Nazis from the Moon

Beware the rise of EU anti-populists

The EU elites’ fear of an imminent Fourth Reich reveals a great deal about their loathing of the European mob.

by Patrick Hayes 

Earlier this month, the sci-fi comedy Iron Sky was released in Britain, featuring the return to Earth of a band of vicious Nazis in flying saucers. ‘In 1945 the Nazis went to the moon’, goes the movie trailer, which shows a giant swastika-shaped base on the moon. ‘In 2018, they are coming back.’

You have to wonder, given his recent comments regarding the rise of the right across Europe, whether Britain’s deputy prime minister Nick Clegg thinks he is inhabiting the same fantasy world as Iron Sky. In an interview with Der Spiegel, where he reaffirmed the Lib-Con coalition’s commitment to the EU, Clegg claimed that there could be ‘a whole range of nationalist, xenophobic and extreme movements increasing across the European Union’. Warning of an imminent ‘disaster’, he implied that lessons need to be learnt from Europe’s history: ‘We know this much from our continent: the combination of economic insecurity and political paralysis is the ideal recipe for an increase in extremism and xenophobia.’

The Systemic Siesta

Pricing Labor Out of the Market

by Carolina Carmenes Cavia and David Howden

With victories over the Germans in the 2008 European Football Championship and during the 2010 World Cup, there is little doubt that the Spaniards have the upper hand on the soccer field. Yet while Spaniards have had much to cheer about in the soccer world over the last five years, the economic situation is a world removed.

Spanish unemployment is now hovering around 23 percent, with over 50 percent of youths jobless. Only around 6 percent of Germans are without work, almost the lowest level in the country since reunification. This divide solidifies Spain's position among the worst-performing economies of the continent, and Germany's vaunted position as among the best.

The "Race to the Bottom"

Value in Devaluation?

by Patrick Barron

The euro is in trouble. That is not news. What is news is that people with deep pockets are willing to pay for economists to provide a solution. Lord Wolfson has offered a £250,000 prize for the best way a country can exit the European Monetary Union (EMU). Five finalists for the prize were announced in March. The winner will be announced in June.

None of the five finalists — Neil Record, Jens Nordvig, Jonathan Tepper, Catherine Dobbs, and Roger Bootle — advocates a return to sound money; all assume that new, national fiat currencies will float; and all assume that unproductive countries will benefit from devalued new currencies. The theory is that a devalued currency will spur export-driven economic growth. Furthermore, they have little confidence that economic reforms — which they all, by the way, do recommend — will be achieved in the near term and see devaluation as a quicker alternative. But will this work? First a word about devaluation itself.

A Case For The Individual

The Case of Sherlock Holmes

By Maura Pennington,

For a character obsessed with details, Sherlock Holmes would be pleased with the ones that were preserved in the BBC modern adaptation whose second series concluded airing in America this past Sunday.  My favorite is John Watson’s puzzled amusement at the gaps in his friend’s prodigious knowledge. 

In the first novel, A Study in Scarlet, before he learns that Holmes is the world’s only consulting detective, Watson tries to make a list to determine his roommate’s occupation based on his apparent areas of expertise.  He finds that Holmes has only a feeble grasp on politics and no understanding of astronomy, the latter made evident by his ignorance of the fact that the earth revolves around the sun.  Both the literary and televised versions of Holmes give the excuse that it only makes sense to retain knowledge that is applicable to one’s own pursuits in life.  For him, the earth’s position in the universe has no bearing on the observation of the idiosyncrasies of men in order to outwit them.

Coming Together or Flying Apart?

The “Greek fatigue.”

By John Mauldin

The debate among very knowledgeable individuals and institutions as to the future of Europe is intense. There are those who argue that the cost of breaking up the eurozone, even allowing Greece to leave, is so high that it will not be permitted to happen. Estimates abound of a cost of €1 trillion to European banks, governments, and businesses, just for the exit of Greece. And that does not include the cost of contagion as the markets wonder who is next. Keeping Spanish and Italian interest-rate costs at levels that can be sustained will cost even more trillions, as not just government debt but the entire banking system is at stake. Not to mention the pension and insurance funds. If the cost of Greece leaving is €1 trillion, then who can guess the cost of Spain or Italy?

A total Greek default wipes out more than twice the ECB balance sheet. That means the remaining countries will have to put twice as much into the ECB as their present commitment, just to get the ECB back to where it technically stands today (because the assumption is still that Greek debt is good, and so the ECB is still lending money to the Greek Central Bank).

Europe continues to fight the wrong battle

Damned if You do, Damned if You Don’t

by Peter Tchir

It is clear that Greece has had a solvency issue now for over 2 years.  The ECB and Troika chose to treat it as a liquidity problem.  Maybe, they could have argued that in early 2010, but by the summer of 2011 it was obvious to any credit observer that the problem was solvency, yet they continued to treat it as one of liquidity.  That is scary because if they fail to see the problem correctly now, they will fail miserably.  Not only is the problem clearly solvency, but now forced currency conversion has been added to the mix. Any “solution” from the EU must now address that risk, and it is not the same as solvency.  Programs that can protect against solvency may do nothing for the redenomination risk.

'Greece is a Failed Corrupt State

From Head of Deutsche Bank - Purposely Inflammatory Statements to Force Greece Exit

By Mike Shedlock

Strong messages from the head or the IMF, the head of Deutsche Bank, and the president of the Bundesbank are highly likely to drive Greek voters away from New Democracy and Pasok in the June 17 elections.

The Guardian writes It's payback time: don't expect sympathy - Lagarde to Greeks.

The International Monetary Fund has ratcheted up the pressure on crisis-hit Greece after its managing director, Christine Lagarde, said she has more sympathy for children deprived of decent schooling in sub-Saharan Africa than for many of those facing poverty in Athens.

The last public intellectual?

The disillusion of the brightest of this generation.

by Neil Davenport 

Twenty-one years ago, an American-Japanese academic, Francis Fukuyama, wrote an essay called ‘The End of History’. His argument was that the collapse of Stalinist communism in Eastern Europe vindicated the supremacy of liberal-capitalist democracies. For Fukuyama, ‘this was it’ for human progress. Capitalist triumphalism, however, barely lasted 12 months, let alone a lifetime, as Western political elites ended up as disorientated and as demoralised as radical left-wingers. Incredibly, by the mid-1990s, Marx’s political economy was back in academic vogue in the United States, while Western politicians often flattered the moral grandstanding of ‘anti-capitalist’ protesters. From that point on, a consensus has emerged that says economic growth isn’t all its cracked up to be and the state is to be cherished and worshipped. In 2012, who would have thought that ‘The End of History’ would look like Sweden?

It is clear that Germany is already being placed on the hook

The Separation of Bank and State

By David Zervos

The euro monetary system is flawed. It is a system that was cobbled together for political purposes; and sadly it was set up in such a way that each member state retained significant sovereign powers – most importantly the ability to exit the system and default on debts in times of stress. There is virtually NO federal power in the Union, as witnessed by the complete breakdown of the Maastrict and Lisbon treaties. In fact, what we are seeing today is that the structure of the monetary system is so poorly designed, it actually creates perverse fiscal linkages across member states that incentivize strategic default and exit.

Our new leader of the Greek revolt, Mr CHE-pras, has figured this one out. And in turn he is holding Angie hostage as we head into June 17th!

The Revolution will not be Tweeted this weekend

Facebook also a loser in Egypt

By Mark Steyn

So how's that old Arab Spring going? You remember – the "Facebook Revolution." As I write, they're counting the votes in Egypt's presidential election, so by the time you read this the pecking order may have changed somewhat. But currently in first place is the Muslim Brotherhood candidate Mohammed Morsi, who in an inspiring stump speech before the students of Cairo University the other night told them, "Death in the name of Allah is our goal."

Like!

In second place is the military's man, Ahmed Shafiq, Hosni Mubarak's last Prime Minister and a man who in a recent television interview said that "unfortunately the revolution succeeded."

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Greece should imitate Latvia

Latvia Shows the Way, Proving Some Famous Merchants of Doom Wrong

by Anders Aslund

Today, the Latvian government can claim victory. In the first quarter of this year, Latvia’s annualized GDP grew by 6.8 percent, the highest growth rate in Europe, and last year Latvia recorded a growth rate of 5.5 percent, the third highest in Europe. Four years ago, GDP plummeted by a total of 24 percent because of the sudden stop of international financing in September 2008. But that decline lasted only two years. Unemployment has fallen from 21 percent in early 2010 to 16 percent two years later.

How times can change. In December 2008, Paul Krugman claimed, “Latvia is the new Argentina.” In June 2009, Nouriel Roubini asserted that “devaluation seems unavoidable” and that the International Monetary Fund (IMF) and the European Union were “throwing good money after bad” in their support of Latvia’s stabilization program.

But Latvia did not devalue. Instead it carried out a vigorous “internal devaluation,” with large cuts in public expenditures and wages as well as structural reforms, while supported financially by the IMF and the European Union. Many argue that Latvia is special, but the Latvian government did exactly what it was supposed to do and the Latvian people understand that. Remarkably, Valdis Dombrovskis, who became prime minister in the midst of the crisis in March 2009 and led the cure, has been reelected twice in parliamentary elections since then.

The Greek Montenegro option

Endgame in Greece: Don’t Look for an Imminent “Grexit”

by Jacob Funk Kirkegaard

As the countdown toward a new Greek election heads toward June 17, most analysts predict an imminent Greek exit from the euro area. Almost anything can happen, but a few possibilities are worth considering. Any newly elected Greek government will have trouble implementing the current austerity program called for by euro leaders and the International Monetary Fund (IMF). A loss of funding at least from the IMF in 2012 appears likely. On the other hand, it is also likely that Greece will remain a member of the euro in the short run, through 2012. Prospects for an outright Greek Exit—a Grexit—are no more than 5 percent.

Two main scenarios for Greece in the coming weeks depend on politics and the elections.

RUN !!

Who is Minding the Store?

“All within the state, nothing outside the state, nothing against the state. “

                                                     -Benito Mussolini
By Mark Grant

When the Defendants are also the Judge and Jury

Here is a prescription for disaster. Here is an opiate that, once seen, should be avoided at any and all costs because the hand is a losing one far past any combination of cards on the Blackjack table. Yet, this is exactly what Europe is proscribing for owners of unsecured bank debt on the Continent.  The importance of Friday’s announcement was not that unsecured bank debt owners were to take losses if some bank foundered but just who would be deciding what losses were to be taken. 

Yes, it is true, investors for the last three years had been assured and re-assured that the sovereign nation where the bank was domiciled would be back-stopping any bank bonds or that the European Union itself would ring fence all bond holders so that the announcement was in direct contention to what we had all been told to get us to support European bank debt. Europe had claimed responsibility and now they have withdrawn it and this reason alone is enough to push yields for European bank bonds far wider than where they are currently as the charade of one more contingent liability has been officially ended. I assert, just for this reversal in position, that the yields of all unsecured bank bonds on the Continent will gap out from their current levels as what we were told is not what we are to get any longer. The new EU bank plan normalizes the losses to put them on the same plain with the American banks but the second part of the story is where disaster lies and I mean unmitigated disaster.

If the ECB Prints, Would Germany Exit the Euro?

"ECB Will be Insolvent and Costs May Exceed 1 Trillion Euros, in case of Greek exit" Says IIF Director

By MIKE SHEDLOCK

According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."

Excuse me for asking but how would they attempt to do that? Print Euros?

Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros :

The cost of Greece exiting the euro would be unmanageable and probably exceed the 1 trillion euros ($1.25 trillion) previously estimated by the Institute of International Finance, the group’s managing director said.

Keynesianism & Eugenics

Νo planner is smarter than nature

"The theory of output as a whole, which is what The General Theory of Employment, Interest and Money purports to provide, is much more easily adapted to the conditions of a totalitarian state."

                                                            John Maynard Keynes

by John Aziz

In looking at and assessing the economic paradigm of John Maynard Keynes — a man himself fixated on aggregates — we must look at the aggregate of his thought, and the aggregate of his ideology.

Keynes was not just an economist. Between 1937 and 1944 he served as the head of the Eugenics Society and once called eugenics ”the most important, significant and, I would add, genuine branch of sociology which exists.” And Keynes, we should add, understood that economics was a branch of sociology. So let’s be clear: Keynes thought eugenics was more important, more significant, and more genuine than economics.

Eugenics — or the control of reproduction — is a very old idea.

Euro bonds could be a step too far for the German public

Germany Looks to Its Own Costly Reunification in Resisting Stimulus for Greece

By NICHOLAS KULISH

MUNICH — When Germany wants to understand Greece and the crisis afflicting Europe it not only looks south to the Continent’s periphery but also turns inward, to the former East Germany, still struggling more than two decades after German reunification.

To an extent not often appreciated by outsiders, the lessons provided by that experience — with the nation pouring $2 trillion or more into the east, by some estimates, to little immediate benefit — color the outlook and decisions of policy makers and the attitudes of voters, a majority of whom would like to see Greece leave the euro zone, polls show.

More on the Greek Banking Calamity

The ultimate in 'extend and pretend' schemes

Greece's biggest banks, their decline in market cap and the loss of deposits since January 2010 (evidently the past several weeks of withdrawals are not yet visible on this chart).

Rumors have been making their way over the wires on Tuesday that the four largest Greek banks will receive € 18 billion in the form of 'EFSF bonds' on Friday in a first tranche of the recapitalization effort that is part of Greece's latest bailout deal. The report was updated several times during the day, until Friday had morphed into 'perhaps Wednesday'.  Below is an excerpt of the report as it appeared at Reuters:

„Greece's bank stability fund approved an 18 billion euro ($22.96 billion) injection to rescue its four largest banks on Tuesday, and an official said they would get the urgently needed funds as soon Wednesday.

Bigger Than Facebook

Spending four years of your life starting off in the world of work rather than going into debt

By Robert Tracinski

With the less-than-spectacular launch of the Facebook IPO, I've heard a number of people speculating that the social networking boom is played out and that innovation will now turn elsewhere. I think they're missing out on a big area that is still left to conquer, an Internet breakthrough that will be way bigger than Facebook.

The rap against Facebook is that the activity it captures--essentially, a half billion people gossiping about their own lives--is so ephemeral that it could all disappear overnight, which is essentially what happened to Facebook's precursor, MySpace. As Rich Lowry put it, Mark Zuckerberg is basically the Henry Ford of goofing off. By the way, for my Facebook friends, let me add that I think this criticism is unfair. I've found Facebook useful, for example, as a news feed where people I know post interesting articles they have come across. But imagine if much of the same technology were used to capture an activity with far more substantial and enduring value.

Property Rights and Fishery Conservation

The tragedy of the commons

By Jonathan H. Adler

Fisheries continue to be among the best examples of the tragedy of the commons in action. As Garrett Hardin himself noted in his 1968 essay, "the oceans of the world continue to suffer" from the dynamic of the commons. Alas, little has changed. Ocean fisheries remain in trouble, as study after study reveals. Most fisheries around the globe are fully or over-exploited, and a substantial number have already faced collapse. The problem with fisheries management runs deep. 

Consumer 3D Printer

Markets in Everything

A $1,299 replicator for the home

Makeusof.com -- "Cubify understands the problem with geeky, DIY, hard to build and calibrate printers; and their Cube aims to solve this (pictured above). Currently on pre-order and due for release on May 25th, the device is about as consumer level as you can get.

At $1,299, it costs as much as a new desktop PC (and considerably less than the other leading consumer level 3D printer – the Makerbot Replicator) – but like all printers, they’ll get you on the cartridges! Yes, you heard me right – the Cube eschews traditional standardized filament rolls in favor of device-specific filament cartridges, with a variety of garish colors available for $50 each. The simplified loading process means switching out colors or loading a new cartridge is easy."