Search The Web

Friday, May 18, 2012

Need some real Rock 'N' Roll to blast you off that couch ? Blogger DJ's got it...

Mitch Ryder and The Detroit Wheels - C.C. Rider
Mitch Ryder and The Detroit Wheels - Sock it to Me Baby
Steve Miller Band - Livin ' in the U.S.A.
Steppenwolf - Born To Be Wild
Jefferson Airplane - She Has Funny Cars
Moby Grape - Omaha
Big Brother and the Holding Company - Combination of the Two
Van Halen - You Really Got Me
The Kinks-  All Day and All of the Night
Bow Wow Wow - Do You Wanna Hold Me
Duran Duran -  Girls On Film
Bryan Ferry -  Don't Stop The Dance
Fire Inc - Tonight is what it means to be young
Fire Inc - Nowhere Fast
The Pointer Sisters - Fire
Frankie goes to hollywood - Relax
Haddaway -  What is Love ?
KC and The Sunshine Band - Please Don't Go 

Thursday, May 17, 2012

And now, for something completely different, a Greek's view of the Greek Euro/Debt Crisis

Writing in the U.K's The Guardian, Nikos Chrysoloras of the Greek newspaper Kathimerini asserts that "Greece must remain in the eurozone". His arguments are cogent, and are extensively excerpted below.

* * *

So, although everyone is an expert on Greece these days, it seems that they have missed the fact that the country has tried the path they propose: expansionary fiscal policies, successive competitive devaluations, and the like. We've been there and done that during the 1980s. The result of the "miracle medicine" was average growth rate of 0.75% over the decade, average inflation at about 20%, interest rates at 33%, quadrupling of public debt and deficits of up to 16% of GDP. If that is the economic paradise of devaluations, thanks, but no thanks, I prefer the hell of austerity. Besides the fact that the younger generation has to pick up the bill for what happened in the 1980s, it is also worth mentioning that during the fiscal consolidation period that followed, in the years before the introduction of the euro, Greece enjoyed healthy growth rates, twice the EU average.

Hence, it is not reform that brought the economy to a standstill. On the contrary, the root of the crisis is the fact that Greece essentially ceased its efforts to reform after the adoption of the euro. Haunted by the stock market bubble of 1999 and exhausted by the continuous fights with trade unions, the Simitis government called it quits back then.

Growth continued to be strong though, since the public investment programme peaked ahead of the Olympics, while the sharp reduction of interest rates on government bonds and bank loans after the adoption of the euro kept the economy afloat. The international climate was also favourable for the powerhouses of the Greek economy (tourism and shipping) and tension in Greek-Turkish relations eased. Even more importantly, continuous pay rises in both the public and the private sector boosted consumption. Salary expenses in the Greek public sector increased by 117% between 1999 and 2009.

Moreover, if the experts were not sleeping during "Greek economic history 101" lectures in school, they would notice that the Greek economy went into recession not after the adoption of the economic adjustment programme in mid 2010, but well before that: immediately after the global 2008 financial crisis, which signalled the end of cheap and easily available credit. In 2009, Greece ran a huge public deficit (15.6% of GDP) in order to avert a recession, but failed to do so (GDP contracted by 3.2%).

So we tried to spend our way out of recession and again, just like in the 1980s, it did not work.
And although it is true that austerity suppresses economic output, Greece's main problem is not austerity, but uncertainty. It should have been clear that no matter how much wages drop, and no matter how good opportunities present, no one will invest in the Greek economy and create jobs, if they are not certain about what will happen in the country. For as long as Greeks and Europeans alike do not provide a definitive and convincing answer to the question of whether Greece will remain part of the eurozone and the EU, GDP will keep contracting and unemployment will be rising.

The drachma will not solve any of the problems of the Greek economy, namely, public finance mismanagement, over-reliance on public and private consumption, lack of medium and large export-oriented enterprises, extremely high percentage of self-employed professionals, low competitiveness, tax evasion, and unbelievably weak administrative capacity.

To the contrary, we should bear in mind that Greece will not devalue an existing currency, because the drachma does not exist. It will introduce a new currency, while already being in a state of default. Leaving aside the logistics of such an endeavour, printing a new currency while already bankrupt is a suicidal move, since no one will want to buy it.

Unlike Argentina, Greece is not a net exporter of raw materials. Hence, it will have no means to support the new currency, which will have no exchange value. The country will be unable to pay in order to import oil, gas, food, and medicines with drachmas. Chaos will ensue and uncertainty will spread to the rest of the eurozone.

Strange as it may sound, what we are going through in Greece, is the best of all possible worlds. Restoring the competitiveness of the Greek economy and changing its structure is the only way for the country to survive in the absence of cheap credit.

The gigantic support programme by the EU and the IMF can only help Greece escape a crash. But the hard landing cannot be avoided. In a sense, Greece now finds itself in "the desert of the real", as its standards of living are adapting to a world without loans, and reflect the actual production of wealth in the country. Staying in the eurozone and pursuing reform is the only chance Greece has. Hopefully, everyone will realise it before descending into chaos.

Tuesday, May 15, 2012

Less Sanguine Views on Greece's Exit from Euro

...from two U.K. newspapers.

Jeremy Warner of The Telegraph warns, "Brace, brace. Dark times ahead as Greece heads for the exit" :

European policymakers are about to commit another major blunder in their handling of the eurozone debt crisis, and this time it could well be fatal. Mistakenly, they have convinced themselves that it won't much matter if Greece leaves, and indeed that it might even help resolve the wider crisis to get rid of this persistent thorn in the flesh.
  

Bring it on, they mutter callously; it will be a lot worse for them than for us. On one level, this is just bravado. It's an attempt to put as nonchalant a face as possible on the now apparently inevitable. But they also seem to believe in their validity of their own analysis – that they have indeed used the past two years well, and are now fully prepared for a Greek exit.
Believe it if you will. The ineptitude to date of the eurozone's crisis response strongly suggests a different conclusion – both that the likely contagion from an exit has been hugely underestimated, and that by prompting a wider breakup, thereby tipping Europe into depression, it may end up as bad for everyone else as it is for Greece.  
The Greek problem has been consistently misdiagnosed and mismanaged right from the start. First there was the suggestion a year ago from Angela Merkel and Nicolas Sarkozy that if Greece didn't buckle under and agree austerity it might be chucked out. Markets reacted logically by selling bonds in any country that looked vulnerable, thereby making it much harder for all periphery governments to fund themselves.  
This disastrous admission was compounded by attempts to underpin confidence in the financial system by forcing banks to mark their sovereign debt to market. This destroyed the concept of the "risk free asset", forcing banks for the first time to apply capital to their sovereign debt exposures. Unsurprisingly, they stopped buying sovereign bonds in the distressed countries, again making it harder for governments to fund themselves.
These mistakes were partially reversed by the European Central Bank's LTRO programme, which provided banks with the liquidity they need to resume purchases of sovereign bonds. Unfortunately, this has only succeeded in creating its own problems. The completely inappropriate austerity of Europe's Fiscalpakt has sparked new doubts about debt sustainability, which has in turn further undermined confidence in bank balance sheets now stuffed to the gunnels with sovereign debt.
  
And they expect us to believe that a Greek exit can be managed without further cost? Let's just briefly deconstruct the increasingly desperate position that Greece finds itself in. Greeks have voted to reject austerity but remain in the euro. They won't be allowed both.
  
If they don't continue with the programme, they'll be denied the remainder of the bail-out money. Unable to pay wages, pensions, healthcare costs and bills, government will quickly grind to a halt. The state could theoretically force the banks to buy its bonds, but the ECB would soon in such circumstances refuse further funding. At that stage Greece would have no option but to return to the drachma.
  
Hyperinflation would replace grinding deflation. The effect on living standards would be equally catastrophic. It's true that properly managed, leaving the euro does in the long term have the potential to return Greece to competitiveness and growth.
  
But does anyone believe Greece capable of managing such a transition well given the positively heroic scale of mismanagement to date? And is it in any case possible to have a well managed exit for a country that doesn't want to leave? In or out, the outlook for Greece looks bleak.
  
If Greece redominates all its debts in cut price drachmas, the ECB and its backers – in particular the German Bundesbank – will take a terrible hit, but it won't be terminal. The Bundesbank would most likely simply write off its Target 2 lending to Greece, which would certainly be a major curiosity given its abhorrence of debt monetisation but wouldn't of itself destroy either the Bundesbank or the euro.
  
The threat comes instead from market contagion to other eurozone countries worst hit by the debt crisis. To Germany, Greece has always been a special case, a nation which cheated its way into the euro, whose citizens are lazy and won't pay their taxes, and is in any case basically ungovernable. There is a very different attitude to Spain and Italy. Germany's determination to make the rest of the eurozone work should not be underestimated.
  
The trouble is that once one has left, and the principle has been established that it is indeed possible to leave the euro, it's going to be tough to impossible to contain the crippling capital flight which is certain to set in elsewhere. Greece is just the canary in the mineshaft, an outrider for the much wider problem of imbalances and divergent competitiveness.
The Guardian offers insights from three experts in "Eurozone crisis: what if … Greece leaves the single currency" :

Nick Parsons, head of strategy at National Australia Bank :
The choices facing Greece and its people are deeply unattractive. On a three- to five-year time horizon, there is no policy option that will turn a bad situation into a better one, and the likelihood is that it will become even worse for many of its people. If Greece stays in the euro it faces a long, slow depression in an effort to remain solvent. If it exits, it could see the collapse of the domestic banking system, the decimation of private savings and a crippling increase in the cost of imported goods and energy.

Greece could claw back some competitiveness through devaluation, making its exports much cheaper than they are currently. But the markets would demand devaluation, and then some. The drachma was fixed at 340 to the euro when Greece joined the single currency. But if a new drachma is introduced at parity with the old currency, then €1 would quickly buy about 1,000 drachma, or possibly even more.

Just look at the evidence of Argentina, which in 2002 decided to abandon the fixed 1:1 US dollar-peso parity, which had been in place for 10 years. A provisional "official" exchange rate was set at 1.4 pesos per dollar, but within six months the market rate had jumped to 3.90. The peso had lost almost 75% of its previously fixed value. Savings were effectively expropriated and import costs tripled. It was a far from painless transition.
Costas Lapavitsas, professor of economics, SOAS, University of London : 

The first step for Greece should be to denounce the bailout agreements and default on its debt, opening the path for aggressive cancellation. Exit will follow in short order, presenting three sets of problems: monetary, banking and commercial. The main difficulty of policy would be to keep these separate as far as possible.
Briefly put: the return to the drachma should be sudden, accompanied by a short bank holiday and immediate imposition of capital controls. For a period the new drachma would circulate in parallel with the euro and possibly other state fiat money.

There are €35bn (£28bn) of banknotes in Greece, mostly under mattresses. If they could be mobilised, a lot of problems would be made easier.

Banks would find themselves in the firing line as assets and liabilities would have to be converted. To protect depositors, but also to control credit in order to prevent a wave of company bankruptcies and support employment, banks should be immediately nationalised. The Bank of Greece should rapidly build mechanisms to generate liquidity independently of the European Central Bank.

The exchange rate of the new drachma would collapse in the open markets, making it difficult to secure supplies of oil, medicine, foodstuffs and other goods. As far as possible, the exchange rate should be managed; there should also be administrative controls to ensure that vital goods reached key enterprises as well as the weakest during the first critical months.

After the initial shock, the fall in the exchange rate would prove positive for the economy. Greece remains a middle income country with a substantial productive sector that could recapture the domestic market once imports became more expensive. There is plenty of productive potential in Greece, evidenced by the technological component of its exports, which remains higher than that of Turkey, a lauded export success story.
Ray Barrell, professor of economics, Brunel University : 
Should we stay or should we go? This is the question Greek voters must now ask themselves. Each must do a careful cost benefit analysis, looking at the gains from being in the euro and the European Union against the costs of leaving. If the Greeks leave and default on the rest of their debt, there is a good chance they may not be welcome at the European Union's tables, so they have to answer both questions. For them, and perhaps for most, the benefits of leaving are transitory, while the benefits from staying may be permanent.
On balance, the advantages would press the Greeks to stay. Some of the advantages of being in the EU could be kept with an association agreement, such as the one Norway has, but it would be much harder to influence trade and competition policy, and subsidies would dry up.
The euro raised growth in the past and hence we have more output now. Leaving the EU would mean slower growth for a period as some of the gains were reversed. Similar estimates exist for the benefits from monetary union for the core countries, but these benefits from increased flows of investment and greater competition still lie in the future for countries such as Greece.
Their potential would be lost on exit, and if there were no benefits from leaving, the Greeks would be poorer in future than if they had stayed.
The gains from leaving would be immediate, with a devaluation restoring competitiveness and raising employment. However, they would be transitory, as borrowing costs and inflation would climb and be more variable with a floating currency. The need to reform the labour market would be less pressing, and raising the retirement age from the lowest in Europe could be delayed. Pension replacement rates could remain generous.
But Greece would lose easy access to borrowing, and taxpayers would soon have to face the reality that they would have to pay for those pensions and support all the other structures that need reform.


DER SPIEGEL argues that "Greece Can No Longer Delay Euro Zone Exit"

...in the first part of a four part article. Excerpts from Part 1 follow below.  Click on the following links to Part 2 : Reforms Have Ground to a Halt, Part 3 : The Only Way is Down, and Part 4 : Scenarios for a Greek Exit.

* * *

Greece has been in intensive care for years, but the patient, instead of recovering, is just getting sicker and sicker. In a confidential report, which SPIEGEL has seen, experts from the IMF arrive at a devastating verdict. The country, they write, has only "a small industrial base" and is characterized by "structural incrustations" and an "excessively large role of the public sector."

It's time to rethink the treatment. The Greeks were never ready for the monetary union, and they still aren't ready today. The attempt to retroactively bring the country up to speed through reforms has failed.

No one can force the Greeks to give up the euro. And yet it is now clear that withdrawal would also be in the country's best interest.

It isn't a matter of abandoning the Greeks. Greece is and remains an important part of Europe. A Greek withdrawal from the euro will have serious social, political and economic consequences -- mostly for the Greeks, but also for the rest of Europe. The continent's solidarity is not tied to the euro, which is why other European countries will still have to support Greece with massive amounts of money.

But only a Greek withdrawal from the euro zone will give the country a chance to get back on its feet in the long term. The Greeks would have their own currency once again, which they could then devalue, making imports more expensive and exports cheaper. As a result, say American economist Kenneth Rogoff and others, the Greek economy could become competitive again.

At the same time, a Greek exit from the euro would send a strong message to other financially ailing countries, namely that Europe cannot be blackmailed. Populist politician Tsipras is merely expressing views that are already widespread within large segments of the Athens establishment, namely that the Europeans will ultimately give in and pay up, because they fear a Greek bankruptcy as much as people in the Middle Ages feared the Black Death.

If the euro-zone countries do give in, the pressure for reform will also decline in the other crisis-ridden countries. If that happens, their debts will continue to rise, investors will flee from the euro and the entire currency union could break apart.

Monday, May 14, 2012

Dallas Fed Reserve : Break up Too Big to Fail Banks

It's a shame Richard W. Fisher, who heads the Dallas Fed, isn't the Fed Reserve Chairman, rather than Helicopter Ben Bernanke. At least Fisher believes that too big to fail banks are bad for America, and might even be willing to do something about it.

For recent pieces on TBTF Banks and the Dallas Fed, see Charles Gasparino's article in The New York Post, "Break up the banks JPMorgan mess is ‘Exhibit A’",  Mark Gongloff's piece in The Huffington Post, "Dallas Fed President Richard Fisher: Too Big To Fail Banks Should Be Punished",  and the Dallas Fed's own Executive Vice President and Director of Research Harvey Rosenblum's recent presentation, "Choosing the Road to Prosperity: Why We Must End Too Big To Fail – Now".


Far Left and Far Right Leaders Directly Confront Each Other in French Parliamentary Elections

The Candidates

In his France24 article, ''Homeric battle' as leftist firebrand takes on Le Pen', Mehdi Chebil reports that Jean-Luc Mélenchon (on the far left) will oppose Marine Le Pen (on the far right) for the parliamentary seat of Henin-Beaumont, "the birthplace of France’s labour movement".  It promises to be a highly entertaining, and possibly volatile race.

What's Mélenchon up to ?  Read excerpts below for Chebil's analysis.

* * *

While Marine Le Pen’s legitimacy at the head of the anti-immigration National Front party is uncontested, Mélenchon has built his success on an alliance of notoriously rebellious leftist movements coalesced around the French Communist Party. François Hollande’s presidential victory threatens to deepen cracks inside Mélenchon’s Left Front Party, as the former senator made clear he would not join the incoming government - unlike several Communist officials, who said they were “ready” to accept ministerial positions.

A head-to-head duel with Marine Le Pen would spectacularly confirm Mélenchon as the leader of the France’s far left.

It would also prolong his campaign claim of being the far right's “sole” opponent. During the presidential campaign, mainstream party leaders tried to seduce the nearly 18 percent of the electorate who voted for Le Pen in the first round of the election. Mélenchon, who garnered just under 12 percent of the vote, hopes to broaden his appeal by portraying himself as an uncompromising bulwark against the National Front.

Marine Le Pen is expected to visit Henin-Beaumont on Monday to take up the gauntlet. She has already dismissed Mélenchon’s candidacy on her turf, telling Europe 1 radio with more than a hint of irony: “He’s looking for a district where he can win… I thought it was anger [that motivated him], but I’m realising that in fact it was love”.

Despite trading venomous barbs during the presidential campaign, the two leaders have met only once in a TV debate. After Mélenchon asked her a question about abortion, Le Pen refused to answer, claiming that she couldn’t debate with a man who called her “half insane”. Mélenchon promptly hit back, saying that he was still keen to debate with the remaining “sane half" of Le Pen.
This time, the far-right heiress will not be able to dodge Mélenchon’s challenge without losing face. The showdown promises to be explosive, with both leaders ready to use fierce rhetoric to conquer Henin-Beaumont’s working-class electorate.

Le Pen took home 31 percent of the Henin-Beaumont vote compared with Mélenchon's 14.85 percent in the presidential election's first round. Still, the far-left leader is hoping that a right-wing electorate split between Le Pen’s Front National and the outgoing ruling UMP party will bring him victory there on June 10.

Thursday, May 10, 2012

Who's Dead Sox Poster-Boy ?

Who would you name as Captain of the Red Sox, or rather, the Dead Sox, the hyper-entitled out-of-shape, uncaring lunkheads who were too busy snarfing down brewskis and fried chicken to work for a playoff spot last September, and since then have, if anything, proven themselves to be even more odiously self-centered, vacant from the neck-up, and disloyal ballplayers ?

Who would I choose ? It's no contest, now.

Why did Senator Lugar Lose the Primary ?

Mourdock (left) and Lugar
Brian Bolduc offers a thorough and persuasive assessment of 'Why Lugar Lost' in The National Review, excerpted below.

* * *

Senator Dick Lugar of Indiana lost his party’s nomination tonight [Tuesday, May 8 ] because he had lost touch with the party’s grassroots.

Since his election to the Senate in 1976, Lugar had cut a profile as a moderate Republican...
True, Lugar wasn’t Arlen Specter — he opposed the stimulus and Obamacare — but his voting record was moderate enough to make him suspect.

And a combination of a poorly run campaign, a credible opponent, and a small, energized electorate sealed his fate.

1. Lugar ran a nasty and ineffective campaign.

Lugar seemingly ignored the Tea Party — even insulted it, at times.

He should have known better. On the campaign trail, Lugar said he knew he would face a challenge as early as October 2010.

Although Lugar raised over $4 million for his campaign, he didn’t hit the campaign trail until the fall of 2011. His opponent, state treasurer Richard Mourdock, however, announced his candidacy in February 2011. Lugar met some success in courting conservatives: Leaders of the Hamilton County Tea Party, for instance, decided to back him after hearing him out. But Lugar’s reappearance on the campaign trail also reminded the rank and file that they hadn’t seen him at their Lincoln Day Dinners and their party conventions for decades.

Furthermore, Lugar’s attacks on Mourdock simply weren’t creditable. Because Mourdock lacked a voting record to attack, Lugar’s camp tried to attack his character.

The negative campaign tarnished Lugar’s statesman image. When Howey/DePauw asked voters in their last poll of the campaign whether, over the past few weeks, their opinion of Lugar had became less favorable, 32 percent said yes, while 12 percent said no.

2. Mourdock was a credible opponent.

Unlike Christine O’Donnell or Sharron Angle, Mourdock committed almost no gaffes on the campaign trail.

Unlike the Tea Party’s less successful candidates, Mourdock was an experienced pol. He ran for Congress in the early Nineties as well as for the party’s nomination for secretary of state. And he had just come off winning two statewide elections as state treasurer. Soft-spoken and understated, Mourdock also put in a strong performance against Lugar in their lone debate in April...

Once Mourdock showed he was a credible opponent, he started rising in the polls.


3. Turnout was low and concentrated among Mourdock’s motivated supporters.

When Rick Santorum pulled out of the presidential race last month, Mourdock told Politico that it was the best possible timing for his campaign. Because Mitt Romney had sewn up the GOP nomination, there would be less interest among casual voters in Indiana. As a result, Mourdock predicted, it would be his more ideologically committed supporters who would turn out — and they did.

In the closing days of the campaign, Lugar was left to plead for the assistance of independents and Democrats to save his candidacy. That tactic — along with his refusal to say whether he would support Mourdock if he won the primary — only heightened Republicans’ suspicions of him. Lugar’s mistakes compounded each other, and now the 36-year incumbent, who once seemed invincible in the Hoosier State, has gone down to defeat.

* * *

For additional views, see Mark Meissner's 'Why Lugar Lost' on The Huffington Post Blog, and David Catanese's Politico articles, 'Dick Lugar's political twilight ?' and 'Richard Mourdock topples Dick Lugar in Indiana Republican Senate primary'.

Wednesday, May 9, 2012

What's behind the Euro's levitation ?


With the debt-crisis laying waste to economies and roiling politics in Eurozone states beyond the PIIGS-- in France, England, and Germany as well--why is it the Euro itself hasn't tanked ? Michael Casey of Marketwatch explains, in his article, 'Odd bedfellows behind the euro’s resilience', excerpted below.

* * *

Central-bank policies explain why buyers frequently emerged whenever the euro dipped below $1.30 in February, March and April. And they’re preventing it from collapsing more rapidly now that it has finally broken below that level and has reached its weakest point since Jan. 25.

With its 1.0% refinancing rate, the ECB [European Central Bank] stands apart from its main counterparts--the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the Swiss National Bank--whose benchmark rates range from zero to 0.5%. What is more, these central banks have all adopted aggressive supplemental measures that the ECB has resisted: “quantitative easing” bond-buying on the part of the Fed, BOE [Bank of England] and the BOJ [Bank of Japan] ; a floor rate for the euro/Swiss franc exchange rate on the part of the SNB [Swiss National Bank]. By default, this creates what is known as “positive carry” for the euro.

This structural problem means the ECB’s monetary stance can’t singlehandedly prevent the euro from falling, which is why it depends on a helping hand--though it isn’t necessarily a welcome one--from China’s central bank and sovereign-wealth funds.

It is widely known that the PBOC [People's Bank of China] is diversifying its $3.1 trillion stockpile of foreign-currency reserves out of dollar assets, a move that includes buying the euro. Yet from all accounts, China’s interest in the European currency reflects something more than a simple portfolio reallocation. Evidence suggests that Chinese state institutions are effectively intervening to manipulate the euro exchange rate, perhaps to offset the competitiveness that the country’s exporters have lost to the dollar now that the yuan has appreciated. Over the previous three months, traders referred so frequently to buy orders by a “large Asian central bank” that it became conventional wisdom that China was deliberately stopping the currency from falling below $1.30.
In reality, it plays out in a more-complicated way than that, with the mere expectation of Chinese buying encouraging self-fulfilling actions by other market participants.

Monday, May 7, 2012

French Presidential Election 2012 Update


As expected, Socialist Francois Holland defeated the incumbent Nicholas Sarkozy, but by less a commanding margin.

Below are surveyed several different news sources with varying perspectives on the results, and what is likely to follow for France and the Eurozone.

***

France 24

1. Hollande ousts Sarkozy in French presidential vote, by Joseph Bamat 

French socialist François Hollande won France’s presidential election on Sunday, with thousands of his supporters rallying across the country to celebrate the left’s return to the Elysée Palace after almost two decades out of office.

France’s Interior Ministry said the left-wing candidate claimed around 51.62% of the runoff vote to incumbent Nicolas Sarkozy’s 48.38%, with turnout at 81.34%.

On Sunday, Sarkozy became only the second French president to fail to claim a second mandate since Valéry Giscard d'Estaing was swept out of office in 1981.

According to a survey by Ipsos polling institute, half of Hollande’s voters said their first reason for voting for the left-wing candidate was to oust Sarkozy.

Sunday's election marked the end of a year-long campaign for Hollande, who won his party’s internal primaries in October of last year and came out on top in the first round of the poll on April 22.

Hollande has promised to add 60,000 new staff to the state education system, reduce the retirement age from 62 to 60 for some workers, and balance the country’s budget by the end of his five-year mandate.

2. Hollande's victory: The tortoise who beat the hare by Leela Jacinto

(Jacinto provides a brief c.v. of the new French President)

Der Spiegel

1. A New French President Predestined to Disappoint, by Mathieu von Rohr

During the campaign, Hollande very clearly positioned himself to the left. He pledged he would apply a 75 percent tax rate to any earnings over €1 million. He said he would also change France's retirement age from 62 back to 60. And he promised an end to European austerity policies -- positioning himself as the antithesis of Angela Merkel and telling his backers: "I don't want a Europe of austerity, where nations are forced to their knees."

Still, it is highly unlikely that Hollande will turn out to be a spendaholic socialist president. And he will bitterly disappoint many of his supporters as a result. Hollande will be the president of an economically ailing country. Public debt amounts to 90 percent of GDP, France hasn't had a balanced budget since 1974 and, at almost 57 percent, it has the highest ratio of government expenditures to gross national product of any of the 17 euro-zone countries. What's more, unemployment stands at roughly 10 percent, and there is an entire generation of children of migrants that has grown up in ghetto-like suburbs and hardly has any contact with the labor market. During the campaign season, these problems only played a secondary role. But, for the newly elected president, they will assume a central one.

The major question is whether Hollande can muster the power he will need to profoundly reform France. At the most basic level, he is a pragmatist and, speaking off the record, many of his colleagues have even described him as a "social democrat." He has also repeatedly pledged to usher in a balanced budget and will be measured according to how well he sticks to his word.

2. François Hollande Must Quickly Hit His Stride, by Mathieu von Rohr

...now a new era has started. And François Hollande will soon be Angela Merkel's most important partner in Europe. They are due to meet soon, maybe as soon as May 15, after Hollande's inauguration. The meeting will reveal how far apart the two really are in their political thinking, and how far they are prepared to go to push through their respective agendas. Just a few days later, the US will host the G-8 summit in Camp David, then the NATO summit in Chicago, where Hollande said he would announce that French combat troops would leave Afghanistan as soon as the end of this year. And the financial markets are sure to test the new president as well.

Hollande won't get a breather in domestic politics either. Campaigning for the parliamentary elections in June starts now. The Socialists must win a majority in order to secure a government majority, in which case Hollande will have to name his prime minister. Much depends on this election and on his choice. If he chooses party leader Martine Aubry, his opponent in the internal party primaries, he will be opting to veer to the left. If he picks parliamentary group leader Jean-Marc Ayrault, it might be a sign that he wants a more pragmatic government -- and it would be a gesture towards Germany, because Ayrault speaks German and has good links with the SPD.

Given such a packed schedule in his first 40 days as president, it is hardly surprising that François Hollande looked so serious on the evening of his victory. He faces a time of great tests and challenges. They will show what kind of a president he will turn out to be, and how far he can shift from his electoral promises. And whether he can live up to the office seized 31 years ago by François Mitterrand, who became not only a legend of the French Left, but a great French statesman as well.

The Telegraph (U.K)

France elections 2012: François Hollande victory sets EU on course for turmoil, by Henry Samuel and Bruno Waterfield

On Sunday night Mr Hollande had won 51.56 per cent of the vote compared to Mr Sarkozy’s 48.41 per cent with 90 per cent of the ballots counted.

Over 100,000 jubilant supporters gathered at Paris’s revolutionary Place de la Bastille, a pilgrimage site for the Left, chanting “François President”.

Many were too young to remember that it was here that a gigantic crowd gathered for the 1981 victory of the last Socialist president, François Mitterrand.

But even as the festivities got under way, officials close to both Mr Hollande and Mr Sarkozy were fearful of a market backlash against the Socialist’s plans to tax the wealthy and expand jobs in the state sector.

There are concerns that Mr Hollande will be unable to respect fiscal discipline targets while enacting a tax — and-spend programme that would see him create 60,000 more state education posts, partly revoke a pension reform and slap a 75 per cent tax on millionaire owners.

A senior Conservative source told The Daily Telegraph that fears France was about to reverse course would cause turmoil and uncertainty.

He said: “Clearly it’s going to focus a lot of market attention on the French public finances, which are nothing to write home about. I don’t think it is going to make life in the bond markets any easier next week.

“We haven’t chosen austerity because it’s fun. We have to do austerity, and so does France.

“He will have to be very careful about his public spending commitments and the lack of welfare reform.”


Washington Post, France’s Hollande aims anti-austerity message directly at Germany

In his victory speech Sunday evening, Hollande said large numbers of other Europeans beside France were eager for such relief from the austerity that has bogged down their economies and produced long unemployment lines.

“This is a strong message to the rest of Europe, which is falling into recession, that things can change,” declared Arnaud Montebourg, a leading Socialist figure and a likely senior official in Hollande’s government.

Merkel has suggested — although cautiously — that she would not be averse to an E.U. mechanism designed to stimulate growth. But reflecting German insistence on budgetary rigor, she has made it clear she would tolerate neither any kind of deficit funding nor Eurobonds to finance projects. Most of all, she has metronomically insisted, she will not hear of reopening the December treaty, which was negotiated in an all-night session after weeks of diplomacy by her and Sarkozy.

“We in Germany are of the opinion, as am I personally, that the budgetary pact is not negotiable,” she said at a news conference Monday in Berlin that was relayed by news services. “It was negotiated and signed by 25 countries.”

The search for economic growth, she and her aides have said, should begin with structural reforms to loosen the labor market, reduce taxes and make businesses more responsive to changing demands. Those are the types of reforms that were undertaken more than a decade ago in Germany, they explained, which contributed to making Germany’s economy the envy of other European countries today.

Friday, May 4, 2012

Wretched 'Star Wars Day' Excess...

...in honor of the upcoming French Presidential Election, Round Two, a graphic I found at the Hollywood Reporter Website.

Guess who's being exhibited at the Paris Museum of Modern Art

Click here to hear the Grateful Dead's Truckin'.

That's right, it's none other than Robert Crumb, the genius behind 'Mr. Natural'. According to Radio France International, this is Crumb's first-ever retrospective in France:
Crumb’s LSD-inspired heroes, rampant sex and undisguised attacks on political correctness, have made him an icon of US counter-culture although the 68-year-old has spent the last 21 years in the village of Suave in southern France. 
The exhibition, Crumb, de l'Underground à la Genèse  (Crumb from Underground to Genesis) which runs until 19 August, brings together more than 700 original drawings dating from 1960 to the present day. Many of the works on display were loaned by a handful of private collectors in Europe and the US and include his hippy-era characters like Fritz the Cat and his cartoon take on the Bible.
Starting with the underground magazine Zap Comic, which Crumb sold on the streets of San Francisco, the show traces his career up to and beyond his reworking of the Book of Genesis.
Crumb’s drawings first appeared in France in 1970 on the covers of Actuel magazine and had an enormous influence on French artists like Moebius and Joann Sfar.
 Exhibition curator Sebastien Gokalp says part of Crumb’s appeal is his absolute lack of self-censorship.
Want examples of the latter ? You'll have to check out the RFI article, for stuff that was too tasteless and offensive for me merely to cite. In recompense, I reproduce below Crumb's famous artwork for the Big Brother and the Holding Company live album, Cheap Thrills.

Click here to hear Big Brother's Combination of the Two.

Better learn to smile, Bubby, before the Fed Happiness Police are unleashed

Be afraid. Be very afraid.
It's not like our Federal government doesn't have enough real problems to concern itself with, or enough time to come up with useful solutions, or enough resources to apply them. So why are pointy heads in the nation's capital--and, for all I know, sequestered in deep, hardened underground bunkers scattered throughout the fifty states and maybe some territories too--expending their considerable energies and intellects [yes, I know I'm making assumptions here] and lots of OUR MONEY on trying to define happiness ?

No, this is not a joke. Look, if you don't believe me, check out Peter Whoriskey's March 29 piece in The Washington Post, ' If you’re happy and you know it ... let the government know', excerpted liberally below.

* * *

Of all the phrases bestowed to us by the Founding Fathers, few come up more than “pursuit of happiness.” Yet who knows where the nation really stands on that score?

Now an answer may be forthcoming. Amid a wave of research on the subject, the federal government is seeking ways to measure what some have called gross national happiness.

Funded by the U.S. Department of Health and Human Services, a panel of experts in psychology and economics, including Nobel laureate Daniel Kahneman, began convening in December to try to define reliable measures of “subjective well-being.” If successful, these could become official statistics.But as the United States ventures into the squishy realm of feelings, statisticians will first have to define happiness and then how to measure it. Neither is a trivial matter. There is even some doubt whether people, when polled, can accurately say whether they are happy.

“I’m worried about the word ‘happiness’,” Kahneman, an author and psychologist, said during a break in a meeting last week.

Whatever the obstacles, the effort has momentum. President Obama has “welcomed” the effort, according to a White House release, and his chief economic adviser, Alan Krueger, is one of the leading researchers in the field.

Before being named chair of the Council of Economic Advisers, Krueger co-wrote one of the key papers on the topic. In it, Krueger and his co-authors proposed a method for generating a national statistic covering “the flow of emotional experience during daily activities.”

The panel, organized by the nonprofit National Academies, has already met with two of the key figures in the U.S. statistical bureaucracy:Robert Groves, the director of the U.S. Census Bureau, and Steve Landefeld, the director of the Bureau of Economic Analysis, the federal agency that puts out the gross domestic product figures.

According to proponents, a measure of happiness could help assess the success or failure of a range of government policies. It could gauge the virtues of a health benefit or establish whether education has more value than simply higher incomes. It might also detect extremes of inequality or imbalances in how people divide their time between work and leisure.

* * *

For additional perspectives on this quest, check out these worthy articles, spanning the journalistic spectrum from The Washington Post (again) to The Weekly Standard.

UK Local Elections Update


Ed Miliband, leader of the triujmphant Labour Party
As expected, Labour trounced the governing coalition of Conservatives and Liberal Democrats in local elections across the U.K.  For a high-level view of the results, where better for a foreigner like myself to turn than the BBC  ?
With all the results in, the BBC's projection of the national share of the vote has Labour with a 38% national share of the vote, up three points, with the Tories down four on 31%.  
The Lib Dems' projected national share of the vote is estimated to be unchanged at 16%. But the party's total number of councillors has dipped below 3,000 for the first time since it was formed in 1988.
The estimated turnout, 32%, was the lowest since 2000. 

For additional perspectives on the election, check out coverage in The Telegraph and The Guardian.

Thursday, May 3, 2012

Euro Election Preview : Greece and the U.K.


International media attention seems focused on the French Presidential election, which will take place Sunday. But elections will also be held in the U.K. and Greece as well.

In Greece, the two main parties, PASOK (socialist) and New Democracy (conservative)--which are led by Evangelos Venizelos and Antonis Samaras respectively, and which bear much responsibility for the country's disastrous economic shape--appear to be recovering from their tailspins in the polls, and after Sunday's balloting may well end up in a coalition government . For more detail, check out Julia Amalia Heyer's report in Der Spiegel.

For the skinny on the U.K.'s local elections,  which proceed even as I type, check out Patrick Hennessey's piece in The Telegraph, 'Three main parties braced for setbacks'. Or Michael White's in The Guardian, 'Local elections likely to point to the mid-term blues for coalition'. Or The BBC's coverage, 'Local elections: Council and mayoral voting in full swing'. What's at stake in these local elections ? The BBC has the answer.

Tuesday, May 1, 2012

Hollande, Sarkozy, LTRO's, and Eurozone Distress : 2 articles

1. Courtesy of James Bond ( I kid you not ) writing for the Carnegie Endowment, on 'French Elections And The Eurozone: Between A Rock And A Hard Place', the copious excerpts below:

Both of France’s presidential candidates headed to the May 6 runoff election—front-runner François Hollande and the current president Nicolas Sarkozy—have proposed ways to bring down France’s high budget deficits. But they have sidestepped the deeper and more fundamental challenges of restoring the country’s competitiveness and igniting growth.

In this election, neither of the candidates is telling the French public that their much-loved system of state intervention and labor protections cannot continue in its current form—no matter how true that may be. To put a finer point on it, they are not telling the electorate that the system, made possible by three decades of post–Second World War high growth, is now being financed at the margin by public borrowing.

The current system is unsustainable. Ever since the euro was created, France’s government spending has exceeded revenue (see Figure 1). The country’s current sovereign debt stands at 89 percent of GDP—not (yet) disastrous. But it is troubling enough that in January 2012 Standard and Poor’s decided to downgrade France’s government debt from AAA to AA+, a reaction to the country’s persistent budget deficit and feeble response to the eurozone crisis.

Both candidates recognize that France’s budget deficit must be brought down and would like to increase the government’s total take to solve the deficit problem. But their approaches reflect the differences in their political outlooks...

But the candidates are not discussing France’s real structural issues. First, for over ten years, France has not had robust economic growth. Second, public spending now accounts for 57 percent of GDP (see Figure 2); even before the current crisis, it stood at over 50 percent. Third, France, as one of the most highly taxed countries in the world, has limited potential for further fiscal mobilization. Fourth and most important, France’s firms and workers are no longer competitive compared to their peers, in particular Germany.

Historically, the policy choices of the two countries could not be more different. Germany, reeling from Weimar Republic hyperinflation, built its postwar growth on a strong deutsche mark. Internal adjustments in the labor market, control of the wage bill, and prudent macroeconomic and public expenditure policy led to productivity gains; reunification in 1990 bolstered the internal-adjustment mind-set. Since the creation of the eurozone a decade ago, European Central Bank monetary policy has been closer to that of the Bundesbank than of the Banque de France, so Germany’s 2002 adaptation to the eurozone and the strong euro did not constitute a break with former policy direction.

France, by contrast, had always exercised looser monetary policy than Germany. Before the introduction of the euro, France was able to contain labor costs without major internal adjustment and labor market reform by the selective and controlled devaluation of the franc relative to the deutsche mark. For France, adopting the euro meant completely breaking with the past. And France has not yet made that adjustment.

France cannot ignore the need to make profound internal reforms. As long as the country shares a common currency with Germany, it will not regain competitiveness without reforming its labor market and reducing its public spending. And reform it must. Without structural changes it will not grow, and without growth it will not be able to contain its debt.

Regardless of who wins these elections, the eurozone is facing two possible futures. The first is more optimistic: The new French president sets in motion the profound structural reforms his country needs...

The second future is far bleaker. If France does not reform, it will drag down the entire eurozone.

2.  According to Katchum, a financial blogger, 'The European Central Bank's LTRO Isn't Working Out: Protect Yourself With Gold And Silver'. [What's an LTRO ? The European Central Bank's Long Term Refinancing Operation] :

On Zerohedge, the article of the ECB deposit facility sparked my attention. Apparently, banks are depositing their money into the ECB at an alarming rate (Chart 1). Since the crisis of 2008, this deposit facility had risen a lot (250 billion euro), but has only recently skyrocketed to more than 800 billion euro.

This deposit facility at the ECB is a macro-economic indicator of market tension residing at the European banks. It is seen as a "safe haven" during economic turmoil in Europe. The higher this ECB deposit facility rises, the more banks favor the safety of the ECB deposit over higher returns in the interbank market. It shows that banks aren't lending to each other, and also shows that appetite for European government bonds is declining.

Even though banks borrowed 489 billion euro (LTRO I) and 529.5 billion euro (LTRO II) in loans (at 1% lending rate) from the ECB, a lot of that money just went back into the ECB deposit facility at 0.25%. This means that banks are actually opting to lose money due to fear of a eurozone break-up and government defaults.

The overall conclusion of this is that banks aren't buying government bonds and aren't lending to each other. Monetary velocity on the interbank market is slowing down. The lending measures (LTRO I, LTRO II) of the ECB aren't working out very much. This trend can be experienced by the rising government bond yields across Europe as investors anticipate huge losses in government bonds. The advice I can give is, prepare yourself for the worst in Europe, especially if you are a European citizen. In a worst case scenario, we will experience bank failures and possibly even government bankruptcy. The only protection you can have against this is to have precious metals in your portfolio...