Greek Rescue Deal Falters on Loan Rate Cut

The show must go on

By Jonathan Stearns

The main obstacle to unlocking international loans for Greece is a plan to reduce the interest rates charged by euro-area creditors as the sides agreed to ease debt-reduction targets, a Greek official said.

A cut in interest rates would put them below the cost of funding for some euro-area countries, the official told reporters late yesterday in Brussels on the condition of anonymity. Policy makers will continue work on an updated aid package for Greece into this weekend in preparation for a Nov. 26 meeting of euro finance ministers, said the official.

An agreement, which would unlock an aid payout of at least 31 billion euros ($40 billion), may raise Greece’s debt target to 124 percent of gross domestic product in 2020 from a previous goal of 120 percent, said the official. The cost of reaching the new target from a currently projected trajectory of 129 percent of GDP that year is about 10 billion euros, according to the official.

Argentina angry at hedge fund court win

Neither a borrower nor a lender be, For loan oft loses both itself and friend

By Robin Wigglesworth and Jude Webber

Argentina has angrily criticised a US court decision that has awarded hedge fund creditors more than $1.3bn as “a kind of legal colonialism”.

“All we need now is for [Judge Thomas] Griesa to send us the Fifth Fleet,” Hernán Lorenzino, economy minister, said.

The victory for several hedge funds against Argentina has sparked fears that the country could be plunged into yet another debilitating sovereign default and threatens to make government restructurings more difficult in the future.

In what has been dubbed the “trial of the century” for sovereign debt restructurings, a US District Court judge on Wednesday ordered Argentina to pay the hedge fund creditors – led by Elliott Associates and Aurelius Capital – in mid-December.

The Biggest Winners From President Obama's Re-Election: Crony Capitalists

Some people never seem to lose no matter what the result of the election

By Joel Kotkin

President Obama’s re-election does not, as some conservatives suggest, represent a triumph of socialism. Instead, it marks the massive endorsement of an expanding crony capitalism that ultimately could reshape the already troubled American economic system beyond recognition.

Nowhere is this clearer than in the President’s victory in the Great Lakes states of Ohio, Michigan, Ohio and Wisconsin. All four of these states are highly dependent on manufacturing and, in particular, the auto industry. Without the bailout, it seems doubtful that Obama — who lost the white working class decisively in most of the country — could have won these critical states.

The auto bailouts have resulted in industrial production growth since February 2010. Furthermore, there has been an industrial revival in the Ohio River valley, with rising output of steel, although much of this has to do with expansion of oil and gas production, which Obama has also taken credit for.

Thanksgiving & Capitalism

The message of Thanksgiving is more timely than ever

by Richard Ebeling

In good economic times or bad, Thanksgiving is when Americans gather with their families and friends and enjoy the most special meal of the year. The event remembers those early Pilgrim Fathers who crossed the uncharted ocean from Europe to make a new start in Plymouth, Massachusetts.

What is less appreciated is that Thanksgiving also is a celebration of the birth of free enterprise in America.

The English Puritans, who left Great Britain and sailed across the Atlantic on the Mayflower in 1620, were not only escaping from religious persecution in their homeland. They also wanted to turn their back on what they viewed as the materialistic and greedy corruption of the Old World.

Prospects for 2013 look ominous for Europe

Euro zone faces deepest downturn since early 2009

By Andy Bruce

The euro zone economy is on course for its weakest quarter since the dark days of early 2009, according to business surveys that showed companies toiling against shrinking order books in November.

Service sector firms like banks and hotels that comprise the bulk of the economy fared particularly badly this month, and laid off staff at a faster pace.

While the monthly rate of decline that manufacturers reported eased far more than economists anticipated, Markit's latest Purchasing Managers' Indexes (PMIs) pointed to little change overall for a recession-hit euro zonethis month.

The flash service sector PMI fell to 45.7 this month, its lowest reading since July 2009, the survey showed on Thursday, failing to meet the expectations of economists who thought it would hold at October's 46.0.

It has been rooted below the 50 mark that divides growth and contraction for 10 months now, and survey compiler Markit said it was too soon to say if this marked the nadir.

With more austerity on the way, and a reminder of the festering sovereign debt crisis in this week's failure of lenders to agree more aid for Greece, prospects for next year look ominous.

IMF and Eurocrats in Clinch

Wrangling Over Greece

by Pater Tenebrarum

Make no mistake, they are doing everything they can to keep Greece in the euro area. There have after all been many opportunities to just say 'game over' and they were never taken. We suspect there is a good reason for this: if Greece were to default and leave the euro zone, it would be proof that the euro is not 'irreversible'. It may well result in a chain reaction, with others leaving as well. So apparently the decision has been made to just keep bailing Greece out.

However, an unexpected delay has popped up. Greece still hasn't received its €31.5 billion aid tranche, in spite of fulfilling all the 'troika' demands – some of which almost caused the new coalition government to break apart.

The problem in a nutshell is this: everybody, including the IMF, knows that Greece cannot reach the long term debt targets that were set out in its bailout. It 'needs more time', but that means it also needs more money. Even if it gets both, it will under no circumstances be able to reach the debt/GDP ratio targets set out, even though the initial long term target is twice as high as the maximum level allowed according to the Maastricht treaty. In other words, not even that farcical target is anywhere near the realm of the possible.

Why Russians and the World Dislike the Ruble

It takes time to build credibility once it has been lost

By Martin Gilman

Russians have long had an ambivalent relationship with the ruble. Even now, Russian companies and individuals by and large seem to prefer to save in dollars or euros, carry out large financial operations offshore and minimize their exposure to ruble assets when they can.

This seems odd. Generally in the modern world, most people have sufficient confidence in their own currencies to keep most of their assets denominated in them. It is sometimes called a home-currency bias. For example, Japanese residents hold yen despite low interest rates. Usually, it is only when significant risks are perceived that people flock to monetary hedges such as gold. The phenomenon was also evident in the case of Greece, when the collapse in domestic bank deposits signaled a fear that people's euros would soon become drachmas.

Regulators R Us

Feds Crank Up Regulations — on Everything

by  William F. Jasper

Get set for the Obama administration’s post-election tsunami of business-killing, job-killing, economy-killing federal regulations. It’s already begun. Take a look at www.regulations.gov, the administration’s regulatory website. The home page informs us that in the last 90 days, the administration has posted 5,934 new regulations.

Yes, our federal bureaucrats have been very diligent. The above-mentioned website informs us of their daily productivity of regulations over the past 90 days:

Today (121)

Last 3 Days (274)

Last 7 Days (371)

Last 15 Days (826)

Last 30 Days (1,915) 

Last 90 Days (5,934)

How will these regulations affect you, your family, your job, business, ranch, or farm? You may not have federal SWAT teams descend upon you, as has happened to dairy farmers and natural food store operators who dared to sell raw milk products not approved by the federal Food & Drug Administration (see here and here) or the hundreds of other Americans subjected to Gestapo-type treatment for running afoul of the volumes of murky and convoluted regulations that fill the 169,301 pages of the Code of Federal Regulations (CFR) published in the Federal Register. 

The Route to Transformative Growth

How Sub-Saharan Africa Is Evolving Into A Global Economic Powerhouse

Growth in sub-Saharan Africa has accelerated since 2000. And the potential for further growth is enormous given its positive demographics and natural resources.

by David Cowan

The potential for economic growth in Sub-Saharan Africa (SSA) is enormous given the continent’s positive demographics and the abundance of natural resources, but historically, infrastructure, political and policy challenges have stood in the way. Without question, there has been a sharp pick up in real GDP growth in the region in the 2000s compared to the previous two decades, when SSA was often seen as a development disaster. This pick-up has led to a marked change in how many investors think about SSA, and has facilitated a switch from decades of Afro-pessimism to the new wave of Afro-optimism.

To give an idea of the potential impact of growth, Citi’s February 2011 long-term growth projection paper, Global Growth Generators: Moving Beyond ‘Emerging Markets’ and ‘BRIC’ , argued that Africa could move from accounting for only 4% of world GDP in 2010 to 7% by 2040 and 12% by 2050. In this new report we examine in much greater depth the prospects for growth in SSA and ask what steps need to be taken to generate truly transformational development that can unlock the potential of the continent's demographic and resources dividend. Critically, to unlock the full potential policymakers must find a path from the current growth model to one which achieves greater global economic integration.

EU Game Changer

Austerity Hits The Core

BY RAUL ILARGI MEIJER

Here's what may be a useful angle to explain to people what is happening in Europe right now, and what's yet to come. It's not about Greece, which shoved another "Deal" through its besieged parliament this week, a deal that itself is also still under siege. It's not about Spain either, which managed to borrow a few billion more, enough to stay alive till Christmas, but sees its bond yields enter the land of ugly (yawn) again.

We all know the stories of the eurozone periphery by now, we've read a thousand chapters. And the core likes it that way, since this keeps us from looking its way. The situation allows for Germany, France and Holland to sit pretty and pretend they're doing fine. They're not.

Some ugly numbers have come out of Germany lately. We’ll get back to that later. More interesting is the report that German Finance Minister Schaeuble has asked a "wise men" committee to draw up a picture of what's really happening with France economically, a picture that should serve as a counterweight to the portrait French President Hollande paints, and which Germany no longer has confidence in.

However, the more poignant sign of what's to come in Europe emanates from Holland.

Thanksgiving, 1789

George Washington's proclamation was not without controversy

By MELANIE KIRKPATRICK

It is hard to imagine America's favorite holiday as a source of political controversy. But that was the case in 1789, the year of our first Thanksgiving as a nation.

The controversy began on Sept. 25 in New York City, then the seat of government. The inaugural session of the first Congress was about to recess when Rep. Elias Boudinot of New Jersey rose to introduce a resolution. He asked the House to create a joint committee with the Senate to "wait upon the President of the United States, to request that he would recommend to the people of the United States a day of public thanksgiving and prayer to be observed by acknowledging, with grateful hearts, the many signal favors of Almighty God."

The congressman made special reference to the Constitution, which had been ratified by the requisite two-thirds of the states in 1788. A day of public thanksgiving, he believed, would allow Americans to express gratitude to God for the "opportunity peaceably to establish a Constitution of government for their safety and happiness."

Another take on Fethullah Gülen

US law professor has no doubt Gülen trial in Turkey was political

 

By AKIN KARAGÜLLE

James C. Harrington, director of the Texas Civil Rights Project and a law professor at the University of Texas, wrote a book titled “Wrestling with Free Speech, Religious Freedom, and Democracy in Turkey: The Political Trials and Times of Fethullah Gülen” on the trial of renowned Islamic scholar Fethullah Gülen in Turkey, which ended with his acquittal being upheld by the Supreme Court of Appeals in 2008.

In an indictment he drafted on Aug. 30, 2000, then-Ankara State Security Court (DGM) Chief Prosecutor Nuh Mete Yüksel filed a lawsuit against Gülen with the Ankara 2nd DGM requesting his conviction under Article 7/1 of Counterterrorism Law No. 3713.

Yüksel claimed that Gülen had since 1989 been involved in activities to establish an illegal organization to create a state based on religion by changing the secular state structure. The indictment made no reference whatsoever to any concrete action constituting a crime as spelled out in the Counterterrorism Law. Instead, the charges in the indictment were based on Gülen’s views as expressed in print and visual media as well as his social activities. In other words, his ideas and beliefs constituted the basis for the charges against him. The Ankara 11th High Criminal Court on May 5, 2006, decided to acquit Gülen following the trial due to unsubstantiated claims. An appeal was filed with the 9th Chamber of the Supreme Court of Appeals, which unanimously upheld Gülen’s acquittal by the Ankara 11th High Criminal Court on March 5, 2008. The Office of the Prosecutor at the Supreme Court of Appeals objected to this verdict on April 4, 2008, under Article 308 of the Code on Criminal Procedure (CMK). The chamber, however, dismissed the objection by the office of the prosecutor on June 24, 2008. In this way, the acquittal was approved and finalized.

Is Congress Guilty of the Largest Insider-Trading Scheme Ever?

The most lucrative tip of all time

by  Bob Adelmann

Mathew Martoma, age 38, was arrested at his home in Boca Raton, Florida, early Tuesday morning by the FBI and charged with insider trading. U.S. Attorney Preet Bharara, whose face appeared on the cover of Time magazine last February as the “man who is busting Wall Street,” was positively joyful in announcing the bust:

The charges unsealed today describe cheating coming and going — specifically, insider trading first on the long side, and then on the short side, on a scale that has no historical precedent.

As a result of the blatant corruption of both the drug research and securities markets alleged, the hedge fund [for whom Martoma worked at the time] made profits and avoided losses of a staggering $276 million, and Martoma himself walked away with a $9 million bonus for his efforts.

UN Demands Obama Smash State Marijuana Legalization

Crossing a line in the sand

by  Alex Newman

In a move likely to further alienate the already unpopular United Nations from the American people, a top official with the global body put his ignorance about the U.S. constitutional system on full display by calling on the Obama administration to lawlessly quash recent marijuana legalization initiatives in Washington State and Colorado. Voters in both states approved the decriminalization of the controversial plant on November 6, nullifying unconstitutional federal statutes and a dubious UN narcotics agreement at the heart of the global “war on drugs.”  

While the international organization obviously has no power to enforce its dictates, UN “International Narcotics Control Board” (INCB) boss Raymond Yans said he hoped disgraced U.S. Attorney General Eric Holder would ignore state laws, the U.S. Constitution, and the will of voters by “challenging” the successful referendums. Similarly, a coalition of former federal “drug warriors,” citing UN agreements, called on Obama to speak out against the legalization measures before they were adopted by the electorate. The administration, meanwhile, has suggested that it would continue to enforce unconstitutional federal statutes in those states despite the nullification measures.

The “invisible” strangers that make our lives better

Giving thanks for the invisible hand, and productivity of the free market, and no turkey czar

by Mark J. Perry

Like in previous years, most of you probably didn’t call your local supermarket ahead of time and order a Thanksgiving turkey this year. Why not?  Because you automatically assumed that a turkey would be there when you showed up, and it probably was there when you showed up “unannounced” at your local grocery store and selected your Thanksgiving bird.

The reason your Thanksgiving turkey was waiting for you without an advance order? Because of the economic concepts of “spontaneous order,” “self-interest,” and the “invisible hand” of the free market.  Turkeys appeared in your local grocery stores primarily because of the “selfishness” and “self-interest” (maybe even greed in some cases) of thousands of turkey farmers, truckers, and supermarket owners who are complete strangers to you and your family.  But all of those strangers throughout the turkey supply chain co-operated on your behalf and were led by an “invisible hand” to make sure your family had a turkey on the table to celebrate Thanksgiving this year.  The “invisible hand” that was responsible for your holiday turkey is just one of millions of everyday examples of the “miracle of the marketplace” where “individually selfish decisions must lead to a collectively efficient outcome,” as economist Steven E. Landsburg observed.

Turkey's Weakest Export

Turkey says it wants to be a model for democracy in the Middle East. But so far its actions lag behind its achievements

BY GAMZE COŞKUN

The Arab Spring has prompted a lot of talk about Turkey's possible role as a model. Turkey's recent economic success and the relative liberality of its institutions have made it a point of reference to many in the Middle East.

Let's leave aside for the moment the issue of whether the Arabs really need a role model, since they're perfectly capable of establishing their own system without copying either Turkey or the West. Being a model is not only about having a well-functioning democratic system but also having the capacity to be able to foster it domestically and internationally and to be able to put rhetoric and aims into action. Does Turkey really offer a useful template for democratic values and institution building?

That Other War

The bloody conflict you didn't read about this week is in Congo, and it threatens to redraw the map of Africa

BY ANJAN SUNDARAM

One of Congo's biggest eastern cities fell to a powerful rebel force on Tuesday, Nov. 20, in a war that may redefine the region but has produced little political action by the United Nations, the United States, and international powers that heavily support neighboring governments -- notably Rwanda, a Western darling and aid recipient -- that are backing the violence, according to U.N. experts. The fighting has displaced nearly 1 million people since the summer, and the battle for the city of Goma marks the latest episode of a long struggle by Rwandan-backed rebels to take control of a piece of the Democratic Republic of the Congo -- a struggle the rebels are now decisively winning. The fighting has also highlighted the ineptitude of the United Nations mission, one of the world's largest and most expensive, charged with keeping Congo's peace.

U.N. Secretary-General Ban Ki-moon called Rwandan President Paul Kagame on Saturday "to request that he use his influence on the M23 [rebels] to help calm the situation and restrain M23 from continuing their attack," as the U.N.'s peacekeeping chief put it. And French Foreign Minister Laurent Fabius affirmed that the rebellion in Congo was supported by Rwanda, expressing "grave concern." But the violence has only escalated since. The U.N. Security Council called an emergency session over the weekend, but its condemnation of the violence, demanding that the rebels stop advancing on Goma and insisting that outside powers stop funding the M23 rebels, have all simply been ignored. The Security Council announced it would sanction M23 but did not even mention Rwanda, the main power behind the rebellion. And even as the fighting has intensified, the U.N. mission in Congo has been making public pronouncements about new access to drinking water for people in eastern Congo -- producing a surreal image of the war.

Here’s a BBC scandal that should really make you disgusted

If you cannot get even, at least get angry

By James Delingpole

How many of you reading this were abused by Jimmy Savile? Few if any, I would hazard. And while I don’t wish to play down the misery wrought over four or more decades by that loathsome perve, the BBC scandal I’m about to describe has resulted in damage, pain and destruction far more widespread than anything Savile managed.

It may have affected you, for example, if: you’ve had your view ruined and your property value trashed by a wind farm; you’re one of the 2,700 people killed in Britain last year by fuel poverty; you can’t get a job; you've lost your job; you’re skint; your kids can’t sleep because they’re so worried about the pets that are going to be drowned by the carbon monster; you've ever wondered why occasionally — even once would be nice — the BBC doesn't make a programme about ‘climate change’ which isn't relentlessly alarmist.

How Putin Is Turning Russia Into One Big Enron

The Battle for Oil and Power in Russia

By Anders Aslund
In a few quick decisions, President Vladimir Putin has devastated Russia's energy policy. This daring radical change of strategy will primarily hit state revenues. The essence of these policy changes is renationalization, a massive increase in capital expenditure and reduced efficiency.

For years, Gazpromhas carried out too large capital expenditures, 70 percent of which investment analysts euphemistically with call "value detraction," which really means corruption or waste. Now, Putin has decided to drive it to new heights. This month, Gazprom went ahead with its South Stream project, which is supposed to cost $20 billion, but will probably cost twice as much. Its sole purpose is to circumvent Ukraine. For the same reason, Gazprom plans to build two more Nord Stream pipes at a cost of probably $20 billion, but neither is needed. On top of this comes the massive investment program in Yamal. None of this adds any value.

Suddenly, on Oct. 29, Putin decided that Gazprom should develop the giant virgin Chayadinsk field in Yakutia, build a pipeline to Vladivostok and construct an LNG plant there for export to China. Officially, this project is supposed to be completed by 2017 and cost $40 billion, but investment analysts assess it at $65 billion.

Putin's explanation was that Gazprom had lost out on LNG for China. But Chayadinsk gas would cost $15 per million British thermal units, while the price of natural gas in the U.S. is $3 million British thermal units. Thus, this project will probably never become profitable. The Chinese prefer much cheaper Turkmen gas, which already flows to China through a pipeline.

Cows Flee California Seeking a Better Economic Climate

Why are cows voting with their hooves?

By Bill Frezza

It's not just millionaires and billionaires who are fleeing the economic madness in California. Even cows are starting to depart for greener pastures. That's right, 400 bovine refugees shuffled off to Kansas just this month, with more expected to follow as over 100 dairy farms in California close their doors.

It's hard to find a government program as insane as the complex web of price supports, market orders, direct payments, diversion programs, herd reductions, import barriers, export subsidies, and stacked-to-the-rafters cheese warehouses that characterize Uncle Sam's efforts to "rationally manage" the dairy market. If you really want to understand how crony capitalism works to create market conditions only a Soviet commissar could love, take a look at what happens when byzantine federal regulations collide with state interventions.

Around the time of the New Deal, guaranteeing the milk supply joined life, liberty, and the pursuit of happiness as one of the cardinal responsibilities of government. While this may be ascribed to a desire by politicians to always have enough babies to kiss, some suspect that buying the votes of dairy farmers had something to do with it.

And so, while presidents come and go and Congress regularly passes reform bills to correct distortions caused by prior reforms, dairy programs enjoy the closest thing to perpetual life that a lobbyist could hope for. The main task of these programs is to make sure that market forces will never be allowed to balance supply and demand.

To ensure the public good, the federal government and some states set a minimum legal price on milk. Selling milk for less can actually land you in jail. While this doesn't sound like such a good deal for consumers or innovative producers, it's great for well-connected dairy farmers and the politicians they support.

Artificially high prices impose a tax on anybody who drinks milk or eats cheese and other dairy products. Estimates put the cost to consumers as high as $5 billion a year. But since this tax is hidden, legislators get to enjoy the gratitude of dairy farmers without having to face the wrath of consumers, who remain in the dark about how much they are individually paying.