Is There No Escape from the Euro?

A European style divorce is both possible and probable 

By Philipp Bagus

As I discussed recently, the costs and risks of maintaining the eurozone system are already immense and rising. So is an exit possible? Intuitively, the exit from the euro should be as easy as the entrance. Joining and leaving the club should be equally simple. Leaving is just undoing what was done before. Indeed, many popular articles discuss the prospects of an exit of countries such as Greece or Germany.[1] However, other voices have rightly argued that there are important exit problems. Some authors even argue that these problems would make an exit from the euro virtually impossible. Thus, Eichengreen (2010) states, "The decision to join the euro area is effectively irreversible." Similarly, Porter (2010) argues that the large costs of an exit would make it highly unlikely. In the following we address the alleged exit problems.

Legal Problems

The Maastricht Treaty does not provide for a mechanism to exit the European Monetary Union (EMU). Thus, several authors maintain that an exit from the euro would constitute a breach of the treaties (Cotterill 2011, Procter and Thieffry 1998, Thieffry 2011, Anthanassiou 2009).[2] In an ECB working paper from 2009 Anthanassiou claims that a country that exits the EMU would have to leave the EU as well. As the Lisbon Treaty allows for secession from the EU, withdrawal from the EU would be the only way to get rid of the euro.

No, not Italy, and certainly not Spain. Egypt.

On The Forgotten Geopolitical Risk

By Art Cashin

From UBS Financial markets:

"Geo-Politics Still Ignored - Veteran traders have wondered for weeks about the markets whistling past a variety of geopolitical challenges. Yes! Yes! I know about Spain and Italy but they are potential financial crises not truly political ones.

A good example is the deteriorating situation in Egypt. The Muslin Brotherhood went back on it initial promise and backed a candidate for president. That raised the likelihood of a religious government and possible rule by Sharia law.

Live From Athens

"You've Got To Pick A Pocket Or Two"

“It's him that pays the piper.  It's us that pipes his tune  So long, fare thee well  Pip! Pip! Cheerio!  We'll be back soon.”                                          -Oliver, Be Back Soon

The focus has shifted. The all seeing orb is now focused on Spain but it may well turn back to Greece soon. The loan money is exhausted again and the Greeks have elections lined up on Sunday, May 6 which is coincidentally the same day of the French run-off elections. To answer the question of at what point Greece might leave the Eurozone and return to the Drachma is relatively simple; it will be the day when the European loan spigot is shut off. Greece will pander, promise and proclaim until that point and then they will say, “have a nice day and thanks for all the fish.”

Christmas Trees and the Logic of Growth

"Black Swan" Fund Creator Explains Why Central Planning Has Doomed Us All

By Tyler Durden

In a must read Op-Ed in the WSJ, Mark Spitznagel, founder of "fat tail" focused hedge fund Universa, where Nassim Taleb has been known to dabble on occasion, explains the fundamental flaw with central planning, and specifically why "moral hazard" or the attempt to avoid the destructive part of natural cycles, is the greatest unnatural abomination ever conceived by man. His visual explanation should be sufficient for even such grizzled academics who have no clue how the real world works, as the Chairsatan, to comprehend why what he is doing is an epic abomination of every law of nature: "Suppressing fire, creating the illusion of fire protection, leads to the wrong kind of growth, which then invites greater destruction. 

Grope and Change

Hookers bring Secret Service to its knees

By mark steyn

Unlike the government of the United States, I can't claim any hands-on experience with Colombian hookers. But I was impressed by the rates charged by Miss Dania Suarez, and even more impressed by the U.S. Secret Service's response to them.

Cartagena's most famous "escort" costs $800. For purposes of comparison, you can book Elliot Spitzer's "escort" for $300. Yet, on the cold, grey fiscally conservative morning after the wild socially liberal night before, Dania's Secret Service agent offered her a mere $28.

Senator Church’s Prophetic Warning

"We are, like, that far from a turnkey totalitarian state"

By George Washington

Senator Frank Church – who chaired the famous “Church Committee” into the unlawful FBI Cointel program, and who chaired the Senate Foreign Relations Committee – said in 1975:

“Th[e National Security Agency's]  capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything: telephone conversations, telegrams, it doesn’t matter. There would be no place to hide.  [If a dictator ever took over, the N.S.A.] could enable it to impose total tyranny, and there would be no way to fight back.“

Now, the NSA is building a $2 billion dollar facility in Utah which will use the world’s most powerful supercomputer to monitor virtually all phone calls, emails, internet usage, purchases and rentals, break all encryption, and then store everyone’s data permanently.

The former head of the program for the NSA recently held his thumb and forefinger close together, and said:

"We are, like, that far from a turnkey totalitarian state"

The American Experiment In Liberty Has Failed

Farmers in human cattle

By Lawrence Hunter

"It is, perhaps, a fact provocative of sour mirth that the Bill of Rights was designed trustfully to prohibit forever two of the favorite crimes of all known governments: the seizure of private property without adequate compensation and the invasion of the citizen’s liberty without justifiable cause…It is a fact provocative of mirth yet more sour that the execution of these prohibitions was put into the hands of courts, which is to say, into the hands of lawyers, which is to say, into the hands of men specifically educated to discover legal excuses for dishonest, dishonorable and anti-social acts."

                           H. L. Mencken, Prejudices: A Selection, pp. 180-82

The American experiment in liberty has failed.  It is only a matter of time before people realize it. Official dogma exulting over the U.S. Constitution, which for so long was propagated through public schools, churches and government mouthpieces, will not forever withstand the exposure of the truth about American democracy now readily available on the Internet.

As France Goes, so Goes Europe?

Europe is coming apart

By Patrick J. Buchanan

When survival is at stake, one may hear from a politician not what he believes — but what he thinks the people deciding his fate wish to hear.

By that standard, what do the people of France, in the final weeks of their presidential election, wish to hear from their candidates?

President Nicolas Sarkozy seems to believe his countrymen are in a deeply nationalistic frame of mind.

Earth Day’s dark side

Guardians of Earth, persecutors of humankind

By Robert Zybrin

Sunday was Earth Day, the annual jamboree of the green movement held worldwide since 1970. Unfortunately, a review of the accomplishments of the advocates of environmentalism and population control since that spectacular debut shows very little reason to celebrate.

The seminal scriptures of modern-day environmentalism were Rachel Carson’s “Silent Spring,” Paul R. Ehrlich’s “Population Bomb” and the publications of the Club of Rome. While stylistically quite different, these books all served to rally the public around a core anti-human philosophy. As the Club of Rome put it, 

“The Earth has cancer, and the cancer is man.” 

Such misanthropic views could only have the most horrific consequences.

Crony Capitalism and the Expansive Central State

Crony Capitalism flourishes in an economy dominated and controlled by a Central State

By Charles Smith

Crony capitalism arises when an expansive Central State dominates the economy. The Central State can then protect crony-capitalist perquisites, cartels, quasi-monopolies and financialization skimming operations of the sort which now dominate the U.S. economy's primary profit centers.

If we step back, the larger context is the purpose and role of establishing a State to protect its citizens from foreign and domestic predation and exploition.

What Shakespeare's shepherd knew

The Ban On Cruel And Unusual Punishment Gets A Test Case
By GEORGE F. WILL 

James Donneley 16 years old
convicted of stealing some shirts
sentenced to 2 months - 1903

In the summer of 1787, just 94 years after the Salem witch trials, as paragons of the Enlightenment such as James Madison, George Washington and Benjamin Franklin deliberated in the Constitutional Convention in Philadelphia, a mob pelted and otherwise tormented to death a woman accused of being a witch. Prosecution of alleged witches, writes historian Edmund Morgan, had ceased in the colonies long before the English statute criminalizing witchcraft was repealed in 1736. Some popular sentiment, however, lagged.

Today, 221 years after the Bill of Rights was added to the Constitution, the Supreme Court is again pondering the Eighth Amendment's proscription of "cruel and unusual punishments." The case illustrates the complexity of construing some constitutional language in changing contexts of social science and brain science.

Counting the Dead Equally

First and second class victims

by Paul Gottfried

Much to the consternation of Western intellectuals and journalists, Hungary’s government sponsors a House of Terror in Budapest which dares to devote attention to not only Nazi crimes, but also Stalinist ones.

Ever since the ascendance of the “antifascist” (read: neo-Stalinist plus PC) persuasion in our “liberal democracies,” it has become gauche and somehow even anti-Semitic to compare Nazi (or more generally “fascist”) atrocities to the collateral damage of the communist forced march into the globalist future.

But the House of Terror’s director, Gábor Tallai, says it is sometimes hard to distinguish between victims of Nazi and Soviet terror. “Many Hungarian Jews who escaped Auschwitz were then dragged off by the Red Army to perform compulsory labor in Siberia.” Since my cousin was one of these forced laborers, I concede Tallai’s point.

The hunger for a simpler, black-and-white world

The Hunger Games trilogy is the fictional equivalent of Occupy’s adolescent worldview

by Patrick Hayes 

‘I don’t write about adolescence’, said Suzanne Collins, discussing her Hunger Games novels in arecent interview. ‘I write about war. For adolescents.’

Regardless of the intended audience of The Hunger Games, its appeal has been much broader. The first novel has sold an estimated 10million copies worldwide and is now as likely to be read by adults as adolescents. Following the pattern of the Harry Potter novels, respectable-looking covers have been produced so adults don’t look out of place reading the books during the daily commute. Critics gush about The Hunger Games offering ‘attractions that many grown-up novels don’t’. The film adaptation has proven to be one of the most successful films of recent years.

It’s not hard to see why. The books are fast-paced thrillers, riffing with a now extremely familiar conceit – a sci-fi dystopia where a group of people are placed in an arena to do brutal combat, with their every move being filmed for a reality TV show called ‘The Hunger Games’. It’s effectively The Running Man with hot teenagers, a made-for-Hollywood version of the Japanese hit, Battle Royale.

Now For An Arab Economic Revolution

Free Goods Versus Freedom

By Saifedean Ammous

Revolution across the Arab world has forced the region’s peoples and governments to grapple with the need for change. Years of sclerosis have given way to a frantic push for reforms to match the aspirations and discontent of millions.

But reform momentum is tugging in two, quite opposite, directions. One push is for governments to provide for their people; the other calls for governments to stop restricting their people’s freedom, particularly their economic liberty. The first type of reform will likely only exacerbate the Arab world’s grave problems; the second offers hope for positive and sustainable change.

The Trouble with Libertarian Paternalism

Choices and Options

By Raghuram Rajan

There are many arguments against government paternalism: apart from limiting individual choice (for example, the choice to remain uninsured in the current health-care debate in the United States) and preventing individuals from learning, history suggests time and again that the conventional wisdom prevalent in society is wrong. And, since governments typically try to enforce the conventional wisdom, the consequences could be disastrous, because they are magnified by the state’s coordinating – and coercive – power.

Too Big to Jail

Crooks Vs Suckers

By Simon Johnson

Among the fundamental principles of any functioning justice system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail. Breaking an oath to tell the truth is perjury, and lying in official documents is both perjury and fraud. These are serious criminal offenses, but apparently not if you are at the heart of America’s financial system. On the contrary, key individuals there appear to be well compensated for their crimes.

Capitalism, Socialism or Fascism?

Whatever we have, it isn’t free market capitalism

by WashingtonsBlog

What is the current American economy: capitalism, socialism or fascism?

Socialism

Many people call the Bush and Obama administration’s approach to the economic crisis “socialism”.

Are they right?

Well, Nouriel Roubini writes in a recent essay:

This is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest…

The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending.

Where does Money Come From?

Money as Debt

By Paul Grignon

The simple answer to the title question is DEBT. Whether paper cash or numbers on a computer screen, all money (except coins) is “evidence of debt”.

What is "cash” and where does it come from? Cash can be the familiar paper stuff, or it can be credit at the national central bank which banks use to settle accounts between banks. “Credit cash” at the central bank is always convertible to “paper cash” upon demand.

So, where does cash come from? Is it just printed by the government as we are shown on TV?

The Celtic Mind

How Adam Smith and Edmund Burke saved civilization
By Bradley J. Birzer

One contemplates the power, depth, and breadth of the finest 18th-century minds only with some trepidation and humility. Or at least, one should.

The favorite study of the great men of that day, famed editor of The Nation E.L. Godkin explained in 1900, was the glorification of the person against political power. In “opposition to the theory of divine right, by kings or demagogues, the doctrine of natural rights was set up. Humanity was exalted above human institutions, man was held superior to the State, and universal brotherhood supplanted the ideas of national power and glory.”

Exodus

White Muslims and Black Jews

By Mark Steyn

As far as the media were concerned, the murder of Jewish schoolchildren in Toulouse and a black teenager in Florida were the same story — literally: Angry white male opens fire on "the other," his deeply ingrained racism inflamed by the tide of toxic right-wing hate infecting our public discourse. Alas, in Florida, the angry white male turned out to be a registered Democrat and half Hispanic — or, as the New York Times put it, a "white Hispanic," a descriptor never applied by its editors to, say, Sonia Sotomayor or Gloria Estefan or indeed any other person living or dead. And in Toulouse the angry white male turned out to be yet another Muhammad.

Oh, well. Better luck next time, although the pickings seem likely to get thinner: Pitch the Western world a decade or two down the road, riven by an ever-more-fractious tribalism between blacks, Hispanics, and Muslims, and the one surviving nonagenarian neo-Nazi white supremacist will be at the retirement home. But it'll still all be his fault.

Happy Birthday Generation Y

Blog Birthday

A child of five starts school, but a blog of the same age has already taken more daring steps. Today I am making an effort to remember that quiet and fearful woman, from before April 9, 2007, who created Generation Y. But I can’t. Her face disappears, dissolving among all the beautiful and difficult moments I’ve experienced since I posted my first text on the web. I can no longer imagine myself without this accidental and personal diary. I have the impression that I have always, in one way or another, been writing a blog. When the indoctrination and the injustice reached intolerable points, my childish head glossed the reality–from the fringes–in ways I could never say out loud. The evasive adolescent I became did the same thing: narrating her daily life, trying to explain it and trying to escape it.

The better solution

Is the EU Too Weak?

By Charles C. W. Cooke

In the wake of the ongoing eurozone crisis, the New York Times reports that the European Union is looking to make “fundamental changes,” mooting the creation of a “central financial authority — with powers in areas like taxation, bond issuance and budget approval.” This, notes the Times, could “eventually turn the Eurozone into something resembling a United States of Europe.”

And so, in the face of arguably the most significant crisis in the history of the European integration project, the conclusion drawn by those who seek further federation is predictable: The problem with Europe, they say, is not that there has been far too much integration of a continent which is inherently unsuited to union, but that there has been too little. Plus ça change, plus c’est la même chose.

WWII referred to as the European Civil War

The EU cannot be serious?

By Donal Blaney

The great polemicist Richard Littlejohn has a phrase that sits alongside Victor Meldrew's "I don't believe it!" as being increasingly apt.

Littlejohn frequently says "You Couldn't Make It Up" (and it became the name of a book he published) - and for good reason.

Increasingly we find ourselves shaking our heads as yet another astonishing pronouncement comes from on high that we, the governed, are expected to take in our strides. 

Today we learn that the European Union (our real ruler) is opening a £44m museum that will be a House of European History. This vanity project in and of itself is an offensive waste of money as governments and peoples tighten belts across Europe. 

But what I found most offensive of all is that World War II is to be described as "the European Civil War". 

Rights concern the liberty of individuals, not the prerogatives of the collectivity

Judging, the cosmic way

By George F. Will

Judge J. Harvie Wilkinson III, a Reagan appointee to the 4th U.S. Circuit Court of Appeals, is a courtly Virginian who combines a manner as soft as a Shenandoah breeze with a keen intellect. His disapproval of much current thinking about how the Constitution should be construed is explained in his spirited new book, "Cosmic Constitutional Theory: Why Americans Are Losing Their Inalienable Right to Self-Governance" (Oxford).

A "cosmic theory," Wilkinson says, is any theory purporting to provide comprehensive and final answers. The three jurisprudential theories Wilkinson criticizes are the "living Constitution," "originalism" and "constitutional pragmatism." Each, he says, abets judicial hubris, leading to judicial "activism."

Marxist Dreams and Soviet Realities

Freedom Vs Servitude

by Ralph Raico
The sharp contrast that Alexis de Tocqueville drew in 1835 between the United States and Tsarist Russia — "the principle of the former is freedom; of the latter, servitude"[1] — became much sharper after 1917, when the Russian Empire was transformed into the Soviet Union.

Like the United States, the Soviet Union is a nation founded on a distinct ideology. In the case of America, the ideology was fundamentally Lockean liberalism; its best expressions are the Declaration of Independence and the Bill of Rights of the U.S. Constitution. The Ninth Amendment, in particular, breathes the spirit of the worldview of late-18th-century America.[2] The Founders believed that there exist natural, individual rights that, taken together, constitute a moral framework for political life. Translated into law, this framework defines the social space within which men voluntarily interact; it allows for the spontaneous coordination and ongoing mutual adjustment of the various plans that the members of society form to guide and fill their lives.

Spain is Greece…

Only Bigger and Worse

On the Surface, Spain’s debt woes have many things in common with those of Greece:

1.   Bad age demographics

2.   A toxic bank system

However, you’ll note that as we tackle each of these, Spain is in fact in far worse fiscal shape than Greece.

Currently there is one person of non-working age (65 or older) for every four people of working age (15-64) in Spain.  This is expected to worsen to one person of non-working age for every three people of working age by 2025 and an astounding more than one person of non-working age for every two people of working age by 2040.

These demographics alone set Spain up for a sovereign debt Crisis. According to Jagadeesh Gohkale of the Cato Institute Spain would need to have 250% of its GDP sitting in a bank account collecting interest forever in order to meet its unfunded liabilities without raising taxes or cutting government outlays.

Bibi’s Dilemma — and Barack’s

The “October surprise” of 2012

By Patrick J. Buchanan

“Bibi” Netanyahu was disgusted.

“My initial reaction is that Iran has gotten a freebie. It has got five weeks to continue enrichment without any limitation.”

The Israeli prime minister was referring to Saturday’s meeting in Istanbul of the P5-plus-1 — the five permanent members of the U.N. Security Council and Germany — with representatives from Iran.

Subject: Iran’s nuclear program. After a “constructive” meeting of one day, all agreed to meet again in Baghdad, May 23, and departed.

For Bibi, it was a strategic defeat.

For Israel’s goal is a halt to Iran’s enrichment of uranium and the removal of enriched uranium from that country.

Cubans have come to rely on each other for five long decades in order to survive

In Cuba, hitchhikers bemoan a host of economic problems

BY KEVIN G. HALL

“Subanse,” climb aboard, I said repeatedly, pulling the right wheels of my eight-seat van off the dangerous two-lane highway that snakes hundreds of miles across an island considered off limits to most Americans.

Ostensibly, I was in Cuba to cover Pope Benedict XVI’s visit. But over the week and across the length of the Ohio-sized country, I gave more than five dozen Cubans a botella — in Cuban slang, a ride.

The end of innovation

The contrasting fates of  Ιnstagram and Kodak shows there’s more money in navel-gazing than transformative tech

by Norman Lewis

Facebook’s acquisition of the social mobile photo-sharing application Instagram for $1 billion reveals two fundamental realities. First, that despite being the darling child of the media - who keep trumpeting its youthful uniqueness - Facebook is simply another large enterprise that is slow to innovate and is driven by the inexorable logic of age-old capitalist economics. Second, the deal truly marks the end of the age of innovation; the purchase of Instagram can be contrasted to the fact that Kodak, the company that pioneered photography from the end of the nineteenth century, went into receivership earlier this year. The contrasting fates of two photographic-based companies speak volumes about the world we now live in.

Markets Vs Jungles

Markets - A Layman's Primer

By David R. Henderson

In his famous book, The Wealth of Nations, published in 1776, Adam Smith explained to his countrymen why some economies grew and others stagnated. Thus the book’s complete title: An Inquiry into the Nature and the Causes of the Wealth of Nations. Many of Smith’s keen insights have weathered the test of time and evidence, and thus are still relevant today. Particularly relevant, to the world and to this article, are Smith’s insights about markets. Economists since Smith, particularly Friedrich Hayek and Ludwig von Mises, have added their own insights about the power of markets in creating wealth and opportunity. In this article, I will not always identify the particular economist who first had a given insight. Rather, my focus in this article is on the insights themselves no matter what their origin.

Japan Runs Out Of Capital

Going Poof

By Jeff Harding

What did you think the odds were of seeing this headline when Japan was here buying up Rockefeller Center back in 1990: “In a Shift, Chinese Capital Flows to Japanese Firms.”

In late ’80s and early ’90s the Japanese were here buying large real estate projects such as Rockefeller Center and the Pebble Beach golf course. The way overpaid and by then mid ’90s, many of these projects were bought back. A syndicate comprising, among others, Arnold Palmer and Clint Eastwood, bought Pebble Beach back from the Japanese lender who foreclosed on the property. Mitsubishi bought Rockefeller Center for $1.4 billion in 1989 and lost the property in bankruptcy in the mid-’90s. It is now owned by an American syndicate.