Forgive Us Our Debts?

The war between lenders and borrowers

by Irwin M. Stelzer
Debtors of the world, unite—you have nothing to lose but your IOUs!

That seems to be what the Greeks are discovering—that they have less to lose by default, with all of its consequences, than by trying to be Germans.

One of the most surprising aspects of the financial crises being played out around the world is the failure of policymakers to concede perhaps the most important underlying fact: This is a war by creditors, in control of the institutions of power, to saddle debtors with the cost of the errors in which both borrowers and lenders are complicit. It is in its way very much like some past debtor-creditor brawls: farmers vs. mortgage lenders, hard money financiers vs. those who wanted to avoid crucifying mankind on a cross of gold, Latin American dictators vs. foreign bankers.

Europe's borrow-and-spend train rolls on

What austerity?

There has been a lot of talk about the EU countries tightening their belts. The data indicate profligacy instead of prudence

By NEIL REYNOLDS

In a 2011 review of government spending in the countries known as Euro27, the European statistical agency tracked public expenditures from 2006, before the Crash, through 2010. Among other conclusions, Eurostat determined that austerity - whatever it was - had yet to reduce government spending. Only by the merest of margins, the agency said, could it document any real, absolute reduction in spending. Indeed, Euro27 governments spent €6.2-trillion ($8-trillion) in 2010: 50.8 per cent of Europe's GDP. Four years earlier, they had spent only 45.6 per cent. By this measure, European austerity has increased public spending by 12 per cent in four years.

How Sweden and Switzerland handle debt, taxes and spending

Heading for Taxmaggedon

by Keith Chrostowski

It’s just never-ending, this standoff in America over taxes, spending and deficits.

For three decades, we’ve stood firm on our particular ideological ramparts, seeing any solution that tilts even slightly toward the opposing philosophy as total surrender.

But other countries have picked their budgetary deadlocks. And they didn’t go all in on austerity or continue bottomless spending that pushed their countries off the debt cliff.

In sensible Switzerland, 85 percent of voters in 2001 approved a “debt brake.” It requires that spending by the central government grow no faster than trendline revenue.

Recession and Recovery

Six Fundamental Errors of the Current Orthodoxy

by Robert Higgs

As the recession has deepened and the financial debacle has passed from one flare-up to another during the past seven or eight months, commentary on the economy’s troubles has swelled tremendously. Pundits have pontificated; journalists and editors have reported and opined; talk-radio jocks have huffed and puffed; public officials have spewed out even more double-talk than usual; awkward academic experts, caught in the camera’s glare like deer in the headlights, have blinked and stumbled through their brief stints as talking heads on TV. We’ve been deluged by an enormous outpouring of diagnosis, prognosis, and prescription, at least ninety-five percent of which has been appallingly bad.

How smokers’ rights are being vapourised

The anti-smoking lobby has now targeted electronic cigarettes in order to crack down even on the ‘notion’ of smoking

by Jason Walsh 

In the battle for smokers’ rights, it is fair to say that those who like to indulge in the ‘evil weed’ have been on the losing side so far. Few people want to stick up for smokers and those who do argue for free choice are frequently accused of harbouring a sinister commercial agenda.

It’s not hard to see why smoking may not exactly be popular. Many people find tobacco smoke fairly unpleasant and the health dangers of active smoking are certainly real. In the absence of a real commitment to freedom in society, no permanent compromises with smokers are possible, no matter how much they segregate themselves from the rest of society. As such, the strictures on smoking have long passed from simple public-health measures and into the territory of behavioural control via legislation. How else can anyone describe the crazed idea of  (previously known as the lingering smell of burnt tobacco)?

An energy policy for dimwits

The UK government’s new energy strategy is about muddling through, not powering society forward

by Rob Lyons 

Yesterday, the UK government published a draft Energy Bill. The bill’s measures would mean rising energy costs and greater encouragement for new nuclear power and renewables, but underpinning it all is the aim of making us use less not do more.

Things used to be so much simpler. The name of the game was to provide energy as cheaply as possible - and that meant fossil fuels, which were not only cheap but abundant, easy to use, flexible and reliable. In reality, not much has changed. According to the International Energy Agency (IEA) report, World Energy Outlook 2011, in 2009 the world was powered by oil (33 per cent of total energy), coal (27 per cent), gas (21 per cent), biomass and waste (10 per cent) and nuclear (about six per cent) (1). Renewables - including not only wind and solar but hydro power, too - provided just three per cent. ‘Dirty’ fossil fuels thus provided 81 per cent of the world’s energy.

Sitting at the Edge of the World

Fighting against windmills

“Very few beings really seek knowledge in this world. Mortal or immortal, few really ask. On the contrary, they try to wring from the unknown the answers they have already shaped in their own minds -- justifications, confirmations, forms of consolation without which they can't go on. To really ask is to open the door to the whirlwind. The answer may annihilate the question and the questioner.”

                                -Anne Rice.

By Mark Grant

One way or another, left or right, the funder or the funded; Greece is going. The situation is just not sustainable and $1.3 trillion in debt is going to be refuted and refuted with consequences that one only hopes the European Union acknowledges and is prepared for past the drivel that they spew out in the Press like Mount Vesuvius throwing up the phlegm of the world on some ashen afternoon in Rome. Sovereign debt, bank debt, municipal debt, $90 billion in derivatives, corporate debt and other obligations of the government left out to dry as Germany reeks with the stench of boars head gone bad.  This is about to be the way of it.

Interpreting India to the West

“Sorrow and the release from sorry.” 

By IRVING BABBITT

Buddhism, as is well known, has practically disappeared from the land of its origin. The older and more authentic form of the doctrine known as the Hīnayāna, or Little Vehicle, is found to-day chiefly in Ceylon, Burma, and Siam; the less authentic form of the doctrine known as the Mahāyāna, or Great Vehicle, which is less a religion than a system of religions, is found chiefly in Tibet, China, and Japan. Dr. Coomaraswamy has undertaken to give an account of both forms of the doctrine as well as to sketch the development of Buddhist art through the ages. His volume may be found useful by those who wish to get a first rapid impression of a vast and difficult subject. But from this point of view it is only a compilation, and the author does not claim anything more for it. His book, he says, “is designed not as an addition to our already overburdened libraries of information, but as a definite contribution to the philosophy of life.” It is as such that I propose to consider it.

"Growth" = Spending Other Peoples Money

The EU Political Game of Growth Vs Austerity is Akin to Polishing the Brass on the Titanic

By Graham Summers

France and other, weaker EU members have begun pushing for “growth.” This in of itself reveals how clueless the political elite in the EU are (economic growth in Europe is synonymous with living beyond one’s means and/or living off of others… the very policies that have lead to the EU Crisis).

Indeed, this shift from focusing on austerity to growth is really just a switch from one side of a coin to the other… without actually addressing the fact that the coin itself has no value as a concept.

Let me explain.

Predictions are mostly about the past

Feedback, Unintended Consequences and Global Markets

by Charles Smith

We cannot know that unintended consequences will always be destructive. Neither models nor projections have accurate track records in predicting the future. 

It seems an appropriate time to re-examine why our ability to predict the future of complex systems is so poor. A significant number of well-informed, smart people believe the Euro Experiment is unraveling in a positive feedback (i.e. self-reinforcing) death spiral.

What Are the Purposes of a Foreign Policy?

Liberty and Peace

By ROBERT A. TAFT

No one can think intelligently on the many complicated problems of American foreign policy unless he decides first what he considers the real purpose and object of that policy. In the letters which I receive from all parts of the country I find a complete confusion in the minds of the people as to our purposes in the world — and therefore scores of reasons which often seem to me completely unsound or inadequate for supporting or opposing some act of the government. Confusion has been produced because there has been no consistent purpose in our foreign policy for a good many years past. In many cases the reason stated for some action — and blazoned forth on the radio to secure popular approval — has not been the real reason which animated the administration.

Why Merkel and Hollande Will Make it Work

Overselling the Rift

By JACOB ALBERT

The leadup to the fateful meeting this past Tuesday between Francois Hollande and Angela Merkel was billed as a make-or-break moment for the foundering European Union. The European commentariat worked overtime to heighten the drama. “Berlin officials had worked feverishly behind the scenes to create the best possible impression of harmony before the visit, and tried in vain to downplay its significance,” gasped the Guardian. “But it was clearly far more than that, with two politicians who had never met before coming together to see not only if they could get on, but if they could work together to solve one of the most intractable problems Europe has faced since the second world war.” It’s hard to overstate the challenges facing the EU at the moment. But the anxious tone accompanying the summit was certainly overdone. For anyone with eyes, the chances of Merkel and Hollande being able to find a common ground always seemed like a good bet.

Big Lies in Politics

Nothing is easier for a politician than promising government benefits that cannot be delivered

By THOMAS SOWELL  

The fact that so many successful politicians are such shameless liars is not only a reflection on them, it is also a reflection on us. When the people want the impossible, only liars can satisfy them, and only in the short run. The current outbreaks of riots in Europe show what happens when the truth catches up with both the politicians and the people in the long run.

Among the biggest lies of the welfare states on both sides of the Atlantic is the notion that the government can supply the people with things they want but cannot afford. Since the government gets its resources from the people, if the people as a whole cannot afford something, neither can the government.

No ELA, No Euros! The End!

The mechanics of a Greek bank run

By David Zervos

As the Greek people begin to smell a Greek exit and a conversion of their hard earned Euro deposits back to Drachmas, they will withdraw Euros from Greek banks. So the Greek banks will head to the BoG with some dubious collateral to beg for Euros to pay depositors. The BoG takes the collateral, gives it a minuscule haircut, and draws Euros via the ELA. This of course creates an increase in BoG Target2 liabilities. The BoG then sends the Euros to the Greek bank and the Greek bank then gives the Euros to the hard working Greek depositor standing in line waiting to empty the account.

Importantly, Greek banks ONLY run out of Euros if the ECB can justify a shut down in funding to the BoG ELA facility or the Greek banks directly. Now, as we heard last week, the ECB has already stopped OMOs with 4 Greek banks (which one could safely assume are the big ones). So the ONLY thing standing between a Greek depositor and his/her Euros is the ELA. No ELA, no Euros!! And, as mentioned above, the ECB has once before threatened to turn off NCB access to Euros via the ELA in the case of Ireland. So there is a precedent for this to happen again!

The Slow Death of the Modern Nation State

The Looming Reversal of Centralization

 “Centralization induces apoplexy at the center and anemia at the extremities.” ~ Lamenais

By Paul Tuccinardi

The present political system is clearly insane. It suffers from schizophrenia. Around the world, almost no one trusts the politicians, yet almost everyone votes for incumbent politicians who promise to reform the government.

Voters now suspect (correctly) that all Western governments are headed for bankruptcy because of the pension programs and government-funded medicine, yet these two programs are politically untouchable. Voters demand them.

For four decades, soft-core critics of the pension/Medicare systems have come to voters with this announcement: “The two systems can be reformed, but we must act now. If we delay, they will bankrupt the government.” Yet the systems are never reformed.

Ratcheting Up The Crisis In Europe

Elections in Greece can’t cause as much trouble as bank runs in Barcelona or Turin

By WALTER RUSSELL MEAD

“Crisis in the eurozone” stories are getting boring and this is one two year old soap opera the world would just as soon see disappear. Nevertheless it grinds on; yesterday the German finance minister said it could go on for another two years.  Unfortunately, he’s right.

But while the news from Europe is complicated and inconclusive (they are always threatening to jump off the bridge but so far, no one has), this is still a story one has to watch. And after months and years when the crisis was mostly in the hands of elites — heads of government, central bankers and the like — in the last couple of weeks the public has been getting involved, and that makes the crisis more dangerous and harder to solve.

A Weekend At Bernie’s

Support for Greece Declared – Sort Of

By Pater Tenebrarum

The markets last week gave our vaunted policymakers on both sides of the pond something to chew over, and the G8 palaver this weekend was marked by the usual sotto voce declarations that the once again budding crisis would be stopped dead in its tracks by whatever interventions are required.

Considering the fact that the financial markets are nowadays seemingly mainly populated by traders suffering from a special form of attention deficit disorder (this includes the mindless computer trading programs of various types that are active in the markets),  we can imagine that these declarations may create a short term bounce in 'risk' – whether it lasts for mere hours or a few days remains to be seen.

Italy And The Great Tax Revolt

The only difference between shakedowns by private thugs and those employed by the state is the badge

mark-2-16 "...why does he eat with tax collectors and sinners?"

by James Miller
Taxation is theft.
There is no denying this.  If I and a few brutes appeared at the door of an unsuspecting individual and demanded monetary compensation less we drag him off to jail, this would be a clear cut case of robbery.  It is a common tactic used by mobs or street gangs to offer protection with the barrel of a gun.  The only difference between shakedowns by private thugs and those employed by the state is the badge.  The badge legalizes extortion and imprisonment.

A Lifetime Of Serfdom

Spain's Public Servants

by J. Luis Martin 

They are cast as lazy and inefficient bureaucrats who don't work hard, take long coffee breaks and enjoy too many perks for being on the taxpayers' payroll. Indeed, the cliché is as universal as unfair. However, the Spanish civil service system exemplifies many of the things that are utterly wrong in the way the country is managed.

The Spanish public sector at a glance

Spain's civil service (función pública) remained virtually unchanged until the 1960s, when its rigid nineteenth-century French fonction publique mold was broken to allow for a more open Anglo-American model. In essence, this meant that access to the civil service was no longer exclusive to competitive examination and merit, as other schemes of recruitment were introduced. 

Η ομαδική αυτοκτονία ως μέσο γεωπολιτικής πίεσης

Πού θα οδηγήσει μια επιστροφή στη δραχμή

Νίκος Καραμούζης

Αγωνιούμε όλοι σήμερα για την πορεία της χώρας. Το εξωτερικό περιβάλλον επιδεινώνεται, σε συνάρτηση με την αύξηση της αβεβαιότητας στην Ελλάδα, ιδιαίτερα μετά το πρόσφατο εκλογικό αποτέλεσμα και την προκήρυξη νέων εκλογών. Το εκλογικό σώμα απέρριψε και τιμώρησε τα δύο πρώην μεγάλα κόμματα εξουσίας για τα πεπραγμένα δεκαετιών, αποδίδοντάς τους την ευθύνη για τη σημερινή κρίση και τον διεθνή διασυρμό της χώρας.

Παράλληλα όμως απέρριψε το εφαρμοζόμενο πρόγραμμα δημοσιονομικής και οικονομικής προσαρμογής, το μνημόνιο, γιατί δεν πείστηκε ότι προσφέρει ελπίδα και προοπτική έγκαιρης εξόδου από την κρίση, ότι οδηγεί στην επανεκκίνηση της οικονομίας, στη δημιουργία θέσεων εργασίας και στη διατηρήσιμη ανάπτυξη. Δηλαδή απέτυχε να πείσει ότι οι θυσίες των εργαζομένων θα πιάσουν τελικά τόπο, εξέλιξη που μας υποχρεώνει να επαναδιαπραγματευθούμε πτυχές του μνημονίου.

US Taxation Myths

The U.S. tax code is more progressive and European than you think

By Veronique de Rugy 

Americans often tout the contrast between the bloated, tax-funded welfare states of the Old World and our leaner, cheaper government. But the data reveal that the U.S. may be closer to Europe than we think.

Contrary to common belief, the American tax system is more progressive than those of most industrialized democracies. A 2008 report by the Organization for Economic Cooperation and Development (OECD), titled “Growing Unequal,” gave two different estimates of the progressivity of tax systems in 24 industrialized countries. One ranking found that the U.S. has the most progressive tax structure; in the other Ireland beat America by a nose. France, which has a notoriously generous welfare state, ranked 10th out of 24 in both of the OECD progressivity indexes.

Other countries have higher tax rates than the U.S. but manage to be less progressive overall. How can this be? The answer is that the rate structure alone doesn’t necessarily tell you much about the progressivity of a country’s tax system. The top rates kick in at much lower income levels in Europe than in the United States, making E.U. tax codes more regressive than ours. 

Beyond Austerity

We must liberalize labor markets, not rely on macroeconomic “fixes.”

by Richard A. Epstein 

Grim is the right word to describe the latest economic news from both the European Union and the United States. Throughout the European Union, austerity programs have failed both politically and economically. In Spain, unemployment rates have soared above 24 percent. The Dutch government is on the edge of collapse because of the popular and political unwillingness to accept the austerity program proposed by its conservative government. Romania is not far behind. Greece, Italy, and Portugal remain in perilous condition. France faces the free-spending socialist candidate Franciose Hollande. On the American front, the decline of GDP growth to 2.2 percent rightly raises fears that our sputtering domestic recovery is just about over.

Fiscal Austerity And Rational Morality

What is the proper purpose, size, and scope of government?

By Richard M. Salsman

Boring as it sounds, “fiscal austerity” has been a hot topic of debate among pundits and political economists in recent weeks, and  I for one think that’s terrific. This is an important debate, well worth having. First, it invites us all to look beyond the mindless histrionics of this year’s campaigning and legislating, and instead to examine a question far more relevant to our long-term security, prosperity and happiness, namely: What is the proper purpose, size, and scope of government? What is government’s nature and what should it be doing, or perhaps more crucially, not be doing? Second, the debate asks how we should be financing the government we have, and whether its spending, taxing, borrowing, and money-printing are moral or not, and practical or not. People should pay attention to this debate, as its outcome will surely affect them.

When Kafka met Orwell

A nightmare in Tewksbury

by George F. Will

Russ Caswell, 68, is bewildered: "What country are we in?" He and his wife Pat are ensnared in a Kafkaesque nightmare unfolding in Orwellian language. 
     
This town's police department is conniving with the federal government to circumvent Massachusetts law -- which is less permissive than federal law -- in order to seize his livelihood and retirement asset. In the lawsuit titled "United States of America vs. 434 Main Street, Tewksbury, Massachusetts" the government is suing an inanimate object, the motel Caswell's father built in 1955. The U.S. Department of Justice intends to seize it, sell it for perhaps $1.5 million and give up to 80 percent of that to the Tewksbury Police Department, whose budget is just $5.5 million. The Caswells have not been charged with, let alone convicted of, a crime. They are being persecuted by two governments eager to profit from what is antiseptically called the "equitable sharing" of the fruits of civil forfeiture, a process of government enrichment that often is indistinguishable from robbery.      

Europe finally awakes from its utopian dream

A defiant Angela Merkel is doing no more than defending the interests of her own electorate

By Janet Daley

Let’s say this again, just in case a single sentient being on the planet has missed it: Germany cannot simply decide to bail Greece (or Spain, or Italy, etc) out of its debts. OK? However much Angela Merkel is nagged, berated, bullied and patronised by Barack Obama, David Cameron, or the BBC/Guardian axis that regard the preservation of the euro project as critical to their own interests, she cannot just revoke, in a unilateral act, the rules of German government or of the Bundesbank.

Her persistent refusal to “take decisive action” of the kind that would suit the purposes of all those clamorous voices at the G8, is not “dithering”, as it is so often described. In fact, it is not (or not entirely) to be explained in any of the mildly contemptuous ways that her tormentors suggest. It does not arise from an unthinking, superstitious terror instilled in her by the Weimar nightmare of hyper-inflation. Nor is it a narrow-minded expression of the German hausfrau’s values of thrift and self-discipline. What Mrs Merkel is doing, quite appropriately, is defending the integrity of her national constitution, the economic principles on which her country’s economic success has been built, and the interests of her own electorate.

The Age of Innocence

The customer is always right

By DAVID BROOKS

The people who pioneered democracy in Europe and the United States had a low but pretty accurate view of human nature. They knew that if we get the chance, most of us will try to get something for nothing. They knew that people generally prize short-term goodies over long-term prosperity. So, in centuries past, the democratic pioneers built a series of checks to make sure their nations wouldn’t be ruined by their own frailties.

The American founders did this by decentralizing power. They built checks and balances to frustrate and detain the popular will. They also dispersed power to encourage active citizenship, hoping that as people became more involved in local government, they would develop a sense of restraint and responsibility.

A shrinking share of the population is carrying an ever-expanding army of dependents

As the Boomers Head for the Barn

by Patrick J. Buchanan

When the April figures on unemployment were released May 4, they were more than disappointing. They were deeply disturbing.

While the unemployment rate had fallen from 8.2 percent to 8.1 percent, 342,000 workers had stopped looking for work. They had just dropped out of the labor market.

Only 63.6 percent of the U.S. working age population is now in the labor force, the lowest level since December 1981.

During the Reagan, Bush I and Clinton years, participation in the labor force rose steadily to a record 67 percent. The plunge since has been almost uninterrupted.

Here is a major cause of the economic malaise of the 21st century, a condition over which a president has little control. A shrinking share of our population is carrying an ever-expanding army of dependents.

Read the rest at: http://takimag.com/article/as the boomers head for the barn

Judge Katherine Forrest is a Modern American Hero

It is the right of the people to alter or abolish any government that becomes destructive to liberty

by John Aziz

Sometimes, the greatest deeds are done by those who are just doing their jobs, like Judge Katherine Forrest who last week struck down the indefinite detention provision (§1021) of the National Defense Authorization Act (NDAA).

It would be all too easy in this age of ever-encroaching authoritarianism in America for a judge ruling on a matter like this to just go with the government line and throw water over the plaintiffs. After all, telling truth to power has consequences. Forrest was appointed by Obama, but after this ruling one wonders whether she is about to meet a career dead-end. Power — especially narcissistic power — does not like being told uncomfortable truths.

Pictures from our own future Horror novel

The Clash of Generations

Prologue: The Last Straw

The day was coming for years, decades, really.

Warnings had been sounded, loud, clear, and often.

Most heard, few listened. The problem was distant, its size unclear.

"No worries. We'll fix it. The next election, the next party, the next leader."

There was time.

There wasn't.

The contract was simple: 100,000 barrels of oil, delivered to this country, at this port, on this day. Payment in Chinese yuan.

The seller was big and always insisted on dollars.

Not that day.

European Illusions

Naming and Shaming the "Guilty Men"

By David Pryce-Jones

The level of unreality created by the masters of Europe is reaching new heights. It is like hallucinating to observe the politicians driving in expensive cars to meet one another, inspecting guards of honor, arranging for ministerial get-togethers, and all the while the construct that put them into office is collapsing all around them. These same politicians chatter extensively about saving the euro and the European Union, about bailouts and firewalls and fiscal pacts, as though words were deeds.

No satirist could do justice to the sight of German Chancellor Angela Merkel and newly elected French President François Hollande shaking hands and vowing to work together to save the union and its currency. Insofar as this pair has any coherent ideas, they disagree. All they have in common is the precariousness of their position. Just trounced in local elections, Mrs. Merkel and her party are well on the way to joining the gathering crowd of electoral rejects. As for Hollande, he believes that growth comes from higher taxes and hundreds of thousands more state jobs, and all in arch-protectionist France. It can’t be long before such socialist illusion comes back to haunt that country.

Will Merkel allow her electorate to become the slaves of Europe?

The Sack of Berlin

"Cries for the ECB to provide liquidity or for debt mutualisation are cries for Germans to work till they’re 67 so Greek crimpers can retire at 50" 

By John Phela

Behind the current rebellion against ‘austerity’ lies the idea that we can carry on as before if only we can screw the money to pay for it out of someone else. But if the bond markets won’t continue to fund them, who do the anti-austerity activists think will?

The most popular answer is ‘the rich’, AKA ‘the 1 percent’. Musing on the Sunday Times Rich List recently, eccentric Labour MP, Michael Meacher observed that 

“the richest 1,000 persons... increased their wealth over the last three years by £155bn. That is enough for themselves alone to pay off the entire current UK budget deficit and still leave them with £30bn to spare.” 

Meacher clearly doesn’t know or doesn’t care how wealth works; the £155bn might not be in the form of cash but (more likely) in the form of assets which would have to be sold for cash which could only then be used to plug the deficit. However, there is no guarantee that these asset values would hold up if these 1,000 rich folks tried to sell £155bn worth at once.

But you also wonder how closely Meacher scrutinized this list

Dr. Frankenstein's Europe

“What the hell are they thinking?”

by John Mauldin

"Had I right, for my own benefit, to inflict this curse upon everlasting generations? I had before been moved by the sophisms of the being I had created; I had been struck senseless by his fiendish threats; but now, for the first time, the wickedness of my promise burst upon me; I shuddered to think that future ages might curse me as their pest, whose selfishness had not hesitated to buy its own peace at the price, perhaps, of the existence of the whole human race."

– The musings of Dr. Frankenstein about his creation of a monster, in Mary Shelley's 1818 novel, Frankenstein

Cost of Losing Athens Can't Be Calculated

What is the cost of throwing good money after bad?

By CARL BIALIK

As Greece girds for elections next month that could lead to its exit from the euro zone, economists are acknowledging an unsettling reality: No one knows what the bill will be.

A wide range of potential price tags has been reported, anywhere from €150 billion to €1 trillion euros ($1.27 trillion). But none of these are comprehensive, nor are they meant to be—they don't, for instance, weigh the cost of an exit against the cost of avoiding one. By comparison, the 2008 Troubled Asset Relief Program, known as TARP, was a $700 billion program initiated in response to the U.S. financial crisis.

Capitalists and other Psychopaths

A Faible for Socialism

by Pater Tenebrarum

We have often remarked on the soft spot the New York Times has for socialism. It is after all the ideology that is most popular among the self-proclaimed intelligentsia, as can be easily ascertained by observing the unbroken support it enjoys in academe – in spite of the fact that the communist system has collapsed in what was the biggest bankruptcy in human history. Apparently they just failed to 'implement Marxism correctly'. It is easily forgotten today that Western intellectuals were cheering for the Soviet Union throughout its seven decade history, from the Lenin era until its ignominious demise.

The mass murderer Stalin was highly popular with our vaunted intellectuals, who gleefully quoted the strong growth in industrial production reported by the Soviets while the West was mired in the Great Depression. That Stalin used a reserve army of slaves from his Gulags to accomplish his alleged economic miracles was silently glossed over. The fact that Soviet production was completely chaotic due to the socialist economy's inability to calculate never rated a mention. The 'data' looked good, that was all that counted.

Pay Up Or Else – Tsipras Plays Hardball

Waving the Default Threat

by Pater Tenebrarum

Alexis Tsipras continues to throw spanners into the works, or let's rather say he seems to be on a mission to fray the nerves of eurocrats and investors alike. This must of course be seen in the context of ongoing electioneering on his part: now that he has been thrown into the limelight, he has to play the role he has assigned to himself to the hilt.

The WSJ reports that there is now a 'defiant message from Greece':

“The head of Greece's radical left party says there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts, throwing down a gauntlet that could increase tensions between Greece's recalcitrant politicians and frustrated European creditors.

Euro area official sector exposures in excess of EUR290bn

Germany EUR 84bn ,France EUR 63bn , Italy EUR 55bn , Spain EUR 37bn

By MIKE SHEDLOCK

Euro area official sector exposure

According to the French Finance Minister, F. Baroin, Greece's exit from the euro area "would cost France EUR 50bn net, in addition to the securities held by banks and insurers in their portfolios." In the German press, it is reported that a Greek exit would cost approximately EUR80bn (EUR16bn from bilateral KfW loans, EUR20bn from the EFSF, EUR12bn from the SMP and EUR30bn from Target 2, based on December 2012 data, source: FAZ).

Here, we estimate the euro area's official sector exposure to Greece (bilateral loans, EFSF guarantees and Eurosystem) and show that the cost estimations mentioned in the press match the exposure if you consider a 20% recovery rate on Greek holdings. 20% is rather low, but not unrealistic given the outcome of the PSI and devaluation of the new Greek currency in the event of an exit. However, because of the accounting treatment of the different exposures and the presence of some financial buffers within the Eurosystem, the one-off, year-end shock on public accounts will be much smaller, probably around EUR100bn (1% of GDP).