Europe's Poorest? Look North

ECB Survey Puts Southerners on Top in Household Wealth, Germans Near Bottom

By BRIAN BLACKSTONE and NINA KOEPPEN

German households are among the poorest—on paper, at least—in the euro zone, according to a study by the European Central Bank that adds a new twist to the debate over how far taxpayers in Northern Europe should go to support weaker countries.

The ECB's findings, released Tuesday, don't give the full picture of a society's living standards, which are affected by things like social protection and infrastructure as well. It also is based primarily on data from 2009 and 2010—early days in the still-festering euro crisis.

Most significantly, the report doesn't adjust for differing rates of homeownership, which is particularly low in Germany.

Nevertheless, the report offers a reminder that citizens in some of the countries hardest-hit by Europe's debt crisis aren't as bad off as many believe.

The question of how much taxpayer money should be put up to bail out governments in Greece, Cyprus and Portugal tops the political agenda in Germany, Europe's biggest economy and financial backer.

The ECB's findings could encourage efforts to further involve the private sector in any future government rescues by imposing wealth taxes or losses on large bank deposits, which would reduce the price tag for Germany and others, analysts said.

The figures "clearly give more weight for bail-ins" of the private sector in countries that need assistance, said Carsten Brzeski, an economist at ING Bank in Brussels.

The report, compiled through a survey of over 60,000 households across the euro zone, shows a dichotomy between cash-strapped governments and a rich citizenry, as high private-sector wealth didn't prevent governments in Southern Europe from racking up large debts.

By one ECB measure of typical households, Germany is the poorest country in the euro bloc, behind even Slovakia and Portugal. A number of factors appear to have skewed the results, such as the emphasis on homeownership, household size and small-business ownership that favors countries in Southern Europe.

Monetarism and Keynesianism

Identical Sides of the Same Adolescent Coin

By John Tamny

About the U.S. not being an impregnable economic island, monetarists should take note as their theory similarly presumes Fortress U.S.A.  They believe dollar credit is controlled by the Fed through the banks it regulates, as opposed to credit for dollars being a rather broad concept such that any Fed ‘tightness’ has historically been made up for by inflows of dollars (think the eurodollar market among countless others)  from around the world.

Monetarists correctly argued that inflation is always a monetary phenomenon, but the newly revived theory that was long ago dismissed even by Friedman is merely a variation of the much discredited Phillips Curve. To put it plainly, monetarism is a parallel version of Keynesian demand management.

Whereas Keynesians naively believe that government spending is a source of economic growth, monetarists in a similarly naïve way believe that money creation for the sake of it boosts the economy. Much as Keynesian demand through government spending allegedly increases growth and the price level, so does monetarist money creation per the other School’s theory. One School thinks government boosts growth, the other thinks money creation does, and both come to the same conclusion that inflation can be the end result of their central planning that allegedly leads to prosperity first. Comically, both sides believe that if they can manage the spending and money creation, that their expertise ensures a lack of what they presume inflation to be.

So while monetarism is associated with Friedman, and as such is viewed by some as ‘free market,’ make no mistake about what it really is. Monetarism, like its Keynesian twin, is central planning. Keynesians once again believe that growth is as simple as Washington taxing or borrowing away resources from the private sector so that it can be spent from the Commanding Heights. The juvenile logic underlying this school of thought is that when “aggregate demand” is down, governments must take funds from the private sector and spend without regard to the economic value of the spending.

Qatar Cuts Egypt Loose as Financial Picture Darkens

With the IMF loan in limbo and Qatar now unwilling to help out, Egypt may be at the mercy of the White House

By gail norton

Egypt’s death spiral is now scaring off even its closest friends. Last year, Qatar give an Egypt in crisis $5 billion in aid money. But Qatar won’t help Egypt anymore, according to the FT. Qatar’s decision comes as Egypt continues its downward spiral:

Shortages of diesel in recent weeks have already created long queues in filling stations, fraying tempers and sparking anger, while villagers frequently cut roads and railway lines over such grievances as water cuts and irregular gas supplies.

The country’s toxic political atmosphere, with fractious leaders intent on undermining each other, could also fan the flames of popular fury and speed up a descent into chaos.

On top of that, the rising price of imported food ingredients is putting heavy financial burdens on the country’s poor. Reuters reports:

Flour and sugar are 50 percent more expensive than they were a year ago, said [baker Mohammed] Alif, and for now the bakery feels it has no choice but to absorb the increase rather than passing it on to customers:

“I can’t make it more expensive because people cannot pay,” he said, pausing between filling shelves with freshly baked rolls and serving a steady flow of shoppers on the pavement.

A $4.8 billion grant from the IMF could stanch the bleeding, but it requires Egypt to accept austerity measures. Austerity remains deeply unpopular with most Egyptians, and politicians are reluctant to risk losing support among constituents.

With the IMF loan in limbo and Qatar now unwilling to help out, Egypt may be at the mercy of the White House. The Obama administration may be about to face a deeply ugly choice: watch Egypt sink further into chaos or ask Congress to send even more aid money than we’ve already promised—to bail out a Muslim Brotherhood government. 

Quotation of the Day…

From The Indispensable Milton Friedman 

… is from pages 250-251 of the collection of previously unpublished essays by Milton Friedman, The Indispensable Milton Friedman (Lanny Ebenstein, ed. 2012); specifically, it’s from the October 2000 interview with Friedman done by the producers of The Commanding Heights:

INTERVIEWER: Do you think the Chile affair damaged your reputation, or more importantly, made it harder for you to get your ideas across?

MILTON FRIEDMAN: That’s a very hard thing to say, because I think it had effects in both directions.  It got a lot of publicity.  It made a lot of people familiar with the views who would not otherwise have been.  On the other hand, in terms of the political side of it, as you realize, most of the intellectual community, the intellectual elite, as it were, were on the side of Allende, not on the side of Pinochet.  And so in a sense they regarded me as a traitor for having been willing to talk in Chile.  I must say, it’s such a wonderful example of a double standard, because I had spent time in Yugoslavia, which was a communist country.  I later gave a series of lectures in China.  When I came back from communist China, I wrote a letter to the Stanford Daily newspaper in which I said, “It’s curious.  I gave exactly the same lectures in China that I gave in Chile.  I have had many demonstrations against me for what I said in Chile.  Nobody has made any objections to what I said in China.  How come?” 

If Europe had only listened to Thatcher’s warning

Euro-skepticism Thatcher’s most relevant legacy

By Amotz Asa-El

 “I am not prepared to accept the economics of a housewife,” said Jacques Chirac in 1987.

Margaret Thatcher, to whom the future French president was referring, was then at the height of her career, having already won her place in history as the restorer of Britain’s economic resilience, and the winner of the Falklands War.

Yes, her macroeconomic gospel was as controversial as it was resolute. However, her stance concerning European federalism in general, and the launch of the euro in particular — now seem prophetic, despite the misgivings of adversaries like Chirac.

Thatcher arrived in power 50 years after the Depression. Her faith in human enterprise and market efficiency had been doubted in Europe for two generations. When she sold British Aerospace and Cable & Wireless, the very term privatization was hardly known, and even for the economists who did know it, it was but the theoretical antithesis of nationalization, the reality that dominated Britain’s postwar economy.

By the time of Thatcher’s political departure in 1990, the whole world knew what privatization was, as Britain had sold even a universally familiar brand like British Airways, and also shed behemoths like British Steel and British Coal.

The Invincible Mrs. Thatcher

Britain’s most recognizable and individual peacetime prime minister was also the first to be known by someone else’s name

By Charles Moore

Not long after she resigned as prime minister, in 1990, Margaret Thatcher began to write her memoirs. I met her at a dinner party and asked her what she would call them. The famous blue eyes flashed at me: “Undefeated!” she declared.

This expressed a sober arithmetical fact. Uniquely at that time in British politics, Margaret Thatcher had won three general elections in a row as party leader and had never lost any. Before she had the chance to contest her fourth, she was deposed by members of Parliament from her own party in a coup. Yet, even in that contest, the pure numbers were on her side. In 1990, when the Conservative Party staged a challenge to her leadership, she won more legislators’ votes than her main rival, but not enough to avoid a second ballot. Her Cabinet colleagues convinced her that she would be humiliated in the runoff, and she resigned.

In the end, those memoirs were given a more boring title (The Downing Street Years), but that one-word exclamation succinctly expressed the great Thatcher myth of invincibility. And in a sense it was true. Much more than any other modern British politician—particularly Conservative politicians accustomed to swimming against a leftish cultural tide—Margaret Thatcher fought, and Margaret Thatcher won. Her victory was so great that it changed her political opponents—the Labour Party—as much as it changed her own party. Her defeat of the left made Tony Blair possible. And today, with David Cameron having finally led the Conservatives back to No. 10 Downing Street and wrestling with a massive inherited government deficit, as Mrs. Thatcher did 30 years earlier, all the old debates have become relevant once more.

As well as elections, Margaret Thatcher won wars. When Argentina invaded the British colony of the Falkland Islands, in the South Atlantic, in April 1982, she sent a task force of 27,000 across the world and recaptured them by June. As the force set sail, she paraphrased Queen Victoria: “Failure—the possibilities do not exist!” With Ronald Reagan in the White House for most of her time as prime minister, she was able to re-forge a mighty defensive alliance that outpaced the Soviet Union and hastened the end of the Cold War. After Saddam Hussein invaded Kuwait, in September 1990, she attended a conference with Reagan’s successor, George H. W. Bush, who was undecided about how best to act. She told him, “Look, George, this is no time to go wobbly!”

Looking Back at Reagan

He was the last president who even glanced at the Constitution once in a while

by Joseph Sobran
Reading Ronald Reagan’s newly published letters reminds me how much I’ve always liked him, even after I stopped admiring him as a president. He was always a modest, decent, good-humored man, with more common sense and a keener sense of proportion than most politicians. And he loved a good laugh.
But the very qualities that made him charming and convivial underscored the absurdity of entrusting him, or any man, with the awful power of the American presidency. The superlatives his adulators heap on him seem as wide of the mark as the exaggerations of his detractors: he was really quite an ordinary man, and he never pretended to be anything else. He should never have had all that power, but who should? At least it should be in the hands of a man who didn’t take himself too seriously and wouldn’t abuse it as grossly as most.
He only shocked me once. That was in 1983, shortly after the grisly bombing of the U.S. Marine barracks in Lebanon, when he ordered the retaliatory shelling of a village that was said to be a terrorist stronghold. Such an act was bound to kill indiscriminately. It was murder! And the Ronald Reagan I knew wasn’t a murderer! This couldn’t be happening!

Britain’s Conviction Politician

Even her adversaries knew that Margaret Thatcher meant what she said

by PETER WHITTLE

Within hours of Margaret Thatcher’s death, some concerned voices on the Left expressed hope that their comrades would have the self-possession to remain reasonably dignified in reacting to the news, bearing in mind that this was not just the passing of an obviously towering political figure, but also of a frail 87-year-old lady. You’d think such an appeal to decency would be unnecessary, but that is to be unfamiliar with the more unhinged elements of the British Left, which, in the former prime minister’s declining years, have boasted of the parties they would throw when the day finally came. As I write, the ugliness is already evident: the hard-left Member of Parliament George Galloway has taken to Twitter with the message “Tramp the dirt down,” and the Durham Miners Association has declared Thatcher’s death “a great day” for coal miners. Not far from where I sit, the long-running stage musical of the film Billy Elliott—set during the 1984 miners’ strike—features a song celebrating the future death of the hated lady. I wonder what will happen when it gets performed tonight. Will it be left out of the show from a sense of decorum, if nothing else? Or will it be sung with even greater gusto? Perhaps the latter, given the cultural and artistic establishment’s abiding hatred for a woman whose greatness often seemed better appreciated outside Britain.

That Margaret Thatcher inspired loathing as well as adoration—that she was what the media habitually call “a divisive figure”—is beyond doubt. But the nature of that loathing is revealing. Its intensity derives not just from opposition to her policies, or even to the fact that she trounced her opponents in three straight elections. It stems from bitterness among the formerly entrenched Left about something more fundamental: a realization that it has lost the argument.

Some of the criticisms of Thatcher by the great and good of the cultural elite went beyond pure political antipathy. They were marked by naked, unashamed snobbery and sexism. They hated her not just for what she believed, but also for what she was, a grammar-school-educated meritocrat from lower-middle-class origins. This is partly a characteristic of British society. Whereas few, if any, Americans knew what Ronald Reagan’s father did for a living, everybody in Britain knew Thatcher was a grocer’s daughter.

The Real Cyprus Template

The One You're Not Supposed To Notice

by Charles Hugh-Smith

The Real Cyprus Template reveals the core-periphery Neocolonial-Financialization Model in all its predatory glory.

Much has been said about "the Cyprus Template" (the so-called bail-in, where deposits are expropriated to recapitalize the insolvent banks), but virtually nothing has been written about the Real Cyprus Template.

Longtime correspondent David P. (proprietor of Market Daily Briefing) charted some very interesting data that enables us to follow the money--specifically, Eurozone money in the "foreign deposit sources" (deposits in Cyprus banks that originated from outside Cyprus).

It appears the key preliminary step of the Real Cyprus Template is that money-center banks in Germany and other "core" Eurozone nations pull their money out of the soon-to-implode "periphery" nation's banks before the banking crisis is announced.

As David observed, "I think this explains a lot about something that has always puzzled me: why the delay in resolving Cyprus after the Greek haircut?"

Here is David's explanation and two key charts:

---

"The Cyprus situation had been simmering for at least a year when in March of 2013 it finally broke; Cyprus had a week to take care of its banking situation or else face a cutoff of access to the eurosystem by the ECB. This brought matters to a head; the Cyprus Bail-In was finally settled upon, where uninsured depositors in the two largest banks in Cyprus took major haircuts, and must wait for return of their money until the assets of the banks are run down.

The banking problems in Cyprus had their roots in the Greek Sovereign Default, and were known by the general public for about a year prior to the recent default; a New York Times article dated April 11, 2012 lays out the particulars.

Looking at Cyprus bank security assets in data provided by the ECB, the problems were visible earlier - right after the first Greek haircut in mid 2011, and a second haircut finalized in early 2012. This was a 11 billion euro hole in a system with 100 billion in assets total, centered upon two banks that held half the deposits in the system.

Greek Crisis Timeline

Date	Event
April 2010	Greek Sovereign Bonds Declared Junk
May 2010	110 Euro bailout, no haircut
July 2011	"Private Sector Involvement" decided at EU Summit
Oct 2011	130 Euro bailout, 53% face value haircut
Mar 2012	Haircuts take effect; actual haircut 85%

You can see the effects of the increasing haircuts in the chart below. The chart lists all types of bonds owned by all the banks on Cyprus. The red line is the important one. It shows "all off-island Eurozone Government Bonds."

The Fruits of Moral Hazard on a Global Scale

Inevitable Catastrophe

Insulate participants from risk with policies like the Bernanke Put and you guarantee destruction of both the market and institutional legitimacy

By Charles Smith (June 24, 2011)

Identify the common characteristic of these three statements:

1. The Federal Reserve will never let the stock market decline, i.e. the "Bernanke put"

2. The Chinese government will never let property prices decline

3. The European Central Bank will never let Greece default

The answer of course is moral hazard: a person who is insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government. The global financial authorities’ success in propping up assets (stocks in the U.S., real estate in China, banks in Europe, etc.) over the past three years has strengthened this asymmetric disregard for systemic risk into a dangerously quasi-religious faith that central banks and governments have essentially unlimited power to keep asset prices aloft via printing money, manipulation of markets and financialization of their economies.

What happens if markets crumble despite massive, sustained central bank and government intervention? The institutions that created moral hazard will be revealed as false gods, and that faith will be destroyed.

This loss of faith in the transparent functioning of markets will trigger what I call the delegitimization of both the markets and the institutions which have essentially promised a permanent upward bias in assets.

We can see the global scale of this central bank-cnetral State induced moral hazard in the tight correlation of all markets: the stock exchanges rise and fall in near-perfect unison, oil and gold rise and fall in parallel with equities, and so on.

As I have noted before, beneath the surface there is really only one trade in the entire global marketplace: all assets on one side and the U.S. dollar on the other. Correlation is not causation, of course, but it is more than peculiar that every decline in global equities is matched by a concurrent rise in the dollar.

Transparent, independent markets do not move in lockstep. The campaign to prop up all asset classes with implicit guarantees of intervention has completely insulated institutions and punters who believe that the Bernanke Put and the Chinese government's equivalent prop under real estate is not just policy but a guarantee of god-like power.

Thus the gains from gargantuan speculative bets are yours to keep, and any losses will be made good by the central bank or government. This is the ideal recipe for misallocation of capital and speculative derangement on an unprecedented scale.

Moral hazard is the ultimate perverse incentive: it rewards all that is unproductive and risky and punishes long-term investment and prudent risk assessment.

A second feature of the global central bank's moral hazard is the necessity to punish any punters who dare to bet against the banks' manipulations. Thus Fed Chairman Bernanke could opine that oil would decline and presto-magico, a "surprise" release of oil by central authorities occurs the next day.

This second feature of central bank manipulation leaves a market devoid of short sellers and thus of any buyers as markets crumble.

Once trust is lost, it cannot be won back. Once participants' faith in the markets and in the god-like power of central bank intervention is crushed, the markets will lose participation on a grand scale. The authorities' favorite game, goosing asset prices to create an illusion of recovery and rising wealth, will be revealed as a global fraud.

Announcements of future interventions will be scornfully dismissed and thus they will have lost their power to prop up the markets.

All of this flows from the very nature of moral hazard: insulate participants from risk and give them unlimited leverage and "free money" to play with, and what you eventually end up with is catastrophe. There is no other possible end state.  

Germany’s account surplus jumps, no one is happy

Europe is a cauldron of uncertainty

By David Marsh

All Germany’s biggest European trade partners are in—or close to—recession, with output in the 17-member economic and monetary union (EMU) region contracting 0.4% last year and likely to fall by a further 0.1% this year, according to latest forecasts. Yet Germany’s current account surplus, measuring trade in goods and services as well as transfers to and from other countries, ballooned to a near-record 7% of GDP last year, the eighth consecutive year that the surplus has equaled or exceeded the 5% level widely regarded as unsustainably high for any other than leading energy-exporting countries.

A significant reason for the rise in the surplus was weakness in German imports which, according to the Bundesbank, was due to “raised uncertainty” among companies in Germany which might otherwise be importing foreign goods for domestic investment.

However, the higher surplus also reflects continued export success: a product of Germanic economic flexibility and the country’s sharp rise in trade with non-euro countries.

Germany still relies on Europe for about 69% of its exports. But, strikingly, European states outside the euro—ranging from Russia, Turkey and Poland to the U.K., Switzerland and Sweden—now account for nearly as much of Germany’s overall export total as countries within the euro.

Of Germany’s five top trading partners, three are outside the euro: the U.S., China and the U.K. According to the German Federal Statistics Office, on a relatively narrow measurement, Germany’s main five trading partners last year were, in descending order: France (with €169 billion), the Netherlands, China, the U.S. and the U.K.

However, taking into account the more extensive export and import figures (such as goods held in warehouses) from the Bundesbank’s balance of payments statistics, as well as trade in services, the U.K. comes out on top of the list of Germany’s 2012 trading partners, with an export and import total of €213 billion, followed by the U.S., France, the Netherlands and China.

EMU was supposed to produce economic stability. Yet, five years after the financial crisis, Europe is a cauldron of uncertainty. The sobering truth about the large current account surpluses heaped up by Germany and EMU’s other prime creditor country, the Netherlands, is that Europe’s monetary set-up has consistently produced much larger imbalances than those that caused the collapse of the Bretton Woods fixed exchange rate system 40 years ago.

The record-breaking run of surpluses has propelled Germany’s net foreign assets to €1,000 billion for the first time, according to latest Bundesbank figures for end-September 2012. Not that Germany’s burgeoning foreign assets are generating any rejoicing in Germany. Quite the opposite.

In an astonishing turnaround in the balance sheet of Europe’s largest economy, nearly 90% of the country’s net foreign assets are held by the Bundesbank, in the form of its currency reserves (including gold) and, above all, the now-celebrated Target-2 loans to the European Central Bank (ECB), representing indirect claims on the weakest members of EMU.

How to avoid a bloodbath in North Korea

A dictator with a sense of humor

America's oil and gas revolution

The U.S. will be an exporter of energy and drilling technologies well into the future

By Mark J. Perry

To grasp the importance of the revolutionary change in oil and gas drilling sweeping across the United States -- and its significance for our economy -- just consider how far behind the rest of the world is lagging.

America's innovative use of energy technology by "petropreneurs" is rejuvenating oil and gas production. Thanks to the combination of hydraulic fracturing and horizontal drilling in shale deposits, along with advances in seismic imaging that allow geologists to examine deposits more than a mile underground, energy resources long presumed to be beyond reach are now being tapped, or at least will be eventually. And it's happening as a result of something unique about America.

"In most of the world, if people are living on the land and there's hydrocarbons underneath it, they will fight it," Bob Dudley, group chief executive of BP, said recently in an interview with the Wall Street Journal. Private ownership of mineral rights in the U.S., along with an existing network of pipelines, enables oil and gas to find their way to market. And this, Dudley said, has given America its big head start.

The upshot is that a United States reliant on imported oil and natural gas is a thing of the past. To be sure, the U.S. will continue to be subject to world oil prices, and supply disruptions in the world will still create price spikes. But an abundance of domestic oil -- and growing use of natural gas in truck fleets -- will dampen price volatility, providing more stability for consumers.

How iron was the Iron Lady?

Both right-wing eulogisers and left-wing partiers are wrong

by Tim Black 

Margaret Thatcher, British prime minister between 1979 and 1990, died yesterday aged 87. But the myth of Margaret Thatcher, and the ersatz ideology named after her - Thatcherism - is still very much alive.

For the remnants of the right, especially dyed-blue Tories, the idea of Thatcher is predictably important. Her era, her electoral successes in 1979, 1983 and 1987, appears as something to be celebrated, a period of apparent success to be basked in. Once regarded as ‘the sick man of Europe’, awash with industrial conflict and a sense of inevitable post-colonial decline, Britain was said to be restored to health by Thatcher, runs the typical narrative. As current prime minister David Cameron put it: ’We have lost a great leader, a great prime minister and a great Briton.’

But for many of those who today preen themselves as left-wing, the idea of Thatcher is arguably even more important. And that’s because she can be blamed for everything that is wrong today. She may have left office nearly a quarter of a century ago, but so potent was the ideology she apparently promulgated - Thatcherism - that we as a nation continue to be in thrall to it. As one prominent left-wing columnist stated yesterday: ‘Thatcherism lives on. Nothing to celebrate.’ Ex-London mayor ‘Red’ Ken Livingstone agreed: ‘In actual fact, every real problem we face today is the legacy of the fact she was fundamentally wrong.’

Elsewhere, Johnathan Freedland at the liberalish-leftish Guardian joined the Thatcherism Lives chorus: ‘The country we live in remains Thatcher’s Britain. We still live in the land Margaret built.’ At the much-reported-upon, little-attended street parties in Brixton and Glasgow, staged in ironic honour of Thatcher’s passing, the belief that her ideas still walk among us was palpable. In the words of one 28-year-old student: ‘It is important to remember that Thatcherism isn’t dead and it is important that people get out on the street and not allow the government to whitewash what she did.’

Indeed, given the power, the brain-melding ideological force, with which Thatcher has been invested since her 1980s heyday, it is unsurprising perhaps that the Judy Garland song ‘Ding dong, the witch is dead’, from 1939 film musical The Wizard of Oz, is now being tipped for a No1 spot in the charts. For too many, Thatcher really has become a supernatural, witch-like figure, responsible for everything that is rotten in the world.

Is Divorcing An Abusive Spouse Ever Too Expensive?

The EU may soon face a Pyrrhic choice....

By John Mauldin

An old joke asks "why does a divorce cost you half your money?" with the answer being "because it’s worth it". After all, there is little worse than being stuck in a loveless, tense, or even downright hostile relationship. Which, of course, is what the eurozone has become, without even the excuse of keeping the show on the road for the kids’ benefit. In the eurozone’s loveless marriage, no-one dares to move out because the potential costs of that action are so unclear. However, with the news that French unemployment continues to scale record heights, that the Bank of Spain has just downgraded Spain’s growth forecasts from -0.5% to -1.5% and that Spanish unemployment will consequently rise for a sixth year in a row to a likely record high of 27%, that European car sales continue to plummet, etc... the question remains open as to how much abuse the various spouses are willing to take?

For now Cyprus clearly wins in the battered wife stakes: daily cash withdrawals from banks are limited to €300, time-deposits (even those below €100,000) are frozen until further notice, etc. And needless to say, like every abusive husband, the Troika offered up the usual contradictory messages of "Cyprus was looking for its beating" and "it will never happen again". And so the question now faced by Europe’s other, battered wives (i.e., investors in "fiscally-challenged" countries and other European Monetary Union bank depositors) is whether this abusive husband has seen the light? Or whether the next time the pressure boils, the Troika’s punches will again fly, thereby extinguishing any notion of European solidarity, any dream of banking union, and any hopes that eurozone nations will stop sleeping in separate rooms and instead jump in the same bed of a common fiscal union needed to live harmoniously under a common monetary roof?

The "good news" is that Europe’s battered wives may not have to wait that long to find out whether the Troika has turned a new leaf.

Why Are Workers Giving Up?

How long can one-half of America carry the other?

By PATRICK J. BUCHANAN

That America created only 88,000 jobs in March, less than half the number anticipated, was jolting news, indicating the recovery that the White House has boasted about may not be at hand.

But in that March jobs report, there was more disturbing news.

While unemployment fell to 7.6 percent, the reason it fell is alarming.

Half a million U.S. workers (495,000) disappeared from the labor force. They dropped out. They are no longer even looking for a job.

Worse, this appears to be an inexorable trend. The participation rate of eligible workers in the United States has fallen to 63.3 percent, a level unseen since Jimmy Carter gave his malaise speech in 1979.

These folks, who have quit working and quit looking, who are they? How do they support themselves? What does this surging dropout rate from the workforce portend for America’s future?

Defending democracy from the demos

The political classes’ fear of right-wing populism is really a fear of volatile voters

by Baris Tufekci 

A few weeks after February’s Eastleigh by-election in the south of England, the centre-left, Labourite think tank Policy Network published a report titled Democratic Stress: The Populist Signal and Extremist Threat. It addresses the problem of ‘right-wing populism’. It argues that populist parties like the UK Independence Party (UKIP) are threatening, or ‘stressing’, liberal democracy in Western Europe and elsewhere because they are undermining the ‘political mainstream’ - that is, the realm of ‘parties who sit comfortably within the pragmatic, pluralistic and institutionally bounded traditions of Western liberal democracy’. If democratic wellbeing is to be secured, mainstream parties must change their relationship with the public, the report says.

Apparently there are three political approaches today ‘which are consequential in terms of real world outcomes: the mainstream, populism and extremism’. The parties of the mainstream – whether ‘centre-right’ or ‘centre-left’ – have common cause in opposing approaches to politics that are contrary to their own ‘style and content’. While populism currently tends to take right-wing forms (UKIP, the Tea Party in America, the French Front National), populist challenges to the mainstream can also emerge from the left, the report argues. And any approach to politics that runs counter to that of the ‘liberal democratic’ mainstream is suspect and a cause for concern.

The report says liberal democracy’s virtue lies in its array of checks and balances on majority rule. The ‘populists’, by contrast, demand a democracy in which ‘the will of the morally pure majority is enacted - without much if any obstacle’. By wanting to impose majority rule, the populists don’t appreciate ‘social complexity’. Nor do they accept that complex bureaucratic institutions like the EU should have the right to impede what individual states can achieve. Liberal democracy is sensitive to these limitations and it has a range of institutional constraints on majority decision-making that safeguard minority interests. À la Robert Dahl, the report champions liberal democracy as a kind of ‘polyarchy’, a form of ‘minorities’ rule’. Its aim is to protect minorities from a majority that would otherwise engulf, overpower and oppress them.

The Myth of Margaret Thatcher

Conservatives must come to grips with the noble failure of the Iron Lady

By PETER HITCHENS

“The Iron Lady,” the cruel motion picture about Margaret Thatcher, makes much of her decline into bemused old age. It arouses sympathy for her among the undecided, and passionate sympathy among those who already revere her. No wonder. I cannot think of any other living person who could have been treated in this fashion. In a way it is a compliment to her that, even in the lonely, desolate weakness of her final years, her enemies—the unintelligent, intolerant left—continue to hate her.

With such people attacking her, it is hard not to rally to her side. But what about those of us who have an uncomfortable and growing suspicion that she was not as good as she is made out to have been? I am one of them. I still cannot resist the feeling that her reputation is not just inflated but damaging to the conservative cause.

I last saw her some years ago at a London publisher’s party, terribly diminished, surrounded by fawning persons who did not seem to see that she was unhappy, lonely, and puzzled. I felt almost ashamed to be there.

For I had been a minor witness of her great days, as we then thought they were. I was sometimes among the traveling press crouched in the back of her majestic but obsolete Royal Air Force plane as she zipped frugally across the world, to be admired and to tell other people what to do.

It was not intimate contact, but we saw more of her than most people ever could. Sometimes we would be summoned to her cabin for interminable briefings which never yielded anything worth writing—for to us she was just the same in private as she was in public. What journalists want from close contact is indiscretion and mischief. She, being a real leader, who sought power to do what she thought was good, was simply not interested in that. She was not really a politician, but a real human being who had entered politics to do what she wanted.

Fyodor Dostoevsky Was a Prophet

Dostoevsky’s 6 Nightmare Prophecies That Came True in the 20th Century

By R.J. Moeller 

Few people in the last 200 years understood human nature and mankind’s fallen state quite like Dostoevsky. His uncanny abilities to dissect the pathology of a killer or the spiritual joy of a contented Russian peasant have inspired generations of writers, thinkers, and even psychologists for a century and a half.

But more than simply being an insightful novelist on the human condition, Dostoevsky turned out to be a truly prophetic voice in his predictions of the dangerous and deadly places where certain ideologies and philosophies popular at the time would lead his beloved Russia in particular, and the modern Western world in general.

In the course of a number of his books – The Devils (aka The Possessed) and The Brothers Karamazov, for example – he foretold of the coming socioeconomic and geopolitical nightmares that awaited 20^th century societies that would adopt progressivism, nihilism, and socialism as their guiding principles. His words carry with them a deeper weight since Dostoevsky lived during his youth as a progressive ideologue eventually sentenced first to death and then, after a mock execution meant to “get his attention,” to four years of hard labor in Siberia.

He returned a deeply religious man and, after spending a few years in Europe investigating the teachings of leading Western intellectuals, a vehement anti-socialist.

In describing the underlying motivations of the young, radical, rabble-rousing character Peter Verkhovensky in The Devils, Dostoevsky said:

He’s a kind, well-meaning boy, and awfully sensitive…But let me tell you, the whole trouble stems from immaturity and sentimentality! It’s not the practical aspects of socialism that fascinate him, but its emotional appeal – its idealism –what we may call its mystical, religious aspect – its romanticism…and on top of that, he just parrots other people.

In the Army Now: Gangs, Nazis & the Mentally Ill

A new book chronicles how the War on Terror opened the ranks to risky recruits

By CLARK STOOKSBURY

Since the Vietnam War, America’s more successful interventions have been brief. That war engendered a legitimacy crisis in the United States military. Domestically, large numbers of young men resisted the draft or took advantage of deferments, but conscription still kept the armed forces supplied with men. In Vietnam, the military was riven by drug use, racial strife, and “fragging”—the assassination of unpopular officers by their troops. Operation Desert Storm in 1991 may be a model for a successful large-scale intervention post-Vietnam: the coalition allied with the United States dropped some bombs and sent an overwhelming ground force; Saddam capitulated while Lee Greenwood provided the soundtrack. If one ignores pesky issues such as the fate of Iraqi Kurds who were encouraged to rebel and the blowback from stationing U.S. troops in Saudi Arabia, the first Gulf War was a big success.

The United States fares worse when our goals are more ambitious and the enemy doesn’t quickly fold. When a volunteer army becomes bogged down in an unpopular war, protesters don’t fill the streets the way they did in 1969, and soldiers don’t “frag” their officers—people simply stop joining the military. The quest to fill that enlistment gap is where the investigative work of English journalist Matt Kennard comes in. In Irregular Army, Kennard documents a series of disturbing trends in the military: lowered standards, inadequately treated mental-health and substance-abuse problems, and the enlistment and retention of white supremacists, Nazis, and gang members.