Network interview nominally is about whether Greece should leave the Euro. But it is really about the struggle between the bondholders, who are crushing Greek democracy and society, versus the population. The interviewee Costas Lapavitsas makes an forceful case why defying the banks is the best route for Greek society, even thought the transition will also be difficult.

David Apgar: Could Germany Be Right about the Euro?

By David Apgar, co-founder of GoalScreen, a web app still in trials that lets investors test alternative price drivers of specific securities (free though the end of the year at www.goalscreen.com. He has been a manager at the Corporate Executive Board, McKinsey, the Office of the Comptroller of the Currency, and Lehman, and writes at www.goalscreen.com/blog.

What if there are good reasons for the preternatural calm of German Chancellor Merkel’s inner circle as the English-language media (based, after all, in the investor capitals of London and New York) light their collective hair on fire about the euro’s imminent immolation? Surprisingly, you can make a decent argument that the euro zone is at no risk of breakup – unless someone secretly switches its purpose from facilitating European trade to providing investors an implicit guarantee against losses.

ContagionEx is For You!

I’m in the middle of a serous shredding which is taking longer than I’d like. But for your viewing pleasure in the meantime, Mark Ames has found this tidbit:

Rob Johnson on Real News Network on the Fed’s Lifeline to Eurobanks, and the Rationale for Austerity

Rob Johnson brings a wide ranging perspective (from politics, as a former Senate staffer; from markets, as a former hedge fund manager; and an economist, by training and via his current role as head of the Institute for New Economic Thinking) to this interview on the immediate and deeper implications of the central bank intervention on behalf of the Eurozone earlier this week. Johnson is deeply skeptical both of the near and longer-term approaches taken to rescue the Euro. This talk has a particularly clear and layperson friendly discussion of the rationale for and failings of austerity.

Wolf Richter: French Presidential Election – Coup De Grâce For The Euro?

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Amidst a flood of proposals, plans, and rumors to save the euro and the Eurozone, much has been made of the Merkozy couple, the uneasy partnership between French President Nicolas Sarkozy and German Chancellor Angela Merkel. During his speech today in Toulon, an ancient Mediterranean port town, Sarkozy reemphasized his commitments: the ECB must remain independent, and France and Germany must remain the pillar of stability. “To defend the euro is to defend Europe,” he said. Alas, he may be out of a job by May 2012—and his potential successors to the left and to the right have different ideas.

Does Anybody Who Gets It Believe Central Banks Did All That Much Yesterday?

I’m still mystified as to the market reaction on Wednesday to the coordinated central bank effort at waving a bazooka at the escalating European financial crisis. But as readers pointed out in comments, the big move was overnight, in futures, when trading is thin, and there was no follow through when markets opened. And volume was underwhelming.

Mosler/Pilkington: Response to Yanis Varoufakis Regarding Our Eurozone Exit Plan

By Warren Mosler, an investment manager and creator of the mortgage swap and the current Eurofutures swap contract and Philip Pilkington, a journalist and writer based in Dublin, Ireland

Recently the Greek economist Yanis Varoufakis responded to the euro exit plan that we published on Naked Capitalism a few days ago. While Varoufakis was broadly supportive of the plan if an exit was absolutely necessary, he criticised some of the details therein.

Mosler/Pilkington: The IMF-ECB ‘Plan’ – Fig-Leaf upon Fig-Leaf

By Warren Mosler, an investment manager and creator of the mortgage swap and the current Eurofutures swap contract and Philip Pilkington, a journalist and writer based in Dublin, Ireland

Politics in the Eurozone has turned into a strange and tragic farce in the recent weeks and months. While the peripheral countries continue to judge successful economic policy on the amount of tax liabilities they can levy to smother their depressed economies, the big dogs play various games in which they try to hide their shame behind ever more sophisticated veils.

Philip Pilkington: The Coming Age of Neocla

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

We stand for the withering away of the state. At the same time we stand for the strongest state power that has ever existed. Is this “contradictory”? Yes, it is contradictory. But this contradiction fully reflects Marx’s dialectics.

– Josef Stalin in remarks to the Soviet Party congress in 1930

Such is the contorted nonsense that flows from doctrine and dogma when these become institutionalised. When dogma is confined to the armchair of the intellectual or the blackboard of the social scientist it is innocuous – simply an attempt by one individual to make sense of a world that they will never, in truth, ever make sense of. But when it comes to occupy a seat of power it becomes like a steamroller that can crush common sense and practicality in a misled attempt to change the world for the better.

Quelle Surprise! Banks Lied About Bailout Funds and Got $13 Billion in Profit from Them

Bloomberg News is continuing with the thankless task of pushing forward with FOIA requests relative to the Fed’s lending programs, and once it eventually gets its troves of documents, having to slog through them to see what they reveal.

Bloomberg has a long article up on its site about its latest findings. And the bottom line is everybody close to the process lied like crazy.

Steve Keen on BBC on How to Get Out of Our Current Depression

Australian economist Steve Keen minces no words during this BBC interview, calling our downturn a depression and calling for radical measures, namely large scale debt writedowns. I can’t imagine a discussion like this getting airtime on a US mainstream media outlet.

Eurocarnage Continues

Things are only going from bad to worse in Europe.

German Bund Action Goes Badly; Bank of America CDS Spread Hit New High; EuroSovereign and US Bank Spreads Widen More. Will the Germans Finally Break Glass?

As our overly-long headline tells you, Wednesday was a really bad day in credit land. Not only has the reality of the severity and seeming intractability of the Eurozone mess started sinking in, but US investors seem finally to be facing up to the fact that a full blown crisis would not be contained and will engulf American banks. If you thought September-October 2008 events were nasty, they could look like a mere trial run for what may be in the offing.

The Financial Times coverage on the failure of the Bund auction is suitably grim:

The Fed Stress Tests While Europe Starts to Burn

Our headline at odds with the media reports on the newest confidence-bolstering ploy by the Federal Reserve, that of new, improved stress tests for the six banks at the apex of the US financial services industry looting operation: Bank of America, Citi, Goldman, J.P. Morgan, Morgan Stanley and Wells.

There’s a noteworthy gap between the scenarios employed in the 1.0 version, which took place in early 2009, when the banks were told to get more capital or else, and the ones about to be implemented.