End Game

Economists Nearly Unanimous on Need for Greek Restructuring

By Phil IzzoAll but one of 49 economists surveyed by the Wall Street Journal last week said Greece will be forced to restructure its debt.

Fifty-three economists, who are mostly U.S.-based, take part in the survey, but not everyone answers every question. Forty-eight of the 49 respondents to the question on Greece think a restructuring is inevitable. “Restructuring, default, or forgiveness by lenders,” said Allen Sinai of Decision Economics. “There’s too much debt for Greece to pay down.”

Last week, concerns grew that the debt crisis could spread, as Italy faced bond market jitters. Just two of 44 participants said that the crisis in the euro zone will be contained in Greece. Thirteen see it moving to Ireland and Portugal, while 19 say it won’t be contained until it has reached Italy and/or Spain. The remainder — 10 economists — expect it to move even deeper into the euro zone.

“My fear is that if we can’t stop the recent Italian scare, all bets are off,” said Diane Swonk of Mesirow Financial. “My hope is that Europe comes together on this.”

In congressional testimony last week, Federal Reserve Chairman Ben Bernanke played down fears that the euro zone crisis could spread to U.S. shores. “Were there to be a significant deterioration in conditions in Europe, we would see a general increase in risk aversion, declining asset prices, a lot of volatility,” he said. But he added: “The direct exposures … are quite small and manageable, so we wouldn’t expect those direct impacts to be the critical channel if there were problems — a default, for example.”

Meanwhile, the majority of respondents — 24 of 46 — say that the European Central Bank‘s credibility has been diminished by its response to the sovereign debt crisis. “The ECB has ignored the economic context of policy,” said Ram Bhagavatula of Combinatorics Capital.

Looking toward risks in Asia, the economists, on average, said the odds are 64% that China is experiencing a bubble in property prices. “Bubbles result from excessive credit creation, as in China,” said Paul Kasriel of The Northern Trust.

Among other potential bubble markets, gold was the only one that got better than 50/50 odds, with the economists on average putting chances at 61% that the yellow metal is overvalued.

An insider recounts the early days of Google

The Beginning

the bizarre job interview, April Fools' pranks that enraged users, roller hockey, platters of sushi—and the uneasy leap to the mainstream.

By DOUGLAS EDWARDS

In November 1999, Douglas Edwards became fledgling Google's first "brand manager," making him employee No. 59. In this excerpt from his new book, "I'm Feeling Lucky," Mr. Edwards gives an inside view of the company's early days, starting with his job interview with co-founder Sergey Brin, then 26 years old.

Cindy McCaffrey, director of public relations, brought me back to the conference room to wait for Sergey. I wasn't nervous. Sergey was about the age of my favorite T-shirt (I was 41) and a Russian by birth. I had lived in Russia. I spoke some Russian. I had Russian friends.

I felt unusually confident that the interview would go well. Perhaps I would become his mentor and we would toast each other's health with fine Siberian vodka. Sergey showed up wearing roller-hockey gear: gym shorts, a T-shirt and in-line skates. He had obviously been playing hard. I had known better than to wear a tie, but he took office casual to a new level.

Sergey pored over my résumé and began peppering me with questions. "What promotion did you do that was most effective?" "What metrics did you use to measure it?" "What types of viral marketing did you do?"

"How much do you think a company our size should spend on marketing?" Sergey asked me. Based on his earlier questions, it was easy to guess what he wanted to hear from me. "I don't think at this stage you should spend much at all," I said. "You can do a lot with viral marketing and small budgets."

He nodded his agreement, then asked about my six months in Siberia, casually switching to Russian to see how much I had picked up. Finally, he leaned forward and fired his best shot, what he came to call "the hard question."

"I'm going to give you five minutes," he told me. "When I come back, I want you to explain to me something complicated that I don't already know." He then rolled out of the room toward the snack area. I looked at Cindy. "He's very curious about everything," she told me. "You can talk about a hobby, something technical, whatever you want. Just make sure it's something you really understand well."

I reached for a piece of scrap paper as my mind raced. What complicated thing did I know well enough to describe to Sergey? I decided to go with the general theory of marketing, which was fresh in my mind, because I'd only learned it recently.

One of my dirty little secrets was a complete lack of academic preparation for the business world. Fortunately, my boss at the San Jose Mercury News, where I was working as a brand manager, had a Harvard MBA and a desire to drive some business theory into my thick skull. She had given me a bunch of her old textbooks, along with strong hints that I should spend time reading them. I began regurgitating everything that I could remember onto the paper in front of me: The five P's (or was it six?), the four M's, barriers to entry, differentiation on quality or price.

By the time Sergey came back, I had enough to talk for 10 minutes and was confident I could fill any holes with the three Bs (Buckets of Baffling Bulls—). I went to the whiteboard and began drawing circles and squares and lots of arrows. I was nervous, but not very. Sergey bounced on a ball and asked questions that required me to make up things on the spot.

He seemed to be paying attention, and I began enjoying myself. We were developing a special rapport! Clearly, he wanted to hear what I had to say and valued my opinions. Later I found out that Sergey did this with everyone he interviewed. An hour wasted with an unqualified candidate wasn't a total loss if Sergey gained insight into something he didn't already know.

The light was fading by the time I finished, and Sergey invited me to join the staff for dinner, which was being brought into a small kitchen across from the conference room. A crowd of hungry engineers bounced from plate to plate with chopsticks picking at a large selection of sushi.

"We just hired a chef, so this is a temporary set-up," Sergey told me. "And we've got a couple of massage therapists coming in as well."

A warning light flashed in my head at that. This was the guy who didn't think there should be a marketing budget, and he had hired a chef and two massage therapists? But then I saw the platters of fatty tuna and shrimp and salmon and yellowtail. I grabbed some chopsticks and began loading my plate. Concerns about a business plan and revenue streams and organizational structure faded away.

Google met most of my requirements. It offered at least the appearance of superior Internet-related technology, some eccentric genius types, funding that should last at least a year and a fun consumer brand that I could help to develop. Two weeks later, on Nov. 29, 1999, I started work as Google's online brand manager.

You would have needed uncanny foresight or powerful pharmaceuticals to envision Google's success in 1999. Or maybe just money to burn. Kleiner Perkins and Sequoia Capital had something, because the two venture capital firms invested $12.5 million each, leading cynics in the Valley to define "Googling" as "getting funding without a business plan."

It's just as well that I hadn't realized how fragile Google truly was as I set up the meeting to discuss next steps for my marketing plan.

"The most important thing to consider," I began, "is that our own internal research shows our competitors are beginning to approach Google's level of quality. In a world where all search engines are equal, we'll need to rely on branding to differentiate us from everyone else." The room grew quiet.

I looked around nervously. Had I said something wrong? Yes. Not just wrong but heretical to engineers who believed anything could be improved through the iterative application of intelligence. Co-founder Larry Page made my apostasy clear. "If we can't win on quality," he said quietly, "we shouldn't win at all."

"I have a good idea," Sergey informed marketing manager Susan Wojcicki a couple of weeks after I started. "Why don't we take the marketing budget and use it to inoculate Chechen refugees against cholera. It will help our brand awareness, and we'll get more new people to use Google."

Our company was barely a year old at the time. We had no real revenue. Spending a million dollars of our investors' money on a land war in Asia would indeed be a revolutionary approach to growing market share.

A wound that won't heal

Why My Father Hated India

Aatish Taseer, the son of an assassinated Pakistani leader, explains the history and hysteria behind a deadly relationship

By AATISH TASEER

Mohandas Gandhi visits Muslim refugees in New Delhi as they prepare to depart to Pakistan on Sept. 22, 1947

Ten days before he was assassinated in January, my father, Salman Taseer, sent out a tweet about an Indian rocket that had come down over the Bay of Bengal: "Why does India make fools of themselves messing in space technology? Stick 2 bollywood my advice."

My father was the governor of Punjab, Pakistan's largest province, and his tweet, with its taunt at India's misfortune, would have delighted his many thousands of followers. It fed straight into Pakistan's unhealthy obsession with India, the country from which it was carved in 1947.

Though my father's attitude went down well in Pakistan, it had caused considerable tension between us. I am half-Indian, raised in Delhi by my Indian mother: India is a country that I consider my own. When my father was killed by one of his own bodyguards for defending a Christian woman accused of blasphemy, we had not spoken for three years.

To understand the Pakistani obsession with India, to get a sense of its special edge—its hysteria—it is necessary to understand the rejection of India, its culture and past, that lies at the heart of the idea of Pakistan. This is not merely an academic question. Pakistan's animus toward India is the cause of both its unwillingness to fight Islamic extremism and its active complicity in undermining the aims of its ostensible ally, the United States.

The idea of Pakistan was first seriously formulated by neither a cleric nor a politician but by a poet. In 1930, Muhammad Iqbal, addressing the All-India Muslim league, made the case for a state in which India's Muslims would realize their "political and ethical essence." Though he was always vague about what the new state would be, he was quite clear about what it would not be: the old pluralistic society of India, with its composite culture.

Iqbal's vision took concrete shape in August 1947. Despite the partition of British India, it had seemed at first that there would be no transfer of populations. But violence erupted, and it quickly became clear that in the new homeland for India's Muslims, there would be no place for its non-Muslim communities. Pakistan and India came into being at the cost of a million lives and the largest migration in history.

This shared experience of carnage and loss is the foundation of the modern relationship between the two countries. In human terms, it meant that each of my parents, my father in Pakistan and my mother in India, grew up around symmetrically violent stories of uprooting and homelessness.

But in Pakistan, the partition had another, deeper meaning. It raised big questions, in cultural and civilizational terms, about what its separation from India would mean.

In the absence of a true national identity, Pakistan defined itself by its opposition to India. It turned its back on all that had been common between Muslims and non-Muslims in the era before partition. Everything came under suspicion, from dress to customs to festivals, marriage rituals and literature. The new country set itself the task of erasing its association with the subcontinent, an association that many came to view as a contamination.

Had this assertion of national identity meant the casting out of something alien or foreign in favor of an organic or homegrown identity, it might have had an empowering effect. What made it self-wounding, even nihilistic, was that Pakistan, by asserting a new Arabized Islamic identity, rejected its own local and regional culture. In trying to turn its back on its shared past with India, Pakistan turned its back on itself.

But there was one problem: India was just across the border, and it was still its composite, pluralistic self, a place where nearly as many Muslims lived as in Pakistan. It was a daily reminder of the past that Pakistan had tried to erase.

Pakistan's existential confusion made itself apparent in the political turmoil of the decades after partition. The state failed to perform a single legal transfer of power; coups were commonplace. And yet, in 1980, my father would still have felt that the partition had not been a mistake, for one critical reason: India, for all its democracy and pluralism, was an economic disaster.

Pakistan had better roads, better cars; Pakistani businesses were thriving; its citizens could take foreign currency abroad. Compared with starving, socialist India, they were on much surer ground. So what if India had democracy? It had brought nothing but drought and famine.

But in the early 1990s, a reversal began to occur in the fortunes of the two countries. The advantage that Pakistan had seemed to enjoy in the years after independence evaporated, as it became clear that the quest to rid itself of its Indian identity had come at a price: the emergence of a new and dangerous brand of Islam.

As India rose, thanks to economic liberalization, Pakistan withered. The country that had begun as a poet's utopia was reduced to ruin and insolvency.

The primary agent of this decline has been the Pakistani army. The beneficiary of vast amounts of American assistance and money—$11 billion since 9/11—the military has diverted a significant amount of these resources to arming itself against India. In Afghanistan, it has sought neither security nor stability but rather a backyard, which—once the Americans leave—might provide Pakistan with "strategic depth" against India.

In order to realize these objectives, the Pakistani army has led the U.S. in a dance, in which it had to be seen to be fighting the war on terror, but never so much as to actually win it, for its extension meant the continuing flow of American money. All this time the army kept alive a double game, in which some terror was fought and some—such as Laskhar-e-Tayyba's 2008 attack on Mumbai—actively supported.

The army's duplicity was exposed decisively this May, with the killing of Osama bin Laden in the garrison town of Abbottabad. It was only the last and most incriminating charge against an institution whose activities over the years have included the creation of the Taliban, the financing of international terrorism and the running of a lucrative trade in nuclear secrets.

This army, whose might has always been justified by the imaginary threat from India, has been more harmful to Pakistan than to anybody else. It has consumed annually a quarter of the country's wealth, undermined one civilian government after another and enriched itself through a range of economic interests, from bakeries and shopping malls to huge property holdings.

The reversal in the fortunes of the two countries—India's sudden prosperity and cultural power, seen next to the calamity of Muhammad Iqbal's unrealized utopia—is what explains the bitterness of my father's tweet just days before he died. It captures the rage of being forced to reject a culture of which you feel effortlessly a part—a culture that Pakistanis, via Bollywood, experience daily in their homes.

This rage is what makes it impossible to reduce Pakistan's obsession with India to matters of security or a land dispute in Kashmir. It can heal only when the wounds of 1947 are healed. And it should provoke no triumphalism in India, for behind the bluster and the bravado, there is arid pain and sadness.

From utopia to reality

From Italy to the US, utopia vs reality

By Martin Wolf

In the eurozone, the fiscal crisis is lapping on Italy’s shores. In the US, the administration declares it will run out of funding early next month if the debt ceiling is not raised. Far fewer Europeans than Americans believe public sector defaults are beneficial. But important Europeans share with Republicans the view that there are still worse outcomes. For reluctant Europeans, the eurozone must not be a “transfer union”. For recalcitrant Republicans, taxes must not be raised. Fiat justitia, et pereat mundus – let right be done even if the world perishes – is the motto.

The fiscal crises we see are a legacy of the west’s private and public sector debt binges of recent decades. As the McKinsey Global Institute tells us in an update of last year’s study of the aftermath of the credit bubble, this is an early stage of a painful process of deleveraging in several economies (see chart). “If history is a guide,” noted the 2010 report, “we would expect many years of debt reduction in specific sectors of some of the world’s largest economies, and this process will exert a significant drag on GDP growth.” So it is proving, with disappointment almost everywhere.

The link between private and public sector debt is intimate. In some countries, notably Greece, easy credit led to an upsurge in public sector borrowing. In others, notably Italy, it encouraged governments to relax attention to debt reduction: its primary fiscal budget (before interest) moved from a surplus of 6 per cent of gross domestic product in 1997, before joining the currency union, to 0.6 per cent in 2005. Elsewhere, the sudden end of private sector credit booms led directly to collapses in government revenue and surges in public spending: the US, UK, Spain and Ireland are examples.

Exploding fiscal deficits are mainly the result of collapses in activity and revenue rather than of bank bail-outs. But fiscal weakness then undermines the banks, partly because the latter hold large quantities of domestic public debt and partly because they rely on fiscal support. The private and public sectors are intertwined. The view of Republican hawks in the US and of German or Dutch hawks in Europe that the crisis has fiscal roots alone is wrong. Easy credit ends up in fiscal crises.

US evidence is striking. Compare the forecasts for fiscal years 2010, 2011 and 2012 in the 2008 and 2012 presidential budgets, the first under George W. Bush shortly before the crisis and the second under Barack Obama well after it (see chart). The 2011 deficit was forecast in 2008 to be a mere $54bn (0.3 per cent of GDP). But in the 2012 budget, it is forecast to be $1,645bn (10.9 per cent of GDP). 58 per cent of this rise is due to unexpectedly low revenue and only 42 per cent due to a surge in spending, both of these changes mostly due to the financial crisis, not the modest stimulus package (about 6 per cent of GDP).

The astonishing feature of the federal fiscal position is that revenues are forecast to be a mere 14.4 per cent of GDP in 2011, far below their postwar average of close to 18 per cent. Individual income tax is forecast to be a mere 6.3 per cent of GDP in 2011. This non-American cannot understand what the fuss is about: in 1988, at the end of Ronald Reagan’s term, receipts were 18.2 per cent of GDP. Tax revenue has to rise substantially if the deficit is to close.

Read the rest at http://www.ft.com/intl/cms/s/0/979c10d8-acb8-11e0-a2f3-00144feabdc0.html#axzz1S4JTPxAZ

Yesterdays

A Small Taste Of The 1930s

by stevengoddard

The climate of the 1930s was atrocious.

It's just a loan

Obama Raises More $$$s Than All Republican Candidates Combined

There is no better example of the power of the presidency and the willingness of many to pay for access

President Barack Obama, despite weak showings in the polls, and the Democratic National Committee raised a combined $86 million in the second quarter of the year, Obama's campaign has announced.

Obama's campaign said in a video message Wednesday morning that it raised more than $47 million and the Democratic National Committee took in more than $38 million through the end of June.

The truth is ugly, and it hurts.

The Gospel According To Saint Ambrose

By Jim Amrhein 

TRUTH, n. An ingenious compound of desirability and appearance…
– Ambrose Bierce, The Devil’s Dictionary, 1911

Many scholars and other well-read folks speak of Twain and Mencken as America’s sharpest skewers of government, institutions, hypocrites, the corrupt, the devout, and the dim-witted…

And surely, they’re one kind of correct or another in that assessment.

But for my money, the brilliant and paradoxical Ambrose Bierce will always be the heavyweight champion of American polemicists.

To me, “Bitter Bierce” is the patron saint of that cardinal virtue, cynicism; his Devil’s Dictionary one of the most piercing works of generalized dissent ever written.

Bierce’s Dictionary hits home where more direct, noble-minded, or allegorical works of satire may fall short due to its expert use of two devastatingly effective tools…

A format we’re all programmed to accept as true (the dictionary entry) – and acerbic humor, truth’s uglier and smarter Siamese twin.

No one I’ve ever encountered wields both the hammer of truth and the rapier of wit as effectively as Bierce. I defy you to read just these few Devil’s Dictionary entries below without crying – either from paroxysms of laughter…

Or because you’ve been shockingly reminded of just how far removed we all are in this Brave New i-World from the bare-bones truth of the way things really are.

Though Bierce’s Dictionary covers all manner of topics – leaving no institution’s pillars un-crumbled and no sacred cows un-roasted – the “definitions” I’ve selected today are, by and large, applicable to the thing I love to hate most of all:Government.

Never has there been a more appropriate time for someone to hammer into us all that “the truth” isn’t what government, the media, or even Webster’s says it is…

Rather, it’s what’s expedient and advantageous in the real world of human-to-human, citizen-to-sovereign, and state-to-state interaction.

I think “Saint Ambrose” is the perfect one to remind us of this distinction – and that cynicism and dissent may be more vital to the survival of the United States of America now than at any other point since our nation drew its first breath.

So here’s just small portion of what Bierce has to say on the subject in The Devil’s Dictionary – see how much of modern-day America you recognize in most of these words. I’ve cut some of the entries for brevity, but their essences are intact…

• ALLIANCE, n. In international politics, the union of two thieves who have their hands so deeply inserted in each other’s pockets that they cannot separately plunder a third.
• AMNESTY, n. The state’s magnanimity to those offenders whom it would be too expensive to punish.

(Hmmm. No wonder we barely prosecute or deport illegal aliens.)

• BOUNDARY, n. In political geography, an imaginary line between two nations, separating the imaginary rights of one from the imaginary rights of the other.
• CAPITAL, n. The seat of misgovernment.
• CONSERVATIVE, n. A statesman who is enamored of existing evils, as distinguished from the Liberal, who wishes to replace them with others.
• DEBT, n. An ingenious substitute for the chain and whip of the slave-driver.
• DIPLOMACY, n. The patriotic art of lying for one’s country.
• ECONOMY, n. Purchasing the barrel of whiskey that you do not need for the price of the cow that you cannot afford.
• ELECTOR, n. One who enjoys the sacred privilege of voting for the man of another man’s choice.
• EXECUTIVE, n. An officer of the Government, whose duty it is to enforce the wishes of the legislative power until such time as the judicial department shall be pleased to pronounce them invalid and of no effect.
• GUNPOWDER, n. An agency employed by civilized nations for the settlement of disputes which might become troublesome if left unadjusted.
• HISTORY, n. An account mostly false, of events mostly unimportant, which are brought about by rulers mostly knaves, and soldiers mostly fools.
• HOUSELESS, adj. Having paid all taxes on household goods.
• INFLUENCE, n. In politics, a visionary quo given in exchange for a substantial quid.
• JUSTICE, n. A commodity which is a more or less adulterated condition the State sells to the citizen as a reward for his allegiance, taxes and personal service.
• LIBERTY, n. One of Imagination’s most precious possessions.
• MONEY, n. A blessing that is of no advantage to us excepting when we part with it. An evidence of culture and a passport to polite society.
• OPPOSITION, n. In politics the party that prevents the Government from running amuck by hamstringing it.
• OUT-OF-DOORS, n. That part of one’s environment upon which no government has been able to collect taxes.
• PATRIOT, n. One to whom the interests of a part seem superior to those of the whole. The dupe of statesmen and the tool of conquerors.

(These next two are priceless – they should be bronzed somewhere important for all to see…)

• PEACE, n. In international affairs, a period of cheating between two periods of fighting.
• POLITICS, n. A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.
• PREROGATIVE, n. A sovereign’s right to do wrong.
• QUORUM, n. A sufficient number of members of a deliberative body to have their own way and their own way of having it.
• RESIGN, v.t. To renounce an honor for an advantage.

(When’s Anthony Weiner’s million-dollar tell-all book coming out, I wonder?)

• REVOLUTION, n. In politics, an abrupt change in the form of misgovernment.
• VOTE, n. The instrument and symbol of a freeman’s power to make a fool of himself and a wreck of his country.
• WAR, n. A by-product of the arts of peace.

See what I mean? These are so accurate in their essences they could’ve easily been written yesterday – yet were first compiled and published as part of The Devil’s Dictionary exactly 100 years ago, in 1911…

When you see it laid out in the clarity of Bierce’s biting “definitions,” it’s incredible how little government and the American system has changed in a century, isn’t it?

The only problem with Bierce’s timelessly accurate assessment of what the underpinnings of government and society really are is that they make the self-deluded (in other words, everyone) want to jump from the nearest bridge.

That’s because the most cardinal of truths is this: The truth is ugly, and it hurts.

Many can’t forgive (or more accurately, stomach) Bierce for his unflagging willingness to call a spade a spade – others can’t help but love him for his ability to do exactly that with so vicious and crystalline a wit. I’m of this second camp, and have been since the day I first read Bierce.

And if these few excerpted “definitions” from The Devil’s Dictionary have given you a fresh glimpse of the sausage-making machine behind the government curtain, jarred your expectations of The System, of even just given you a hearty guffaw or two…

Stay tuned for the second installment of this two-part series. If you think Bitter Bierce’s take on sovereign Government is harsh – wait ’til you hear what he thinks about education, medicine, marriage, love, friendship, Wall Street, religion, morality, birth, death, and life in general.

It’s pure Ambrosia for the cynical soul…

As Goes Greece, So Goes …

The Euro 1999 – 2012 R.I.P.

By Jeff Harding 

Italy is the world’s eighth largest economy and it has one of the highest levels of public debt-to-GDP in Europe:

Greece is ranked the 28^th largest economy in the world. By comparison Ireland is ranked 36^th.

Needless to say, Italy represents a flash point in the euro zone as bond vigilantes have gone after it for the past two days. Fear is contagious as they say. Greece is the ostensible problem and the stated reason for today’s EU emergency meeting, but they will discuss Italy. Italy’s debt costs are still relatively low, but the Bund spread is growing and their cost of debt relative to the amount of debt (primary balance) is a problem.

Is this something we here in Fortress America should worry about? Yes.