Not a Crook—Yet

The Obama administration seems more Nixonian by the day

By Harry Stein

The comparisons of the Obama and Nixon White Houses are suddenly coming—pardon the expression—fast and furious, and why not? The IRS investigations; the administration’s fixation on leaks and leakers and its obsession with enemies; the cover-ups, the blame-shifting to subordinates, the defiant chief executive, even the sweating, pathetically dissembling press secretary; it all has the odor of that earlier time. Again, it’s all happening early in the second term, following a triumphant reelection. Again, the operative terms are arrogance, contempt for law, and thuggery.

The growing awareness of administration malfeasance is evident in the numbers on Google: more than 59 million hits for “Obama and Nixon” and 24 million–plus for “Obama and Watergate.” For those interested, the 44th president’s face can already be found morphing into the 37th’s. Then there’s the rising tide of commentary. “Obama knee-deep in Nixon-esque scandal” runs the headline of columnist Joe Battenfield’s piece in the Boston Herald, which notes that Obama’s campaign slogan would have been more appropriate if it were not “Forward” but “Backward”—“All the way to, say, 1972.” “Benghazi, IRS—Son of Watergate?” asks Cal Thomas. “In IRS Scandal, Echoes of Watergate,” observes the Washington Post’s George Will.

Syria and the myths of WMD

The West’s conventional firepower, used against regimes with WMD, is far more destructive than any WMD

by Tim Black 

Support for imperialist interventions used to be mustered in terms of nationalism and national interests. But over the past couple of decades, the terms have shifted. Today, Western states are far more likely to solicit support for a foreign venture in terms of our fears, our insecurities, our sense of ever-proliferating threats. What if there are agents of terror waiting in the wings? What if a crazy dictator uses a biological weapon? In short, the politics of nationhood has long since given way to the politics of fear. And nowhere is this more apparent than in that peculiarly contemporary Western obsession with those nightmarish words: weapons of mass destruction.

Indeed, the current political discussion around Syria, especially the arguments for and against intervention, is being conducted almost entirely in terms of one species of WMD, namely chemical weapons. (The other two types of WMD are nuclear and biological.) Initially, we had those in the US and UK who were keen on military intervention seizing upon the various Western intelligence agency reports of Syrian government forces possibly using the chemical weapon, sarin gas. That, so the argument went, was a step too far; a step over US president Barack Obama’s ‘red line’, the point at which Assad’s war against the rebels would become a war crime. The point, that is, at which Western military intervention would be justified.

A Brief History Of Cycles And Time

It is about time

By Eric A

Let me ask you something: Do you really think your ancestors didn’t see the Depression coming in 1921 or in 1929? Of course they did. The Balloon Option-ARM mortgage had just been invented, creating a housing boom larger and even more groundless as our own, immortalized by the Marx Brothers in The Cocoanuts. They warned the world then just as we do now, and no one listened then, just as they don’t now. Why? It wasn’t time.

Likewise, do you think Hoover and Roosevelt didn’t do everything they could, whether legal or illegal to stop the endless economic decline after 1929? Of course they did. Roosevelt confiscated the entire money supply, packed the Supreme Court, and took control of the entire US economy to no avail. Henry Morgenthau, Roosevelt’s Treasury Secretary, admitted,

"We have tried spending money. We are spending more than we have ever spent before and it does not work... We have never made good on our promises. I say after eight years of this Administration we have just as much unemployment as when we started. And an enormous debt to boot."

Getting Run Over by Brussels

A Lobbyist’s Wonderland

by Don Quijones

Once upon a time I was a committed convert to the European project. Even long before leaving British shores for the continent, I strongly believed in the European dream, in the idea that Europe could overcome its almost prehistoric divisions by embracing a new era of unity.

But in the last five years my position has shifted somewhat. As I have learned more and more about the bleak reality of European integration, I have come to realise that British fears about the EU’s threat to national sovereignty and the institution of democracy itself — fears that my former adolescent self had dismissed as both childish and irrational — were wholly justified. 

Here are a few salient points of interest regarding Europe’s ongoing experiment in political and economic centralisation, which is radically changing the lives of almost half a billion Europeans:

1. According to some estimates, as much as 80 percent of all laws passed by national European governments are mere rubber stamped edicts emanating from Brussels.And the scale of EU interference in national governance continues to grow by the day. Just last week, the Commission passed a raft of new regulations to control what varieties of seeds the continent’s agriculturists can and can’t trade, dealing a heavy blow to small farmers across the continent while further strengthening the power of seed industry corporations.

Russia's Plan For The BRICS To Dismantle The Dollar System

The BRICS are coming (hoping) to change the world

By Valentin Mândrăşescu

The status of the US dollar as the world reserve currency gives the US a number of advantages over other countries. The world’s most important commodities are priced and traded in dollars, even if most of these commodities are not produced in the US. The fact that the world’s financial system is based on the dollar allows the Federal Reserve to export inflation to other countries, while the Federal Government runs a huge deficit with impunity.

So far, only China has been active in challenging the dollar supremacy. The internationalization of the yuan is an official priority of Chinese leaders. Currency swap agreements with major trade partners like Brazil, France, or Australia are small but important steps in the Chinese strategy. Changing the world financial system is not an easy task and certainly a very challenging undertaking for China. Now, it seems that Beijing has found an ally in the Kremlin. And there appears to be a consensus between the BRICS countries: the urgent necessity to dismantle the dollar system.

A week before the recent BRICS summit in Durban, the Kremlin administration has silently produced a document which describes the Russian strategy in the context of BRICS cooperation. The document makes for a fascinating read for anyone brave enough to plow through the dense Russian legalese. The strategy has been designed in the “inner circle” of Vladimir Putin’s team, so it is safe to assume that it represents the official view on the BRICS future.

Welfare Costs Rapidly Escalating – Everywhere

As We Go Marching

By Alasdair Macleod

Many of us are aware of Professor Laurence Kotlikoff of Boston University’s calculation that the net present value of the US Government’s future liabilities rose by $11 trillion in fiscal 2012 to $222 trillion. These are principally welfare, healthcare and social security costs.

This is admittedly a high-end estimate, dependent on variables such as longevity, demographics and the interest rate at which future liabilities are discounted. It is an escalating problem, because baby-boomer retirees suddenly stop paying income and social security taxes and instead draw down on the system. The implication is that these costs are impacting government finances at an increasing rate, potentially undermining the creditworthiness of the US Government.

According to OECD figures other countries appear to be in far worse positions, as shown in the table below, where they are ranked by cash pension costs faced by governments in 2011.

The Prophet of Europe’s Crisis

Wilhelm Röpke was a “euroskeptic” long before the term was coined

By SAMUEL GREGG

As Europe’s economic debacle gathers apace, there’s no shortage of commentators saying “I told you so.” The impact of factors such as out-of-control welfare states, excessive debt, widespread bureaucratization, a flawed monetary experiment, low-productivity, and labor market rigidities seems obvious to us today.

The truth, however, is that few observers — European or American — forecast that the European unification project would eventually produce a fiasco on this scale. Indeed, most early opponents of European political and economic integration were old-fashioned lefties who feared it might impede implementation of socialist policies!

A rare exception to this rule was the German economist Wilhelm Röpke. Today, he’s mainly known as a primary intellectual architect of the postwar German economic miracle as well as one of postwar Keynesianism’s most ferocious critics. However, not many know that Röpke was also one of the very few free market economists who loudly and publicly criticized what would eventually become today’s European Union even before the Treaty of Rome was signed in 1957. Röpke was in short a “euroskeptic” long before the term was coined.

The End of the Castros?

Raul Castro’s latest gestures cannot be taken at face value

By ALBERTO DE LA CRUZ

On the Friday of the last weekend in February, Cuban dictator Raul Castro caught the news agencies covering his island nation by surprise when he dropped a hint that he was thinking of retiring. Later that Sunday, at a meeting of Cuba’s communist National Assembly, Castro went much further and announced that he would step aside at the end of the five-year presidential term to which he had just been “elected.” Adding fuel to the fire was the announcement that Miguel Diaz-Canel, a relatively unknown 52-year-old communist party apparatchik, had been appointed Castro’s second in command—and would thus theoretically be next in line to take command after the aging dictator’s exit.

Naturally, journalists, analysts, and so-called Cuba experts immediately began to explore the possibilities and ramifications. Many of them proposed the Western Hemisphere’s bloodiest and longest-running dictatorship was now possibly just five years away from its end. Furthermore, Castro’s choice of a younger, more modern successor born after his brother’s revolution just had to be a sign that the island’s communist government was slowly but surely preparing to embrace a more democratic political system.

What many of these writers failed to do, however, was examine the latest political moves of the Cuban dictatorship through the prism of the regime’s history. Never in the past 53 years has anyone outside the Castro family possessed any real power in Cuba. Not only have the Castro brothers kept non-family members from positions of influence, they have summarily eliminated anyone who has posed or could possibly pose a threat to their authority. Therefore, it would be prudent to take Raul Castro’s retirement announcement and the appointment of Diaz-Canel with a proverbial grain of salt.

Hollande’s France: About to Become the New Mexico?

How fast can a country go down the drain ?

By David Drew

One of the constants of modern European history is that compared to the Germans, the Italians and the Brits, the French have stayed put. Since the French Revolution, the French have mostly stayed home. Emigration has just not been the French way.

That may be changing. London is already full of talented young French people looking for a country that still believes in the future, and there may be lots more emigration ahead. A twenty year old named Clara G, a second year history student at the Sorbonne, recently published an open letter to President François Hollande in the French paper Le Point. In it, she quotes a poll that found that 50 percent of 18-24 year olds and 51 percent of 25-34 year olds would, if they could, like to leave France for another country. Clara explains why she and so many her age want out:

I don’t want to work all my life in order to pay taxes that will, for the most part, only go to service the 1,900 billion euros of debt that your generation was kind enough to leave as your legacy. If these loans had at least been invested in a plan for the future of the country, if I thought I would profit a little from them, I wouldn’t have any problems repaying them. But they only allowed your generation to live above its means, to secure a generous welfare that I won’t be able to enjoy. In order to make your lives, I would say “cushy”, but I’m afraid that the word offends you.

Berlin Wary of ECB Plan to Help Southern Europe

'Violation of Treaties'

The European Central Bank would like to encourage banks in Southern Europe to issue more loans. But Berlin is concerned that a planned move to trigger such lending could violate EU treaties. German Finance Minister Wolfgang Schäuble has hit the brakes

By Spiegel

German Finance Minister Wolfgang Schäuble and European Central Bank head Mario Draghi have never seemed particularly eager to avoid conflict with one another. Just in January, the two got into a mini war-of-words over the need to bail out Cyprus, with Schäuble openly questioning whether the country was systemically relevant.

Now, the two are at odds again. 
Schäuble is deeply critical of an ECB idea to purchase asset-backed securities, fearing that the plan could be little more than "obscured state financing," a no-no for the ECB. Schäuble made his remarks at a breakfast of conservative lawmakers last Wednesday, according to sources present. Schäuble said that such a plan would violate European Union treaties.

The motivation for considering such a move is clear. The ECB is eager to stimulate bank lending, particularly in Southern European countries where the debt crisis has made banks wary of issuing loans. But Schäuble is concerned that an ECB program of buying asset-backed securities could amount to the bank taking over some €70 billion in debt owed by Italy to private creditors.

Schäuble was backed on Monday by Hans Michelbach, the top conservative in the Finance Committee in parliament. "After the extremely questionable ECB purchase of sovereign bonds, this would be a clear violation of European treaties," Michelbach said, according to German news agency DPA. There are, he said, apparently some people in the ECB leadership "who consider the ECB to be the Bad Bank of Southern Europe."

The Untouchables of the 21st Century

Companies won't even look at resumes of the long-term unemployed

Dalit or Untouchable Woman of Bombay according

 to Indian Caste System - 1942

by Raul Ilargi

Throughout history and throughout the world, there have been classes of untouchables. Best known perhaps (other than Elliott Ness and Wall Street bankers) are the caste that goes by the name in South Asia, a.k.a. the Dalits, but there are/were also for instance the Cagots in France, the Burakumin in Japan, and the Roma and Jewish populations in medieval Europe though the Middle East. In the US, one could include the black and native populations. Wikipedia has this definition:

Untouchability is the social-religious practice of ostracizing a minority group by segregating them from the mainstream by social custom or legal mandate. The excluded group could be one that did not accept the norms of the excluding group and historically included foreigners, house workers, nomadic tribes, law-breakers and criminals and those suffering from a contagious disease. This exclusion was a method of punishing law-breakers and also protected traditional societies against contagion from strangers and the infected.

The origin of the phenomenon may have started simply as a way to exclude criminals and diseased people from a community, but obviously that's not where it led.

Land of Pyramids Going Downhill

Arab Winter in Full Swing

by Pater Tenebrarum

We held that Mubarak surely deserved his fate, but it was always a big question what would come after him. When last we wrote about Egypt, we remarked that it had gone from 'spring to winter in one go'. The new head of government is only loosely differentiated from the old one, and the entire apparatus of repression has simply been assimilated on an 'as is' basis. 

It turns out that the country is in the meantime suffering from a vast increase in internal instability, as vigilantes and criminals battle it out. Guns have become big business, while the formal economy is spiraling down the drain ever faster.

A symptom of the malaise is the performance of the country's currency, the pound, which has crashed this year as foreign exchange reserves have dwindled by 60%.

---

The Egyptian pound has crashed 

 The revolution has evidently not fulfilled its promise so far.

Bloomberg reports: 

“Artisans who make machine parts by day are turning into bootleg gunmakers at night, says Hussein, 54, who asked not to be identified by his full name for fear of prosecution. He only sells to a middleman because “trust the wrong person and you’re going to jail.” He can make as much as 3,000 pounds ($435) per gun — about 20 percent of what a legally licensed one costs.

“Fear is big business nowadays,” Hussein said. “People buy the guns because they’re afraid. People buy the guns because they want to scare others. We’re in a jungle now.”

Bernanke stole your pension

The Dysfunction Trilogy Part B

By Chan Akya  

A core aspect of the logic of folk who support stimulus programs in the name of John Maynard Keynes is that government spending to offset private sector contraction remains a victimless crime. This is completely untrue, and understanding the actual costs of Keynesian machinations by studying real-world examples of dysfunction is important to unravel this pernicious logic. 

In the first part of this series, we considered the impact of random intervention in the shipping sector, in particular the role it has played to crush profits and imperil employment in the sector globally. 

In the second part of this series, we will look at conditions in the area of retirement planning and returns. The notion of stealthy wealth transfers is part of a longer debate that goes into the core aspects of the financial crisis; to a large extent many of the issues have been raised previously in these pages but perhaps more in passing than as the core focus. 

The core function of financial markets is to connect pools of savings with the people who need money for their immediate future. In demographic terms, this can be expressed as markets being the intermediary between older people with savings and young people who need to borrow to set up house, buy cars and other utilitarian requirements. 

Construct of pensions - a quick primer

This a quick primer, and not all the nuances are or even can be covered in such a short summary. First let's quickly recap the theory here, even if parts of it will appear unrealistic to many readers who have been hardened with real-world experiences over the past few years. 

The rate of return for these old people is meant to take into account two primary factors: the cost of money and the risks entailed. The cost of money is measured by one of two factors - either as the minimum rate of return on money that keeps its purchasing power constant; or as a cumulative measure of opportunity lost by renting it out without risk. 

Typically these two rates are close to the same, or in other words, returns on local government bonds are meant to offset the loss of purchasing power while preserving the principal. Instead of local government bonds, one could consider bank deposits as a suitable alternative. 

Real world impact: if you consider the historical depreciation in the value of money - purchasing power - across the Group of Seven nations, and the needs of a comfortable existence in future, then a realistic return rate on pension portfolios would range between 5% and 10%. Remember also that this rate needs to account for capital withdrawal once people actually retire. Once we remove the periods of overly high inflation as well as stagnation or deflation (that would be you, Japan) the base (minimum) rate works out to 6%. This is the realistic minimum rate that needs to be achieved on pension portfolios, but one could also consider it a weighted average of returns before people actually retire. 

Keynes stole your ship

Dysfunction Trilogy Part A

 

By Chan Akya

Despite mounting evidence of the dysfunction being caused by Keynesian policies, rhetoric in Europe and the United States is overwhelmingly turned against austerity. Over three articles, the author will examine specific examples of the dysfunction that has been caused by such government intervention, and the very real economic pain being caused as a result with the objective of dispelling the dangerous notion that higher government spending is a victimless crime.

Here is a quick quiz: name a global industry that is as old as antiquity, employs millions of people, withstood and indeed thrived with technological change but perhaps most importantly of all with diverse supply and demand dynamics is an industry that has never been cornered by any particular group for very long in history. 

If you thought the reference above was about shipping, well done. In contrast if you thought it was about prostitution, well then, time for a cold shower. 

The typical cycle of shipping is as old as history and has always been about two contrasting and virtually uncorrelated forces: firstly the interaction of operations with risk, and secondly the boom-bust cycle. Western readers will remember learning about the exploits of sea-faring Greeks and other Mediterranean peoples as merchants far and wide seeking to profit from trade with other countries. This continued into the times of Shakespeare (examples include the Merchant of Venice and settled into modern times as shipping became the moving force of global economies post World War II. The advent of standardized containers during the Korean War and thereafter proved a boon for global trade, and with it, improved the economic fortunes of all countries involved.

For these 70 years or so of modern shipping, at least five boom-bust cycles were visible as the effects of the cold war, the oil crisis, the emerging-market crisis in the '80s, Scandinavia's sovereign debt crisis in the '90s, and the decline in the industry in the first few years of this millennium. 

Every one of these cycles has been driven by a function of overconfidence leading to an excess ordering of ships, and when a debt crisis that disallowed loans to be refinanced or an economic downturn came, demand was cut too quickly for the industry. More than once, a debt crisis came along with an economic downturn but the global nature of the industry and continued technology evolution always helped to pull the industry up. 

US plays with genocidal fire in Iraq

The forces are beginning to mass

By Mark Langfan

On January 10, 49 BCE, Roman General Julius Caesar crossed south over the red Rubicon river with his army. An all-out-to-the-death Roman civil war was inevitable. 

On April 23, 2013, Iraqi Prime Minister Nuri al-Maliki's Shi'ite tanks fired and murdered at least 23 unarmed Sunni protesters in the northern city of Hawijah as his tanks crossed red rivers of Sunni blood. An all-out-to-the-death Iraqi civil war is inevitable. 

Maliki's penchant for the mass-murder of innocent protesters shares the same religious genocidal lineage as Syrian President Bashar al-Assad: they are both Shi'ite stooges of Iran. Maliki, Assad, and their Iranian puppet-masters will stop at nothing, and murder millions of Sunnis without a single thought. 

How did we get here? Well, President George W Bush really launched two different invasions of Iraq: one announced, and one unannounced. The announced war was to take down Saddam Hussein. The unannounced war was to take down the entire Iraqi Sunni power structure. Then, instead of letting Iraq fall into three natural ethnically homogenous democratic-or-so parts, Bush laid the groundwork for a Shi'ite-Iranian dictatorship. To make matters worse, America sold the Iranian stooge billions of Abrams M1 tanks that will now be used, by Iran’s lackey, as Sunni killing machines. 

So, not only did President Obama anoint the newest Shi'ite Iranian robo-murderer, he armed him with the latest and greatest American mass-killing machines. Just wait until Maliki whips out his Obama-Apache helicopter "crowd control" Gatling guns. You won't hear a word from President Obama denouncing the use of American military equipment to mass murder innocent Muslim civilians. 

What No One Wants to Hear About Benghazi

The real lesson of Benghazi: interventionism always carries with it unintended consequences

by Ron Paul

Congressional hearings, White House damage control, endless op-eds, accusations, and defensive denials. Controversy over the events in Benghazi last September took center stage in Washington and elsewhere last week. However, the whole discussion is again more of a sideshow. Each side seeks to score political points instead of asking the real questions about the attack on the US facility, which resulted in the death of US Ambassador Chris Stevens and three other Americans.

Republicans smell a political opportunity over evidence that the Administration heavily edited initial intelligence community talking points about the attack to remove or soften anything that might reflect badly on the president or the State Department.

Are we are supposed to be shocked by such behavior? Are we supposed to forget that this kind of whitewashing of facts is standard operating procedure when it comes to the US government?

Democrats in Congress have offered the even less convincing explanation for Benghazi, that somehow the attack occurred due to Republican sponsored cuts in the security budget at facilities overseas. With a one trillion dollar military budget, it is hard to take this seriously.

The baby-boomer death cult

The euthanasing of a Belgian Nobel laureate raises disturbing questions about attitudes to the elderly and the future

by Michael Cook 

Euthanasia claimed its most famous victim last Saturday. At the age of 95, Belgian Nobel laureate Christian de Duve was killed with a lethal injection. He died in his home, surrounded by his four children.

He had planned his death for weeks and even explained his reasons and his philosophy of life in a long interview with the Belgian newspaper Le Soir. This was published immediately after his demise.

Why Saturday? Apparently de Duve had cancer, but he had also fallen down on 1 April and spent several humiliating hours on the floor. He took it as a sign of worse to come and decided to set a date for his euthanasia – which is legal in Belgium. He waited until his son, who lives in the United States, arrived home. His daughter Anne described the final moments to Le Soir: ‘It was impressive. He was smiling, asking us not to cry, saying that it was a happy moment. I’ve never seen anyone who was so full of life at the moment of death. He left us in great serenity, refusing painkillers before the final injection. As he left us, he said farewell as he smiled at us.’

Born in 1917, de Duve was deservedly famous in Belgium as its only living Nobel laureate. He shared the 1974 Nobel for Physiology or Medicine with Albert Claude and George E Palade. His contribution was describing the structure and function of discovered peroxisomes and lysosomes, small structures within cells. In his very active retirement, he devoted himself to writing about the origin of life.

No doubt de Duve’s death will be used by the euthanasia and assisted-suicide lobbies in the UK, the US, Canada, Australia and elsewhere as an advertisement for legalisation. Belgian notables tumbled over themselves to eulogise his memory. Prime Minister Elio Di Rupo praised his exemplary career and public spirit. Leading politician Paul Magnette lauded his conviction and courage. PZ Meyers, of the popular blog Pharyngula, exclaimed: ‘What a dignified and honorable way to go!’

Non-Template Becomes Template, Continued

Asmussen’s Musings and the Orwellian EU

By Pater Tenebrarum

We have previously written about the fact that the 'depositor haircut' in Cyprus has indeed become the 'template' for dealing with bank insolvencies in the EU. As we have pointed out at the time, this is in a fundamental sense a salutary event: it should finally open the eyes of depositors as to what risks they are exposed to when keeping money at fractionally reserved banks. Moreover, there is no reason why tax payers should foot the bill for bailing out insolvent banks.

So far, so good, if only it were that easy! This week a report made the rounds   regarding German ECB board member Jörg Asmussen informing a reportedly 'astonished' EU parliament in Strasbourg about the 'new template'. The original article can be found at 'Deutsche Wirtschaftsnachrichten' in German language (a Google translation should serve to get the drift). 'Savers must bleed', as the article states. Moreover, it points out that citizens will now be asked to so to speak pay up twice: once as tax payers funding the ESM, and in individual cases as savers keeping money at banks that happen to go under.

A major bone of contention remains however the fact that in order to avert bank runs, the EU wants to make sure that the deposit insurance for deposits of less than €100,000 remains in place. It is a bone of contention mainly for the reason that a number of countries could not possibly swing even that. Hence the urge to create the so-called 'banking union', because once it is in place, German tax payers and savers will be liable for insuring bank depositors in Greece and elsewhere just as they are now doing in Germany. France is very eager to get this banking union off the ground, as are understandably Spain and Italy. It is a good bet that none of these nations have the wherewithal to bail out their own banking systems if push really comes to shove. For instance, the three largest French banks hold assets worth 240% of GDP (with the assets of the banking system as a whole clocking in at over 400% of GDP).

Orwellian Language

An article at Reuters recently also discussed these topics. It reads almost like a satire in places. Consider the beginning of the article:

“Depositors should be the very last to suffer losses when a bank collapses, according to a proposal being discussed by European Union countries and seen by Reuters, which would shield savers from the kind of losses they face in Cyprus.” 

So in other words, depositors will be liable, but it won't be like Cyprus, promise! If they are to be 'shielded' from losses akin to those suffered by depositors and savers in Cyprus, something must be different. However, nothing actually is. 

“The idea comes as member countries finalize a new draft law for the European Union that could make losses for larger savers a permanent feature of future banking crises. EU officials, however, are nervous that such a regime will panic savers, prompting them to withdraw money.

IMF Admits Spain is Bankrupt

Read Between the Lines: Get Your Money Out While You Can

By Mike "Mish" Shedlock

It should be obvious to anyone reading this blog that Spain is in an economic depression as well as bankrupt. It is equally obviously that eurozone imbalances and a flawed treaty are to blame.

Finding mainstream organizations willing to admit Spain is bankrupt is another matter. Yet today, Jeremey Warner writing for The Telegraph says just that. 

Warner says Spain is officially insolvent: get your money out while you still can 

I'd not noticed this until someone drew my attention to it, but the latest IMF Fiscal Monitor, published last month, comes about as close to declaring Spain insolvent as you are ever likely to see in official analysis of this sort. Of course, it doesn't actually say this outright. The IMF is far too diplomatic for such language. But that's the plain meaning of its latest forecasts, which at last have an air of realism about them, rather than being the usual dose of wishful thinking.

Let's take the projected budget deficit first. This is expected to decline quite steeply this year to 6.6 per cent of GDP, but that's mainly because the cost of bailing out the banking sector fell substantially on last year's budget. On a like-for-like basis, there has in fact been very little fall in the underlying deficit. And nor on the present policy mix is there ever likely to be, for that's where the deficit is projected to remain until the end of the IMF's forecasting horizon in 2018.

Next year, the deficit is expected to be 6.9 per cent, the year after 6.6 per cent, and so on with very little further progress thereafter. Remember, all these projections are made on the basis of everything we know about policy so far, so they take account of the latest package of austerity measures announced by the Spanish Government.

The Red Queen Principle

The Failure of Democracy and the Rise of the Welfare State

By Camille Pecastaing 

Are political regimes fated to decay and die away, as everything in nature is?

Back in the eighteenth century, men in England, France, and the United States conceived of a new type of regime that would prevent the tyranny of the absolutist monarchies that reigned at the time. They put their hopes in a balance of power between various institutions of government, and in the periodical recourse to election to purge the system of excessive corruption and entrenched power. The democratic form of government established on those principles would work wonders for over two centuries.

But now, in its third century of existence, it is producing dysfunctional and potentially self-destructive forms of governance. The United States has been deadlocked in the monumental issue of its budget deficit and entitlements, unable to cut spending or raise taxes. Europe as a whole is no less fiscally bankrupt, and measures to restore its public finances are throwing the continent into economic depression and political upheaval. 

This is not the first test for democracies that, over the last 200 and some years, have weathered countless political crises. Throughout that period, democracies were able to mobilize so many resources, human and financial, that they won epochal wars against other regimes and were emulated on all continents. Yet, the diagnostic today is severe: with age, the democratic welfare state as we know it suffers from morbid obesity, and while the remedy is not hard to conceive—rebalancing the relationship between the public to private sector—it seems impossible to administer.

The etiology of the crisis points at the very design of the regime: the patient will not take the cure, voting out any government trying to cut public spending. Foreign donors who bail out bankrupt governments are often slapped in the face by the citizens of those countries. The recent woes of Greece and Cyprus show how the people can lack responsibility and gratitude.

Political theorists of ancient Greece were ambivalent about democracy. The Greek elite liked to rule its own affairs but, as a privileged minority in an expanding society, it had much to lose if a populist tyrant were to leverage the power of the masses. Accommodations were made with monarchy, hoping for a king powerful enough to keep the mob in check, and wise enough to protect the propertied classes.

The New European Revolt

Some young Europeans have given up on change

By tyler durden

One of the main benefits of forecasts based on demographics is the fact that they can be more precise and therefore more reliable than others. For example, the number of people aged 40 in the United States twenty years from now is roughly the same number of people aged 20 today, minus premature deaths plus new immigrants. A prediction that enjoys a similar inevitability is that welfare programs as currently defined will certainly be unaffordable a few years from now, given the aging of the population and concomitant rising dependency ratio.

It is a fair bet that one way or another, the current generation of young people will be unwilling and/or unable to pay for Social Security and Medicare as they presently stand. Of course, Western Europe has the same problem and President Hollande of France recently got a whiff of what is coming from an open letter addressed to him by a 20-year old student named Clara G.

In summary, Clara does not believe it fair that she and her generation should be saddled with the enormous debt accumulated by Mr. Hollande’s generation. As a remedy, she is considering leaving France for friendlier pastures. She says she is not alone and cites a recent poll by Viavoice which found that a shocking 50% of French people aged 18-34 wish to leave France. Forty-five years after the upheavals of Mai 68, half of the young of France are more interested in exile than in change.

Addressing the President directly, she writes:

“This will probably shock you, but it is mainly for fiscal reasons,… simply because I do not feel like working all my life to pay taxes, a large part of which will only service the 1.9 trillion Euros of debt that your generation has kindly left us. If these borrowings had at least been invested to prepare the future of the country, if I was getting a small benefit from them, it would not be a problem for me to help repay them. But this debt only helped your generation live above its means, and assure itself a generous social safety net which I will not have. (…)

The Inconvenient Truth About Benghazi

Did the Obama administration's politically expedient story cost American lives?

By PEGGY NOONAN

The Benghazi story until now has been a jumble of factoids that didn't quite cohere, didn't produce a story that people could absorb and hold in their minds. This week that changed. Three State Department officials testifying under oath to a House committee changed it, by adding information that gave form to a growing picture. Gregory Hicks, Mark Thompson and Eric Nordstrom were authoritative and credible. You knew you were hearing the truth as they saw and experienced it. Not one of them seemed political. You had no sense of how they voted. They were professionals. They'd seen a bad thing. They came forward to tell the story. They put the lie to the idea that all questioning of Obama administration actions in Benghazi are partisan and low.

What happened in Benghazi last Sept. 11 and 12 was terrible in every way. The genesis of the scandal? It looks to me like this:

The Obama White House sees every event as a political event. Really, every event, even an attack on a consulate and the killing of an ambassador.

Because of that, it could not tolerate the idea that the armed assault on the Benghazi consulate was a premeditated act of Islamist terrorism. That would carry a whole world of unhappy political implications, and demand certain actions. And the American presidential election was only eight weeks away. They wanted this problem to go away, or at least to bleed the meaning from it.

Because the White House could not tolerate the idea of Benghazi as a planned and deliberate terrorist assault, it had to be made into something else. So they said it was a spontaneous street demonstration over an anti-Muhammad YouTube video made by a nutty California con man. After all, that had happened earlier in the day, in Cairo. It sounded plausible. And maybe they believed it at first. Maybe they wanted to believe it. But the message was out: Provocative video plus primitive street Arabs equals sparky explosion. Not our fault. Blame the producer! Who was promptly jailed.