Siding with the Angels

The Eternal Peril of the Simple Answer

History is harder to untangle than politicians would lead us to believe.

By Thomas Sowell

Anyone who has ever been in a Third World country, or even in a slum neighborhood at home, is likely to wonder why there can be such dire poverty among some people while others are prospering.

Both politicians and intellectuals have tended to have simple answers to that question, even if these simple answers have been different in different eras.

A hundred years ago, the prevailing answer was that some people are innately and genetically inferior. Not only was this answer

Ultimately, the political establishment wins

DESTROYING AMERICA, BILL BY BILL

by SIMON BLACK 

As you’re probably aware, yesterday was the much ballyhooed blackout of several popular web sites in protest of new legislation that threatens the Internet as we know it.

The United States Congress has teed up two separate bills which give government agencies sweeping new powers to punish millions of innocent users, criminalize harmless activities, and effectively make entire web sites disappear at their sole discretion without any judicial oversight.

In a nutshell, these bills would create the online equivalent of Nazi Germany.

But what can we really expect from these people? It’s not the first time that Congress has gone out of its way to destroy freedom and prosperity, and it certainly won’t be the last. Just look at the last decade for a plethora of examples:

USA PATRIOT Act, 2001. The US Constitution officially became toilet paper when this bill of over 60,000 words just happened to be introduced only a few weeks after 9/11. Roving wiretaps, suspension of due process, and a complete loss of privacy became the norm.

Freedom of speech is the basis for all other freedoms

Speech crimes and France

Denying genocide may be ignorant, but the French government shouldn't criminalize it.

by LA Times Editorial

On Monday, the French Senate is scheduled to debate and possibly vote on a bill that would criminalize denial of the Armenian genocide of 1915, along with any other events recognized as genocide in French law. The bill has passed the lower house of Parliament. The Senate should reject it, in the name of free speech, the freedom of historical inquiry and Article 11 of France's pathbreaking 1789 Declaration of the Rights of Man and Citizen ("The free communication of ideas and opinions is one of the most precious rights.…").

The question is not whether the atrocities committed against the Armenians by the Ottoman Empire were terrible, or whether they should be acknowledged in Turkish and European memory. They were and they should be. The question is: Should it be a crime under the law of France, or other countries, to dispute whether those terrible events constituted a genocide, a term used in international law? And is the French Parliament equipped and entitled to set itself up as a tribunal on world history, handing down verdicts on the past conduct of other nations? The answer: No and no.

The construction of a massive, post-Tito Yugoslavia

The European Crack-Up

BY THEODORE DALRYMPLE

A Belgian journalist who interviewed me recently about the European debt crisis asked me whether I believed in the European Project. I replied that I would answer her question—if she would tell me what the European Project actually was. By revealing my doubts, I proved to her that I suffered from the strange kind of mental debility known as Euroskepticism, a condition supposedly compounded of low intelligence and aggressive xenophobia. The low intelligence manifests itself in the patient’s view of European institutions as a gravy train for a transnational nomenklatura, rather than as the beginning of a new, generous, and free-spirited type of postnational identity. The xenophobia manifests itself as a secret desire for conflict and war, the European Union and its predecessors supposedly having been responsible for the avoidance of war on the Continent over the last 65 years.

Reflections

The Final Countdown

by  Tim Price  

“Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach.” Debt talks “have not produced a constructive response.”               

           - The Institute of International Finance, January 13, 2012

“The war situation has developed not necessarily to Japan’s advantage..”             

            - Japanese Emperor Hirohito after the atomic bombing of Hiroshima and Nagasaki, announcing Japan’s surrender to the Allies.

There is a terrible hubris at the heart of mankind. Like every other living thing on the planet we are products of nature, but we consider ourselves to be well above it. We are beset by regular reminders of our vulnerability, but quickly dismiss them off-handedly to a spiritual plane, calling them “acts of God” as if to show that we could never have prevented them.

In a significant essay for Foreign Affairs, “The Black Swan of Cairo,” Nassim Taleb shows how the efforts of our authorities to suppress volatility actually end up making the world less predictable and more dangerous.

“Although the stated intention of political leaders and economic policy makers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to “Black Swans” – that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.”

An Advise to Young People

GET READY TO GRAB YOUR ANKLES
by SIMON BLACK

If you’re reading this and under 30, let me be absolutely clear about one indubitable point: your government is going to sacrifice your future in order to pay for its own mistakes from the past.

To give you an example, students in London came out to the streets in droves last Friday to protest the British parliament’s most recent austerity measures which tripled the cap on their university tuition to $15,000.

Sure, Britain is imposing all sorts of austerity measures on its citizens… and while I won’t get into a discussion about the absurdity of government controlled education, I will point out that students are having their benefits cut far more drastically than any other segment of the population.

Are pensioners seeing their costs triple? No. Are middle-aged workers seeing 50% tax hikes? No. Aside from the very small segment of high-income earners who will be forever robbed and pillaged of their wealth, the younger generation is next in line to receive the butt end of the crisis fallout.

Younger folks have comparatively lower incomes, benefits, job opportunities, and political clout than their seniors, yet they are increasingly expected to assume a disproportionately larger burden of the consequences of government folly.

Black Swans

Quotes and paraphrases from Nassim Nicholas Taleb

10. Mother Nature is robust. Large modern corporations are fragile.

9. When the big bridge collapses, the “news” interest will be in the last truck that made it over, when the real story should be about the fragility of the bridge.

8. Somewhere in every Black Swan story there’s a turkey. The turkey has a clear understanding of history, and of growth. The nice farmer feeds him every day, and the turkey keeps getting fatter. Then comes Thanksgiving. It’s a Black Swan for the turkey. But not for the butcher.

7. We can say safely that the Black Swan started entering society with agriculture, with the fact that we started settling. Complexification started then… In my tableau of what’s fragile and what’s robust, the nation-state is a fragile entity, whereas city-states are more robust. So the creation of the nation-state created this big unpredictable event, that First War. Even those who saw it coming didn’t see the damage it was about to cause. So the First War probably is the most consequential one, and it came in two volumes…

6. I think that today we are entering a different world of Black Swans because of the Internet.

5. Newspapers make us stupid. They overexplain with “causes” of things that can’t be checked. And because they are driven by the sensational, they misrepresent risk. I prefer the social filter of news, over dinner or lunch. Anything that draws me away from face-to-face contact is harmful to my health.

4. Grandmothers had a rule of thumb after the Great Depression: work and save for a few years before you get into risk… Unpredictability and debt are not friends.

3. On bailouts: My analogy is to the gambler who is now gambling with the trust fund of his unborn great-great-granchildren… Prudence should be the first thing on the agenda of governments, not speculation. Stimulus packages are speculation… We are gambling on a massive recovery. It’s too big a gamble, and besides it’s immoral.

2. In the economic crisis, and in the Gulf of Mexico, what we should be discovering is not who made what mistake, but the fact of fragility. Alas, what we don’t learn is… that we don’t learn.

1. No government can fortify something that’s inherently fragile.

On Greek PSI

Headlines And Reality

The Greek PSI is once again (still) hitting the headlines.Here is what I think the most likely scenario is (80% likelihood).

by Peter Tchir

Some form of an agreement will be announced.  The IIF will announce that the “creditor committee has agreed in principle to a plan.”  That plan will need to be “formalized” and final agreement from the individual institutions on the committee and those that weren’t part of the committee will need to be obtained.  The headline will sound good, but will leave a month or so for details to come out.  In the meantime every European and EU leader (or employee) with a  press contact will say what a great deal it is.  That it confirms that Europe is on the path of progress and that they are doing what they committed to at their summits.

That will be the hype that will drive the market higher.  They will do it because they have to.  They cannot afford an uncontrolled default, so they will have to push forward as though they have fixed something.

Boosting the concentration of moral authority and political power in the hands of a tyrannical few

Let’s have a proper debate about the welfare state

Hooked on poverty porn, getting the unelected Lords to do their dirty work... there’s little progressive about today’s welfare-defenders.

by Brendan O’Neill 

What is worse: elected politicians proposing to reform the welfare state, or unelected Lords, cheered on by liberals, unilaterally shooting down such reform? It’s the latter. Even if you aren’t a fan of Lib-Con plans to trim the welfare bill (I think it’s daft to imagine such trimming will reverse the economic downturn), you should be far more concerned by the patronising and profoundly undemocratic turn that the so-called radical side in this debate has taken. Today, the defenders of welfare are doing far more harm to what we might term progressive politics than the right-wingers seeking to rethink welfarism.

The history of mankind is the history of ideas

The Liberation of the Demons

By Ludwig von Mises
The history of mankind is the history of ideas. For it is ideas, theories and doctrines that guide human action, determine the ultimate ends men aim at, and the choice of the means employed for the attainment of these ends. The sensational events which stir the emotions and catch the interest of superficial observers are merely the consummation of ideological changes. There are no such things as abrupt sweeping transformations of human affairs. What is called, in rather misleading terms, a "turning point in history" is the coming on the scene of forces which were already for a long time at work behind the scene. New ideologies, which had already long since superseded the old ones, throw off their last veil and even the dullest people become aware of the changes which they did not notice before.

Selling the Wrong Idea

India's Hiccup
By JAGDISH BHAGWATI

Adam Smith, writing in The Wealth of Nations, was probably the first to call England a nation of shopkeepers. But few remember that Smith used the phrase to argue that England was a “nation whose government is influenced by shopkeepers”. And that influence was malign. Thus, he blamed the founding of the British Empire on the desire of shopkeepers to secure monopoly of trade in colonial commodities.

India’s shopkeepers today invite a similar, if different, opprobrium. By opposing retail sector reform, they and their political supporters in the BJP, Trianmool Congress and the communists, are not merely sabotaging this important reform. They are also throwing up roadblocks to the deepening and broadening of the post-1991 reforms that is so badly needed today.

Bobby Fisher doesn't live here anymore

$10 TRILLION Liquidity Injection Coming? Credit Suisse Hunkers Down Ahead Of The European Endgame

By Tyler Durden

When yesterday we presented [27] the view from CLSA's Chris Wood that the February 29 LTRO could be €1 Trillion (compared to under €500 billion for the December 21 iteration), we snickered, although we knew quite well that the market response, in stocks and gold, today would be precisely as has transpired. However, after reading the report by Credit Suisse's William Porter, we no longer assign a trivial probability to some ridiculous amount hitting the headlines early in the morning on February 29. Why? Because from this moment on, the market will no longer be preoccupied with a €1 trillion LTRO number as the potential headline, one which in itself would be sufficient to send the Euro tumbling, the USD surging, and provoking an immediate in kind response from the Fed. Instead, the new 'possible' number is just a "little" higher, which intuitively would make sense. After all both S&P [28] and now Fitch [29] expect Greece to default on March 20 (just to have the event somewhat "priced in"). Which means that in an attempt to front-run the unprecedented liquidity scramble that will certainly result as nobody has any idea what would happen should Greece default in an orderly fashion, let alone disorderly, the only buffer is having cash. Lots of it. A shock and awe liquidity firewall that will leave everyone stunned. How much. According to Credit Suisse the new LTRO number could be up to a gargantuan, and unprecedented, €10 TRILLION!

Unlimited lines of credit to just about everybody

QE3 has already begun in Europe

By Jonathon M. Trugman

The Fed chief authorized a coordinated action that lowered pricing on US “dollar swaps” by 50 basis points (0.5 percent) to its key allies in central banking. The Bank of England, the ECB, the Swiss National Bank, the Bank of Japan and the Bank of Canada are each a party to the agreement.

This was done, purportedly, “to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and to help foster economic activity,” the Fed’s release said.

In reality, though, the Federal Reserve has just extended essentially unlimited lines of credit, camouflaged as a swap to the world in US dollars.

And now the strapped European Central Bank can and has tapped the Fed for very cheap money — cheaper than US consumers can borrow for, if they can get access to credit at all.

Essentially, we just bailed out Europe’s banking system with the full faith and credit of the United States.

On Dec. 21, the ECB put some of our money to work and lent out 489 billion euros to 523 different banks for a full three years.

So now, through the Fed, we are invested in a circular, circumventing fashion in 523 of Europe’s weakest banks — at all-time low interest rates, no less. And the ECB has chosen to withhold the names of these banks.

To sum it up:

* The Fed essentially borrows or is backed up by US taxpayers, already in debt through mortgages, credit cards, student loans.

* The ECB in turn borrows from the Fed and then leverages that money up under its ECB umbrella.

* The ECB then lends it out to 523 of Europe’s most overleveraged banks.

* The desperate banks keep some to fortify their balance sheets, and use the rest to buy sovereign debt in some of the most overleveraged countries in the world, like Italy and Spain, which were just downgraded Friday by S&P.

So after the long laundering of US dollars, the Fed now is investing in and lending to Europe’s most desperate banks, which have in turn invested some of that money in the debt of some of Europe’s weakest countries.

Kingdoms run on oil

Iran, the U.S. and the Strait of Hormuz Crisis

By George Friedman

The United States reportedly sent a letter to Iran via multiple intermediaries last week warning Tehran that any attempt to close the Strait of Hormuz constituted a red line for Washington. The same week, a chemist associated with Iran's nuclear program was killed in Tehran. In Ankara, Iranian parliamentary speaker Ali Larijani met with Turkish officials and has been floating hints of flexibility in negotiations over Iran's nuclear program.

This week, a routine rotation of U.S. aircraft carriers is taking place in the Middle East, with the potential for three carrier strike groups to be on station in the U.S. Fifth Fleet's area of operations and a fourth carrier strike group based in Japan about a week's transit from the region. Next week, Gen. Michael Dempsey, chairman of the Joint Chiefs of Staff, will travel to Israel to meet with senior Israeli officials. And Iran is scheduling another set of war games in the Persian Gulf for February that will focus on the Islamic Revolutionary Guard Corps' irregular tactics for closing the Strait of Hormuz.

From Eternal Stability to Turmoil

The Geopolitics of Egypt

By The Stratfor Editor

The greatest misunderstanding about Egypt is the common belief that it is a large country. It does occupy more than 1 million square kilometers (386,000 square miles) -- twice the size of France -- but most of its territory is wasteland. In fact, slightly less than 35,000 of those 1 million square kilometers, a land area roughly the size of the U.S. state of Maryland or the European country of Belgium, are actually inhabited. This tiny portion of massive Egypt -- from the Aswan High Dam to the Mediterranean shore -- is the Egyptian core and home to 99 percent of Egypt's population of 83 million.

Those 35,000 square kilometers, however, are not condensed into a convenient, easy-to-manage, Belgium-shaped chunk. Instead, they are stretched thin, clinging to the banks of the Nile River in a strip that is almost always less than 30 kilometers (18 miles) wide. Only at the northern delta (the Nile flows from south to north) does this zone

Solving the Mayan Code

Is This The End Of Europe?

By John Mauldin,

One of the interesting things about being in Hong Kong is that I get to see the weekend edition of the Financial Times 12 hours early. And the headlines were not all that pleasant. As I promised last week, we will cast our eyes to Europe and ponder what is in store for Europe for the year and the next five years. And what do we read on page 2? The "ECB raps revisions to draft a fiscal pact." Seems they feel there are too many loopholes, which will make the document meaningless … somewhat like the treaty they have now. And we further learn that "Greek default threat grows as talks falter." Seems there is a lack of agreement on how much of a haircut the investors ought to take, and the Greeks don't want to guarantee any future debt, just in case they need to default some more in the future. But they do want the €15 billion they need to keep the debt machine running for a few more months.

And on page 1, in big type, we are surprised (but not very) by the headline, "France and Austria face debt blow." Seems those sharp-eyed accountants over at S&P have decided to downgrade French debt from AAA. Which of course leads to another headline on page 2, suggesting "Firepower of bail-out fund cast into doubt." The currency markets were shocked – shocked I tell you – that S&P would do such a thing and promptly took back the euro rally and cast the euro down to recent cycle lows. Who knew, other than the entire free world not watching reality TV, that S&P was planning to do such a thing? And we read elsewhere that the European Commission is dismayed that S&P would do something so clearly not right, at least according to the way they keep their own books.

Even here in amazing Hong Kong, with the growth of China driving a wave of prosperity, eyes are fixed on Europe. How will they deal with the crisis? We read that US exports to Europe were down 7% last quarter, and Europe has not yet really entered into recession, which is almost guaranteed this year. And if US exports are down, then so are Asian and Latin American exports. Global growth appears to be threatened.

There are so many pieces of data to go through in order to augur Europe's future – I want readers to know I have left no stone unturned! In fact, I went to some very old stones to get help with this week's letter. I began to scrutinize the Mayan Code from ancient Central America, which so many feel predicts the end of the world on December 21 of this year, bringing my fresh eyes to an old mystery.

Is western decline inevitable?

The Decline of the West

Big government was harming Europe's prospects anyway, but the euro is making things much worse

by John Redwood

The rising strength of China and Brazil, of India and the Civets, is based on hard work and free enterprise. Economies which have been kept poor by too much state control and by bad government in past decades, are being progressively liberated.

As this occurs, so more businesses are set up, more jobs created, more people are better educated. A virtuous circle has been created.

The declining relative strength of the west, especially of Europe, is based on the opposite process. There is growing government interference in every aspect of economic life. The top down Euro scheme, little wanted by the German and French people, let alone the British, is doing untold damage to economic prospects.

It is proving to be the ultimate ill judged intervention by the political classes, the final expression of governing power that is damaging families, businesses and job prospects.

The fire rages on

America, Greece and a world on fire

By Gideon Rachman

It took an economic crisis in Greece in 1947 to force the United States to assume world leadership. Now, more than 60 years later, another Greek crisis is showing what the world feels like without US leadership.

In February 1947 the British government – bankrupted by the war and beset by a harsh winter – told America that it could no longer afford to aid Greece, which was on the brink of economic collapse and civil war. A British diplomatic cable at the time recorded a belief in Washington that “no time must be lost in plucking the torch of world leadership from our hands”.

Searching for a new treaty of Westphalia

Grim lessons from the 30 years war

By Wolfgang Münchau

The financial crisis has given rise to several historical comparisons, not least the Great Depression. I would like to invoke another for the eurozone crisis – the 30 years war, which ravaged central Europe from 1618 to 1648.

Both the eurozone crisis and that terrible war occurred amid sudden power shifts; they were triggered by seemly trivial events; and they became incredibly complicated. They are also marked by sudden regional power shifts. Before 1618, the Holy Roman Empire was almost equally divided into Catholic and Protestant electorates. The truce ended when the balance of power shifted with the ascension in 1617 of the Catholic Ferdinand as king of Bohemia, who was one of

End Game for the USA

The US Government Is Bankrupt

by Doug Casey

Everyone knows that the US government is bankrupt and has been for many years. But I thought it might be instructive to see what its current cash-flow situation actually is. At least insofar as it's possible to get a clear picture.

As you know, the so-called Super Committee recently tried to come up with a plan to cut the deficit by $1.5 trillion and failed completely. To anyone who understands the nature of the political process, the failure was, of course, as predictable as it was shameful. What's even more shameful, though, is that the sought-after $1.5 trillion cut wasn't meant to apply to the annual budget but to the total budget of the next 10 years – a fact that is rarely mentioned.

From Genocide to the road of Prosperity

The Rwandan Renaissance

By DALIBOR ROHAC

Strange as it may sound, Singaporeans are a common sight in Rwanda. On a recent trip to the proverbial heart of African darkness, I ran into a sizeable group of them having lunch in one of Kigali’s international hotels. They were reviewing potential business opportunities, so they told me. Later that day, I visited the Rwanda Development Board, an organization that fosters private investment in Rwanda. While there, I casually picked up a PowerPoint presentation from a training session for Rwandans by the Singapore Cooperation Enterprise. As in Singapore, the slides were swiftly confiscated; apparently they contained “confidential information.”

Just like Singaporeans, Rwandans are not shy about their ambitions. Deeply traumatized by the genocide of 1994, they have made enormous progress in the past decade distancing their country from its less-than-glorious past and also from the many economic, political and social troubles still pervasive in sub-Saharan Africa. Rwanda today is optimistic, forward-looking and striving hard to become the service and IT hub for the whole of East Africa. Yet, unlike Singapore, Rwanda is poor, landlocked and surrounded by unreliable and corrupt neighbors. What is more, Rwanda faces the limits of a development model that relies significantly on enlightened personal leadership.

Quo Vadis, Britannia?

How Long Until People Raise The Alarm About Britain?

By Ilargi

There is a relative silence in the international financial press when it comes to Britain.

The economic situation of continental Europe gets almost all the attention.

Every now and then someone in France or Germany states that Britain, too, should be downgraded, like when S&P cut the ratings of 9 European countries, but such statements attract hardly any interest at all. This might not be overly wise, though.

At the end of last year, Tyler Durden at ZeroHedge published a graph from Haver Analytics/Morgan Stanley that should probably have sounded alarm bells quite a bit louder than it did.

Taking risks and embracing freedom

Licensed to censor performance art

By treating adults like children, the 2003 Licensing Act is being used to undermine the freedom of both artists and audiences.

by Manick Govinda 

During the twentieth century, performance art developed a reputation for being both powerful and provocative. Originating as an underground movement, and witnessed by small audiences in basement and warehouse spaces, it was also highly influential. The likes of Martin Scorsese, Samuel R Delaney, Don DeLillo, The Beatles (John Lennon married a performance artist) and many other cultural luminaries were drawn to its secret world. It was controversial, puzzling, life changing and, in some cases, extremely physically violent (usually to the artist, not the public).

In this tradition of anti-establishment art, a few contemporary young British performance artists such as Thomas John Bacon continue to forge ahead. Finding grassroots venues or spaces, such as Lock Up Performance Art, a garage on a council estate in Bethnal Green, young up-and-coming performance artists continue to challenge and provoke, and they do so in environments unburdened by the demand for bums on seats or big audience numbers.

Populist Politics in a Digital Age

Running scared of the English Defence League

‘We talk about apathy, then these guys get into politics and we shit ourselves.’ 

by Patrick Hayes 

It’s a worrying sign of the times when the first large-scale study of the make-up of the English Defence League (EDL) – a right-wing group that is fiercely opposed to radical Islam – has to top its policy recommendations with ‘Do not ban the group’.

While he doesn’t think that the police or government are planning to impose such a ban, Jamie Bartlett – head of the violence and extremism programme at UK think-tank Demos and co-author, with colleague Mark Littler, of the report Inside the EDL: Populist Politics in a Digital Age– recognises that there are groups lobbying for the right-wing organisation to be added to the government’s list of proscribed organisations.

Indeed, UK home secretary Theresa May did ban the EDL from marching through the London borough of Tower Hamlets in September last year. (Perhaps out of a warped sense of fairness, May then banned all other groups from marching there, too.) Following the riots in London in August, UK prime minister David

How to prepare a Greek Salad

Greece’s creditors seek end to deadlock

By Kerin Hope 

Greece’s international creditors are considering an appeal to the French and German leaders to break a deadlock in negotiations over the size of the losses to be taken by banks and other bondholders as part of a €100bn deal seen as crucial to bringing the country’s debt under control.

The move to involve German chancellor Angela Merkel and French president Nicolas Sarkozy comes after restructuring talks with official investors broke down on Friday raising concerns that Greece was moving closer to becoming the first developed country in nearly 60 years to default on its debt.

In a sign of urgency, Guido Westerwelle, German foreign minister, flew to Athens on Sunday for talks about the so-called private sector involvement (PSI) negotiations with Greek premier Lucas Papademos.

Europe 201

How Much Risk Do You Want in a Government Bond?

By John Mauldin

Government bond investors are a curious breed. They invest in government bonds because they actually think there is not supposed to be any risk. They want their money to be safe. If they wanted risk, there are lots of opportunities to invest with the potential for more reward.

The moment that government bond investors begin to think they might be at risk, they leave. And history suggests they tend to leave seemingly all at once. It is the Bang! moment. Someone fires the starting gun, and they all head for the exits. They start selling their bonds to speculators at discounts, which makes the effective interest rates in the market rise, sometimes by a lot. That means that if a country wants to borrow more money, it will have to pay the effective price in the market, or maybe as much as 15-20% IF – a big IF – it can even get someone to buy the bonds, which of course makes it even more difficult to pay their debt as interest costs rise.

Europe 101

Getting Simple About Europe

By John Mauldin

Let's assume a country that has a gross domestic product (GDP) of $1,000. In the beginning it taxes its citizens about 25% of GDP and spends the money for the public's benefit. But alas, it spends about 30% of GDP, so it must borrow the overage (about $50) from its citizens or from the citizens of other countries. Because the country starts out with relatively little debt, interest rates on this loan are low, because those who buy the debt can easily see that the the country can pay them back. If the debt of the country is only 5% of GDP ($50) and the interest rate is 4%, then the amount that must be paid as interest is only about $2 per year. Not a whole lot, about 0.2% of GDP.

Brutal and Ugly

Fleeing the Clutches of the U.S. Empire

By Robert Wenzel

As the United States attempts to influence keys sectors of the globe, those areas of influence are turning into wastelands, as people flee to freer lands. This weekend's WSJ has two instructive examples.

First, in Europe, where banksters are attempting, through US-controlled institutions such as the IMF, to impose heavy regulation and taxes on the people, the most productive people are leaving. WSJ reports:

Economic distress is driving tens of thousands of skilled professionals from Europe, and many are being lured to thriving former European colonies in Latin America and Africa, reversing well-worn migration patterns... The exodus is raising concern about a potential long-term cost of the economic crisis—a talent drain that could hinder the euro zone's weakest economies as they struggle to climb out of recession....

The toll is mounting in Spain and Portugal, countries losing skilled workers to their former colonies. More people are emigrating from Spain, Portugal, Ireland, Slovenia and Cyprus than are moving to those countries, and in Greece officials worry that a similar trend is taking hold there...

Last year, with unemployment topping 20%, Spain became a net exporter of people for the first time since 1990, according to Spain's National Statistics Institute. Some 55,626 more people left the country in the first nine months of last year than arrived, the institute said.

Spaniards are scattering to better-off European countries and beyond, particularly to Latin America. Of the estimated 37,000 Spanish citizens who left the country in 2010, nearly 60% emigrated to countries outside the European Union...

At least 100,000 of Portugal's 11 million citizens moved abroad in 2011, after a decade of anemic growth and rising debt in Western Europe's poorest nation. In Africa, Angola's burgeoning economy has absorbed 70,000 Portuguese since 2003, according to the government-backed Emigration Observatory in Lisbon.

The number of Portuguese in Brazil on work-related visas shot up by 52,000 in the 18 months through June 2011.

Likewise, the cocaine growers are leaving the area where the Empire pushed down its thumb. From WSJ:

Once concentrated in Colombia, a close U.S. ally in combating drugs, the cocaine business is migrating to nations such as Peru, Venezuela, Ecuador and Bolivia, where populist leaders are either ambivalent about cooperating with U.S. antidrug efforts or openly hostile to them.

If you want war, prepare for war

U.S. troops quietly surge into Middle East

By David S. Cloud

The Pentagon has quietly shifted combat troops and warships to the Middle East after the top American commander in the region warned that he needed additional forces to deal with Iran and other potential threats, U.S. officials said.

Marine Corps Gen. James Mattis, who heads U.S. Central Command, won White House approval for the deployments late last year after talks with the government in Baghdad broke down over keeping U.S. troops in Iraq, but the extent of the Pentagon moves is only now becoming clear.

Thou shall not default, the ECB commands it

Dealing with Greece’s biggest holdout

by Joseph Cotterill 

If you didn’t believe us that the European Central Bank will do everything it can to achieve seniority for its Greek bonds in the country’s debt restructuring, hopefully Thursday’s ECB press conference convinced you.

Not only did ECB chief Mario Draghi obsfuscate — twice — on whether the bank is prepared to take losses on its Greek debt, but Vitor Constancio, the vice-chief, made a point of emphasising that Greece is negotiating private sector involvement.

The implication being that the ECB’s €40bn-plus holdings should not be seen as private, despite having originally been issued by Greece as private bonds. (The ECB bought the bonds in the secondary market.) Since that suggests the ECB shouldn’t be affected by any

Dark Inventory and other Nightmares

Fear and Loathing in the Financial Markets – What Happens to the Economy When the Oil Bubble Bursts?

By Philip Pilkington

In 2008 profits in the US economy crashed out. But they soon bounced back. This bounce was largely due to the profits being reaped in the financial sector – which sickened many given that 2008 was in large measure caused by the financial sector. This always struck me as odd – not to mention unsustainable. If the ‘real’ economy is in the doldrums you can be sure that, in the medium to long run, the business class will go down with it.

In what follows I will draw on Chris Cook’s post on this site the other day to argue that, if he is correct (and I think he may be), judgment day is just around the corner for the profiteers. Soon they will have to learn that you cannot financial engineer your way to profitability forever, especially when the rest of the economy is withering. Who knows, this may even inspire what has come to be called the 1% to focus their attention on the problems that have arisen in the global economy in recent months – for they have been truly burying their heads in the sand for the past three years.

But first, let us look at this incredible post-2008 resurgence of profitability.

From Profit Bust to Profit Boom

When the world financial markets crashed out in 2008 profits hit the wall. Yet, they did not hit it quite as hard as one might expect. As the below graph shows profits did not even reach the levels they did during the 1983 recession as a percentage of GDP.