Judgment Day For The Euro

The European Union can be based only on the rule of law

By Hans-Werner Sinn

Europe and the world are eagerly awaiting the decision of Germany’s Constitutional Court on September 12 regarding the European Stability Mechanism (ESM), the proposed permanent successor to the eurozone’s current emergency lender, the European Financial Stability Mechanism. The Court must rule on German plaintiffs’ claim that legislation to establish the ESM would violate Germany’s Grundgesetz (Basic Law). If the Court rules in the plaintiffs’ favor, it will ask Germany’s president not to sign the ESM treaty, which has already been ratified by Germany’s Bundestag (parliament).

There are serious concerns on all sides about the pending decision. Investors are worried that the Court could oppose the ESM such that they would have to bear the losses from their bad investments. Taxpayers and pensioners in European countries that still have solid economies are worried that the Court could pave the way for socialization of eurozone debt, saddling them with the burden of these same investors’ losses.

‘We are not forever chained to this planet’

Neil Alden Armstrong RIP

Three cheers for Neil Armstrong, the twentieth-century embodiment of man’s age-old yearning to explore and discover.

by Tim Black 

It is July 1999 – 30 years since the Apollo 11 moon landing – and Neil Alden Armstrong is doing a press conference at the Kennedy Space Centre in Florida. Someone asks him what he thinks is the legacy of that famous mission. His response is striking: ‘In my own view, the important achievement of Apollo was a demonstration that humanity is not forever chained to this planet, and our visions go rather further than that, and our opportunities are unlimited.’

In a few unrehearsed clauses, Armstrong did something unusual. He articulated a crucial and, today, often obscured aspect of our humanity. That is, he expressed our very human ability to surpass ourselves, to go beyond what is possible in the here and now and towards what might be possible in the future. Armstrong makes no mention of our limits, of our horizons. We are not ‘chained’ to extant possibilities, he is saying; we are forever in the process of discovering new opportunities. He’s right, but not just about space exploration. He’s right about human history: think of social and political revolutions; think of the immense material gains and development of the past couple of centuries; think of the explorers of the New World; and think, too, of man’s ventures into space. The list goes on. Human history, you see, is a tale of people unchaining themselves, of discovering that there are no limits which cannot be transcended.

The Dialectic of Destruction

From each according to his ability, to each according to his needs

by Murray N. Rothbard

Some might protest that, in our discussion of communism, we have not mentioned the feature that is generally considered the hallmark of that system: the slogan, 

"From each according to his ability, to each according to his needs." 

This phrase seems to contradict our view that the essence of the communist society is a secularized religion rather than economics. The locus classicus, however, of Marx's proclamation of this well-known slogan of French socialism, was in the course of his vitriolic Critique of the Gotha Program in 1875, in which Marx denounced the Lassallean deviationists who were forming the new German Social Democratic Party. And it is clear from the context of his discussion that this slogan is of minor and peripheral importance to Marx. In point 3 of his Critique, Marx is denouncing the clause of the program calling for communization of property and "equitable distribution of the proceeds of labour." In the course of his discussion, Marx states that inequality of labor income is "inevitable in the first stage of communist society, ... when it has just emerged after prolonged birth pangs from capitalist society. Right can never be higher than the economic structure of society and the cultural development thereby determined." On the other hand, Marx goes on,

In a higher phase of communist society, after the enslaving subordination of individuals under division of labour, and therewith also the antithesis between mental and physical labour, has vanished; after ... the productive forces have also increased with the all-round development of the individual, and all the springs of cooperative wealth flow more abundantly – only then can the narrow horizon of bourgeois right be fully left behind and society inscribe on its banners: from each according to his ability, to each according to his needs![1]

The central banks are digging themselves a deeper hole

More QE is on the way

by DETLEV SCHLICHTER

Last month we entered the sixth year of this crisis, although parts of the media seem determined to continue calling it a ‘recovery’. Wishful thinking. We have been in continuous crisis for half a decade. Doses of Valium and Prozac – called QE among central bankers – have calmed nerves occasionally and given the false impression of healing.

QE, or ‘quantitative easing’, is, of course, the creation of massive new quantities of monetary units and their targeted injection into financial markets for the purpose of manipulating asset prices and interest rates, and of flooding the banks with extra free reserves. QE is a dangerous drug. It is a hallucinogen. It can make you feel better for a while but it won’t cure the disease. In fact, it makes you sick. The global economy suffers from grave distortions that are the result of years and decades of artificially cheapened credit: Overstretched banks, too much debt, inflated asset prices, misallocated capital. Cheapening credit further – and manipulating asset prices further – is, however, the MO of QE. QE encourages additional borrowing and further balance sheet expansion.

A German Sovereign Wealth Fund to save the euro

The lesser evil

Daniel Gros, Thomas Mayer

Large German trade surpluses are ingrained in the Eurozone’s structure, but private sector mechanisms for dealing with the corresponding capital account deficit are broken. The unavoidable result has been large official capital account deficits by Germany (the bailouts) and the Eurosystem (Target2 balances). This column proposes the creation of a Germany sovereign wealth fund that would restart the private recycling of Germany’s excess savings – eventually cleaning out the Target2 imbalances and depreciating the euro in the process.

Since the early 1950s, German savings have tended to exceed investment with the inevitable result that that Germans have, on net, been investing in foreign assets.

·        Most of these excess savings have been intermediated by the domestic banking system.

The banks have difficulties investing German surpluses abroad given that they finance themselves through deposits in the national currency and thus cannot take exchange rate risk. The resulting exchange rate adjusted tended to keep the surplus under 1% to 2% of GDP most of the time.

Meaningless Words in Politics

We must attach concrete meanings to the words politicians use to deceive us

by Ron Paul

As we enter the fall political season, we will hear a great deal of rhetoric from both major political parties and their many candidates for office. It’s important for us to remember, however, that words can be made meaningless by misuse or overuse. And when we as citizens allow politicians to obscure the truth by distorting words, we diminish ourselves and our nation.?

Don't Call Out My Scam And I Won't Call Out Yours

The Rot Runs Deep Part 2

Complicity reigns supreme as everyone benefiting from a scam keeps quiet about everyone else's skim lest their own share of the spoils fall under the harsh light of inquiry.

by Charles Hugh-Smith

The uncomfortable truth is that America has become a nation of skimmers and scammers. The rot runs deep not just in the upper reaches of the financial and political Elites, but in the bottom 99.5% as well.

America can now be summarized by this phrase: "don't call out my scam and I won't call out yours." In other words, all the skimmers and scammers have become complicit, not just in protecting their own scam from the light of day, but in protecting everyone else's scams, too, lest those who lose their swag unmask someone else's scam in revenge.

Examples of skimming and scamming abound in finance and government. It's almost tiresome to even list examples; fortunately for us, tireless truthseeker "George Washington" has amassed a list of bank fraud and malfeasance (reprinted by the equally indefatigable Barry Ritholtz).

Melting the Ice

Economically and morally, the laws and freedoms which sustain civilized life are withering away

by James E. Miller

It’s a safe statement to make that when Mitt Romney is finally crowned the GOP nominee for president during the Republican National Convention, any vestige of liberty will be firmly wiped away from the ballot box come this November.  For those who have followed his campaign in the United States, Congressman Ron Paul has been swindled out of the nomination through various underhanded tricks at state conventions.  The explanation is straightforward: Paul’s views are not comfortable within the Republican Party establishment.  Today’s GOP is a party of banker interests, imperialism, and clandestine state empowerment while claiming to represent small, limited government.  Romney embraces this platform while Paul’s decades-long voting record stands in opposition.

For towing the party line, Romney has been anointed the “electable” candidate while Paul has been deemed an extremist.  The GOP declares this while the media parrots the message as it does every election cycle.  To the pundits and writers who cover political affairs, only moderation can win over a large electorate.  The people don’t look kindly upon radicalism or so it’s alleged.

Grexit Showdown

Greece's Fate to Be Decided at October EU Summit

By Christian Reiermann and Christoph Schult

European leaders are unconvinced that the Greek government's austerity efforts will produce quick results. Greece's fate is now likely to be decided at the EU summit in October. The country's European partners will have to choose among a number of equally unattractive alternatives.

They embraced, slapped each other on the shoulder and called each other "my friend." When Jean-Claude Juncker, the prime minister of Luxembourg and president of the Euro Group, met with Greek Prime Minister Antonis Samaras at Samaras' office in Athens last Wednesday, the mood was convivial -- but only for the TV cameras.

Behind closed doors, the Euro Group head got down to business, telling Samaras that the end of the line had been reached, and that the Greek government could no longer expect any special treatment from its partners. Juncker also told his host that constantly demanding more time for reforms wasn't helpful.

When Samaras, the chairman of the center-right New Democracy party, was still opposition leader, he had a reputation for being resistant to the advice of his fellow European conservatives. But now he has apparently become a quick learner. During a visit to Berlin two days later, on Friday, he was no longer asking for more time to implement reforms.

Samaras now has two to three weeks left to put together an austerity package worth about €14 billion ($17.5 billion) for the next two years. The Greek leader is promising to privatize state-owned businesses, cut government jobs and collect taxes more efficiently. But politicians in Berlin and Brussels doubt whether his new course will produce results quickly enough.

Showdown in Brussels

The troika of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) will spend the entire month of September auditing the books in Athens. Whether the report will be finished by the time the euro-zone finance ministers meet on Oct. 8 is already debatable. Meanwhile, staff at the European Council in Brussels are assuming that the summit of European Union leaders on Oct. 18-19 will be a showdown over Greece.

How Paris Is Killing French Industry

Peugeot on the Brink

French carmaker Peugeot is fighting for its survival. But, by keeping its plants in-country and supporting wage hikes, the government is ignoring the rules of survival in the age of globalization. In the end, the workers it is trying to help might be the biggest losers.

By Dietmar Hawranek and Isabell Hülsen

Well-meaning people can often be particularly dangerous. Take French President François Hollande and Minister of Industrial Renewal Arnaud Montebourg, for example. They want to rush to the aid of French automaker PSA, which has driven itself into a crisis with its Peugeot and Citroën brands. Representatives of the CGT trade union, such as Jean-Pierre Mercier, also want to help. "We will fight for our jobs and the livelihoods of our families," says Mercier.

The French government and the unions want to prevent Peugeot from closing its plant in Aulnay-sous-Blois, outside Paris, and slashing 8,000 jobs. But if politicians and labor leaders are successful, they will only make things worse. Perhaps they'll manage to save a few thousand jobs in France in the short term. But, by doing so, they will put the company's future into even greater jeopardy.

The company, which has been making cars since 1890, is fighting to survive. Sales have plummeted, and plants are not operating at anywhere close to capacity. PSA is currently losing €140 million ($173 million) a month.

For the 3,000 Peugeot workers in Aulnay-sous-Bois, their work ended temporarily at 10:30 p.m. on July 26. The plant was closed for five weeks, as it is every year for the summer vacation. But, this time, things were a little different. The commencement of the annual vacation period had a bitter aftertaste. Workers had just learned that the plant was to be permanently shut down in 2014.

President Hollande reacted immediately, saying that PSA's downsizing plans were "unacceptable" and had to be renegotiated. Minister Montebourg said that he had little faith in company management and speculated that perhaps the car company was merely playing the "imaginary invalid." He also said that he had a "real problem" with the company's strategy and the behavior of its main shareholder, the Peugeot family, which owns more than a quarter of its shares and received a substantial dividend last year.

The real Syrian problem

Syria is locked into a state of a precarious "internal arms race"

By Richard Javad Heydarian

Undoubtedly, Syria is at the epicenter of one of the bloodiest and most unfortunate conflicts in recent times. It increasingly resembles a protracted humanitarian crisis that is endangering the very integrity of the Syrian nation-state. 

There is no way to understate the tragic dimensions of the crisis: more than 20,000 civilians in casualties, 1 million internally displaced people, two million in need of urgent humanitarian assistance, and almost 140,000 fleeing to neighboring countries such as Lebanon, Jordan, Iraq, and most especially Turkey. Unfortunately, as the armed uprising gains momentum, and the regime desperately clings on to power, the humanitarian costs are bound to increase - with no clear end in sight. 

There is also an international dimension to the crisis. A coalition of North Atlantic Treaty Organization (NATO) and Arab monarchies are supporting the armed-opposition, while Eastern powers such as Iran, Russia, and China have stood by the "regime". 

However, the most worrying aspect of the Syrian crisis - especially in the long-run - hovers around two intertwined issues: (1) the fate of Syria's considerable stockpile of weapons of mass destruction (WMDs) and a whole host of advanced weaponry that could be used by sinister elements in the most pernicious manner; and (2) the continuous infiltration of extremist elements into the Syrian theatre, which is not only undermining the democratic-secular nature of the uprising, and increasing the prospects of even bloodier sectarian mass atrocities, but also represents a serious challenge to regional and broader international security. 

The highly fluid situation
Syria is practically a warzone. Much of the countryside is a "no man's land", filled with the heavy presence of Free Syrian Army (FSA) units that have routinely sabotaged the regime's heavily-armed forces through a combination of asymmetrical and (even in certain instances) conventional warfare.

How you are cast discreetly in the role of the sucker

Your Savings, Our Money, Their Folly

By  George Handlery

Remarkable things are imposed on you and you might not even notice. It begins with the currently frequent helping intervention of politics in economic matters. There are three questions regarding the disbursed, supposedly stimulating, gifts of politics; Are you getting your due, are you receiving what someone else has created, or are you paying a lot for the little you get. The growing burdens of the existing system are real while the long-term consequences promise devastation. For the tort, you will not even be able to attain official victim status. That position is already occupied. The game we play is to take it from someone to benefit so-and-so. Especially if you think otherwise, you are in this game the one from whom it is taken to give the loot to someone else.

Monetary charlatans ignore history at our own peril

Do Whatever it takes

by Doug Noland
I believe it was the History Channel, but it may have been Discovery. It was one of those restless nights where sleep wasn't coming easy - a couple years back, as I recall. The subject of the program was an intellectual framework for better understanding the escalation of aerial attacks against civilians during World War II. 

Prior to the war, it was generally accepted that there was a moral imperative to protect civilians. Memories of "Great War" atrocities were fresh in leaders' minds, while major technological advancements in aeronautics and ballistics were recognized as creating unprecedented capacity to inflict devastation upon population centers. 

In September 1939, president Franklin D Roosevelt issued an "Appeal ... on Aerial Bombardment of Civilian Populations" to the governments of France, Germany, Italy, Poland and Britain:

If resort is had to this form [aerial bombardment] of inhuman barbarism during the period of the tragic conflagration with which the world is now confronted, hundreds of thousands of innocent human beings who have no responsibility for, and who are not even remotely participating in, the hostilities which have now broken out, will lose their lives. I am therefore addressing this urgent appeal to every government which may be engaged in hostilities publicly to affirm its determination that its armed forces shall in no event, and under no circumstances, undertake the bombardment from the air of civilian populations or of unfortified cities ...

The Bundesbank against the World

German Central Bank Opposes Euro Strategy

By Christian Reiermann, Michael Sauga and Anne Seith

The European Central Bank plans to resume buying the bonds of crisis-hit countries on a large scale. Jens Weidmann, head of the German central bank, is firmly opposed to the idea, arguing that it will lead to inflation and lessen pressure on governments to carry out reforms. But he is becoming increasingly isolated within the ECB and in the political world.

Volker Bouffier has always portrayed himself as the last true conservative in Germany's center-right Christian Democratic Union (CDU). Bouffier is the governor of Hesse, the western German state where Germany's financial capital Frankfurt is located, and is known for raging against gay marriage, multiculturalism and school reforms. On questions of monetary policy, he has always been a champion of traditional German virtues. "The European Central Bank cannot become an institution that compensates for the failures of individual government budgets, such as Italy's," he said recently. "That isn't part of its mandate."

But on Monday of last week, Bouffier seemed to be a changed man. He had invited Jens Weidmann, 44, president of the German central bank, the Bundesbank, to a meeting at the Hesse state chancellery. For weeks, Weidmann had sharply opposed the ECB's plans to buy up large quantities of Italian and Spanish sovereign debt. In the meeting with Bouffier and his cabinet, Weidmann had just reiterated his position in the ongoing dispute with ECB President Mario Draghi when Bouffier, to the surprise of everyone in attendance, announced his new priorities. Apparently, the values of Southern European bonds on the balance sheets of Frankfurt banks are now more important than his conservative values.

Of course he still supported stable prices, Bouffier said, but noted that the mood in financial markets had become extremely fragile. And despite his characterization of the ECB's debt-buying plans as sinful, he said that there were no longer any alternatives to massive intervention by the central bank. "The political tools have been exhausted," Bouffier said.

The Bundesbank president is becoming increasingly isolated, and not just in provincial German politics.

Francois Hollande – Moving France Toward A Command Economy

France – a Zwangswirtschaft?

by Pater Tenebrarum

Zwangswirtschaft is the very apt German term Ludwig von Mises used to describe various forms of state capitalism, such as the economy of Nazi Germany. The literal translation is 'coerced economy' and as such it is a decisive step closer to a full-scale socialistic command economy than the severely hampered market economy (a milder form of state capitalism) that is in place in most of the so-called 'free world' today.

Francois Hollande is a typical colorless career bureaucrat-politician who never had a 'real job' in his whole life, this is to say, he never had to prove himself in the private sector. The cabinet put together by the perpetually astonished looking president (we strongly suspect that he is still astonished that he was actually elected) is of similar quality: it is almost a Soviet-stylepolitbureau, with not a single senior minister who is not a career politician or bureaucrat (the two often go hand in hand in Europe). 

German news magazine Der Spiegel, which is normally known to be sympathetic to the center-left, recently published a scathing article on the industrial dirigisme of Hollande's government the title of which leaves little to the imagination: “How Paris Is Killing French Industry”.

What prompted the magazine to take a closer look at France's economic policies was the case of ailing car maker Peugeot, which the president and his 'minister of industrial renewal' (talk about irony), Arnaud Montebourg have decided to micro-manage to death.

The strong do what they can and the weak suffer what they must

Will Iran be US's Melos?

By Peter Jenkins

One of the most depressing aspects of all the talk about Israel or the United States destroying Iran's nuclear facilities (and much else besides, no doubt) is the near absence of any reference to international law. Even so distinguished an expert as Anthony Cordesman seems to take it for granted that there will be no legal impediment to the US attacking Iran if a credible threat of an attack fails to intimidate Iran into making the concessions required to pacify Israel.

In my country, Britain, on February 20, 2012, members of the House of Commons spent five hours debating whether the use of force against Iran would be "productive" without dwelling more than cursorily on the legal aspects of the question. 

How is one to account for this blind spot? Are ignorance and oversight to blame, or has respect for international law gone out of fashion? 

It's hard to believe that anyone who has policy-making responsibilities that involve other states, or who takes a professional interest in such policy-making, can be unaware of what the bed-rock of the post-1945 international system has to say about war-making. The United Nations Charter was drafted to be understood by a much wider readership than international law-focused lawyers. Paragraphs 3 and 4 of Article 2 of the Charter could hardly be clearer:

The inmates think they are running the asylum

The deadly Israeli and the mad Turk

By Pepe Escobar 

Tel Aviv may be inches away from turning the already declared economic war on Iran into a hot war. 

Take a look at this madness: [1] The Bibi-Barak warmongering duo (Prime Minister Bibi Netanyahu and Defense Minister Ehud Barak) may be about to go for broke on an Iran strike - against the advice of Israel's top defense and intelligence experts. Barak may even have had access to secret US intel. He said, "there probably really is such an American intelligence report - I don't know if it is an NIE [National Intelligence Estimate] one - making its way around senior offices [in Washington]." 

"Probably?" "Really?" "I don't know?" And this forest of hypotheticals is a justification for hot war? 

Then Barak added; "As far as we know it brings the American assessment much closer to ours". 

Not really. Here's the response by a White House National Security Council spokesman; the US intelligence assessment remains the same. That is; Iran is not conducting a nuclear weapons program. 

And if any extra confirmation was needed, Washington seems to have a pretty clear picture of Iran's nuclear progress. [2] 

According to White House spokesman Jay Carney, "We would know if and when Iran made what's called a breakout move towards acquiring a weapon." 

The Iran-India-Afghanistan riddle

Can Trade Ease Asia's Political Tensions?

By Vijay Prashad

At the sidelines of the 16th Non-Aligned Movement (NAM) Summit in Tehran, Iran, the governments of Afghanistan, India and Iran will hold a small conclave. Commercial issues are at the top of the agenda. Not far down the list, however, are significant political matters. These are of great interest as the Israelis and the United States power up their aircraft for a bombing raid on Iran’s Fordo nuclear bunker, and as the US and North Atlantic Treaty Organization (NATO) begin their obligatory withdrawal from more than a decade-long occupation in Afghanistan.

Geography is one of the greatest reasons for the trade between these countries. In May, Afghanistan's Commerce and Industries Minister Anwar al-Haq Ahady and Iran's Ambassador to

Afghanistan Abolfazl Zohrevand signed an agreement to deepen the trade ties between these countries. The main issue before them was use of the Chabahar port in southeastern Iran. About 50 hectares of land beside the port have been set aside for the construction of a hub for Afghan traders. 

Few people paid any attention to this pact, although it has much broader implications than for these Afghan traders. For the past 10 years, the Indian government has been working with the Iranians to upgrade the Chabahar port, with the expectation that eventually Indian ships will dock there and unload cargo destined not only for the Iranian market, but crucially for the Afghan and Central Asian markets.

Angela Merkel Just Revealed the Real Situation in Europe

You couldn’t make this stuff up if you tried

By Graham Summers

For several months now, I’ve been stating that the world’s central banks are in a bind. That bind is that their monetary policies are becoming less and less effective at placating the markets while the consequences of said policies (higher costs of living, the targeting of troubled banks in the credit market, etc.) are increasing.

As a result of this, central banks have begun resorting to more and more “verbal intervention” or promises to “act” without ever acting.

We received confirmation of this over the weekend when Angela Merkel chastised Germany Bundesbank Head Jens Weidmann for stating that an ECB policy of buying bond was like a dangerous drug.

Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year.

North Korea on the Nile

Egypt is a lost cause where Washington is concerned

by Spengler

Reports that Egypt's oil suppliers are cutting shipments to the nearly-bankrupt nation coincide with a dramatic diplomatic shift towards Iran by President Mohammed Morsi. Morsi's attendance at the Non-Aligned Summit in Teheran today denotes the end of Iran's diplomatic isolation in the Sunni Arab world.

In addition, as my Asia Times Online colleague M K Bhadrakumar noted in his Indian Punchline blog, Morsi proposed to include Iran in a four-nation contact group to resolve the Syrian crisis, along with Turkey, and Saudi Arabia. Morsi's outreach to Iran at the August 15 Organization of Islamic Coordination summit in Mecca was welcomed by Iran's Foreign Ministry. [1] [2] 

At the same time, Egypt has become a prospective threat to Israel for the first time in more than three decades. The deployment of Egyptian tanks in the Sinai, supposedly in pursuit of terrorists, violates the 33-year-old peace treaty with Israel, and persuades some Israeli analysts that Egypt might threaten Israel's southern border in the event of an Israeli strike on Iran's nuclear facilities. 

"If Netanyahu finally decides to strike Iran's nuclear sites, shouldn't he consider a possible scenario, in which Morsi (soon to visit Tehran for a conference), orders two army divisions to cross the Suez Canal into Sinai?," asks Amos Harel, the senior defense analyst at Ha'aretz. [3]