Danes as Most-Indebted in World Resist Credit and Mortgages

Mortgage borrowing slowing down is not necessarily a bad thing

Pedestrians look at residential apartments and houses displayed for sale in the window display of an estate agent in Copenhagen. Danes’ personal debt is 267.31 percent of income, according to Eurostat data compiled by Bloomberg.

By Frances Schwartzkopff

Danes, the most indebted people in the world, are losing their appetite for credit.

After amassing personal debt equal to almost three times income, mortgage borrowing grew at the slowest pace last quarter since 2000, the Association of Danish Mortgage Banks said this month. Bank lending at Nordea Bank Denmark A/S, the country’s second-largest lender, fell to its lowest in more than a year.

From a risk perspective, it’s good that consumers are deleveraging,” Anders Jensen, chief executive officer of Nordea Bank Danmark A/S, said in an interview. “From an income perspective, we won’t make any money from lending.”

Denmark is the Scandinavian economy hardest hit by the global financial crisis. Households have watched their personal wealth drop by 400,000 kroner ($69,900) on average since theproperty market peaked in 2007, according to Danske Bank A/S. (DANSKE) After the real estate bubble burst in 2008, house prices plunged more than 20 percent, wiping out more than 12 banks and driving the economy into a recession that lasted into 2009.

Gross domestic product contracted 0.5 percent in 2012, the country’s worst economic performance in three years. Consumer spending, which makes up half the $300 billion economy, dropped 0.1 percent in the fourth quarter, declining for a third consecutive period,Statistics Denmark said April 4.

Denmark’s government estimates the economy will grow 0.5 percent to 1 percent this year, less than both Sweden and Norway. While Denmark’s krone peg to the euro has protected exporters from currency gains, the nation’s housing crisis has undermined consumer confidence.

Spending Declines

Against that backdrop, consumers don’t dare borrow more, said Las Olsen, a senior economist at Danske Bank. Danes are taking advantage of lower interest rates to make bigger principal repayments on their mortgages, central bank data showed today.

In the first quarter, homeowners amortized 7.5 billion kroner, compared with 6.7 billion kroner a year earlier, the central bank estimates.

“When rates are low, the principal payment makes up a larger portion of a debt instalment,” Ane Arnth Jensen, head of the Association of Danish Mortgage Banks, said today in a note. “That’s what we’re seeing now, with an average effective rate on mortgages at an historic low of 2.9 percent.”

Time to end UK art’s dependency culture

State funding suffocates the arts with policy making imperatives

by Denis Joe 

Maria Miller took up her post as secretary of state for culture, media and sport last September. After the distraction of the Leveson Inquiry, she has finally got round to discussing the ‘culture‘ bit of her brief.

Her speech, ‘Testing times: fighting culture’s corner in an age of austerity’, delivered at the British Museum last week, was brimful with ministerial cliche: the arts are ‘educational’, ‘socially beneficial’, ‘good for trade’, and so on. But the central tenet of Miller’s speech was that art can be profitable. Miller went on to list recent success stories such as the Olympics and Liverpool’s year as Capital of Culture in 2008, highlighting how much money those events brought into the cities.

But here’s the thing: pouring money into the arts has little impact on broader society. It does, however, have a negative impact on the arts themselves.

In the case of Liverpool, there was a spectacular increase in revenue during 2008, but five years on very little has changed. As a report from Liverpool Hope University noted recently, ‘since being announced as the 2008 Capital of Culture, the urban-regeneration focus has… shifted toward the city centre and away from the city’s marginalised communities… Liverpool still contains some of the most disadvantaged areas in the UK and is the UK’s most deprived local authority.’

The people of Liverpool do not seem to have been any more inspired by Capital of Culture year either. The Royal Court Theatre continues with its endless cycle of ‘taking the piss out of Scousers’ shows. Operas at the Empire still play to a third of the venue’s capacity, unless it’s Puccini or Verdi’s better-known works. Audiences for poetry events continue to attract only poets. The only people who still talk about 2008 are councillors.

The development of the Mersey Docks and the Liverpool-Manchester canal are the sorts of projects that have a real economic value: they provide jobs and they improve transport infrastructure. Art is useless. The only value it has is that which we impose on it.

The Great Society needs to be replaced by the Free Society

America on Welfare

By Doug Bandow 

Living the good life on welfare. Even the Europeans recognize that they pay a high price for creating an increasingly dependent society. 

Denmark has been transfixed by the revelation of a 36-year-old single mother who collects more in benefits than many Danes earn at work, and has done so for two decades. Worried Karen Haekkerup, Minister of Social Affairs and Integration, people “think of these benefits as their rights. The rights have just expanded and expanded.”

But it’s really not that much different in the U.S., the nominal home of the free. Nearly two decades ago welfare reform briefly captured political attention and won bipartisan support. The effort was a great success. But most welfare programs remained untouched and the gains have been steadily eroded. 

Today nearly 48 million people, almost one out of every six Americans, receive Food Stamps. Outlays on this program alone have quadrupled in just a decade. Indeed, the government actively promotes the program, encouraging people to sign up. Other welfare programs also are growing in reach and cost. The Congressional Budget Office recently pointed to “increases in the number of people participating in those programs and increases in spending per participant.” The U.S. isn’t that far behind Europe.

Indeed, America, like Europe, has a veritable welfare industry. A forthcoming report from the Carleson Center for Public Policy, named after Reagan administration welfare chief Robert Carleson, charges that “The federal government has spawned a vast array of redundant, overlapping and poorly targeted assistance programs.” Authors Susan Carleson and John Mashburn count 157 means-tested programs intended to alleviate poverty. There were more than two score housing programs, more than a score of nutrition programs, almost as many employment/training and health programs, and lesser numbers of cash assistance, community development, and disability programs. More expansive definitions count even more programs — 185 total, according to Peter Ferrara.

No surprise, the welfare industry is expensive. Social Security is the single most costly program, but more goes collectively to welfare. Today government at all levels spends around $1 trillion a year on means tested anti-poverty programs. And that amount is just going up and up. 

Total federal and state welfare spending rose from $431 billion in 2000 to $927 billion in 2011. Both parties are responsible, but President Obama bears particular responsibility. Last year, explained my Cato Institute colleague Michael Tanner: “Welfare spending increased significantly under President George W. Bush and has exploded under President Barack Obama. In fact, since President Obama took office, federal welfare spending has increased by 41 percent, more than $193 billion per year.”

And this is just the start. From 2009 to 2018, figured Heritage Foundation scholars Robert Rector, Katherine Bradley, and Rachel Sheffield, at current rates the federal government will spend $7.5 trillion and states will spend $2.8 trillion on welfare, for a total of $10.3 trillion.

Germany's Perspective

Southern Europe's Shadow Economies

by Christopher Sultan

Much has been said about the relative disparity of wealth between Germany and the rest of Europe, with the conventional wisdom being that Germans are rich and everyone else poor. This assumption has been challenged to the core recently, with some studies even suggesting that median household wealth in places like Cyprus is far, far greater than that of Germany, contrary to previous assumptions. In turn, this helps to explain the lack of "eagerness" of the Germans to constantly "assist" with the bailouts of peripheral countries by directly funding or assuming debt guarantees, or otherwise be loaded with the primary burden of future inflation if and when the ECB's creeping monetization of European debt, both directly and indirectly via PIIG bank collateral, unleashes the Weimar flashback tsunami. In this context, it is easy why it was the Germans who were intent on demolishing not only Russian billionaire savings (which as the Spiegel article below demonstrates, Germans are convinced are largely ill-gotten and hidden), but also why the punishment should stretch to uninsured depositors.

After reading the Spiegel article below, which reveals so much about German thinking, it becomes very clear that not only is Cyprus the "benchmark", but that the second some other PIIG country runs into trouble again, and its soaring non-performing loans inevitably demand a liability "resolution" a la Cyprus, it will be Germany once again at the helm, demanding more of the same equity, unsecured debt and ultimately depositor impairment. As the following punchline from Spiegel summarizes, "It would be more sensible -- and fairer -- for the crisis-ridden countries to exercise their own power to reduce their debts, namely by reaching for the assets of their citizens more than they have so far. As the most recent ECB study shows, there is certainly enough money available to do this." And that is the crux of the wealth-disparity demand of the European Disunion.

From Spiegel, by its staff

The Poverty Lie: How Europe's Crisis Countries Hide their Wealth

How fair is the effort to save the euro if the people living in the countries that receive aid are wealthier than the citizens of donor countries like Germany? A debate over a redistribution of the burdens is long overdue.

The images we see from the capitals of Europe's crisis-ridden countries are confusing to say the least. In the Cypriot capital Nicosia, for example, thousands protested against the levy on bank deposits, carrying images of Hitler and anti-Merkel signs, one of which read: "Merkel, your Nazi money is bloodier than any laundered money."

UK Austerity?

Sluggish growth shows Big Government still holding back economy

By Rory Meakin

Five years on from the start of the recession, with GDP still 2.5 per cent lower than it was then, it speaks volumes about the feebleness of the economy that today’s announcement of meagre growth last quarter was greeted with relief. But it’s not just the overall level of growth which is worrying, the dominance of Government growth is also a major concern.

GDP was up a paltry 0.3 per cent compared to the previous quarter, and up 0.6 per cent on the same quarter last year. Compared to 2008, it was down 0.5 per cent. But Government was up 0.5 per cent on last quarter, up 1.2 per cent on the same quarter last year and up 6.9 per cent on 2008. Our bloated and still growing Government might give the economy some short term relief from adjusting to new circumstances. But five years on, we’re not in the short term anymore.  

Luxembourg Is Not The Next Cyprus, Not Yet, But....

It's getting closer

By Wolf Richter   

The Grand Duchy of Luxembourg, with a population of just over half a million, smaller even than the other speck in the Eurozone, the Republic of Cyprus, ranks in the top three worldwide in per-capita GDP. In a Eurozone wealth survey, it had the highest average household wealth – €710,100. Only Cyprus, a former off-shore banking center in the Eurozone, came close. Yet Luxembourg is threatened with ruin.

It has 141 banks – bank companies, not ATMs. One bank per 3,808 people. Most of them do private banking. The financial sector added 38% to GDP in 2010 and contributed 30% to the country’s tax revenues, according to the Luxembourg Bankers’ Association (ABBL). All due to bank secrecy and tax laws. But suddenly, after Cyprus had been massacred, Luxembourg buckled.

With the big German guns, and the smaller guns from other nations, swinging in its direction, Luxembourg agreed to participate in an international automatic data-sharing arrangement that would send banking data of foreign clients to their countries, starting in 2015. Prime Minister Jean-Claude Juncker, somewhat defensively, proclaimed that lifting bank secrecy wasn’t such a big deal, that Luxembourg didn’t live from tax evasion. For the banks, the “lights won’t go out in 2015,” he said.

During the entire Eurozone bailout debacle that he presided over until February as President of the Eurogroup, he’d proven to be time and again an inveterate optimist.

“It’s expected that only 60 to 70 banks will survive in the coming years,” declared Alain Steichen, a prominent Luxembourgian tax lawyer, at a conference about the consequences of the data-sharing agreement. He should know. Per his online profile, he “assisted Thomson in the merger acquisition of Reuters in order to form Thomson Reuters, with the group’s main holding location being Luxembourg.” He also “assisted Chase Manhattan in the merger acquisition of JP Morgan in order to form their main holding company in Luxembourg.” Yup, there are a lot of benefits to doing business through Luxembourg.

Combine bank secrecy with nominee corporations to get a particularly juicy cocktail. An entire industry of “fiduciaries” has formed around the banks for that purpose. These accounting, audit, and law firms set up and maintain tax-advantaged nominee corporations, the infamous mailbox companies, whose directors and top executives are principals of the fiduciary firm. The client and the source of money remain anonymous to the outside world. A perfect setup for money laundering. Because the bank is doing business with a Luxembourg mailbox company, not a foreigner, and because the signatories are pillars of Luxembourg’s society, the setup is impervious to the automatic data-sharing arrangement. But now mailbox companies too are under attack, not only in Europe, but also in the US Congress.

“I expect a serious change of the banking landscape because there will be customer withdrawals,” Alain Steichen explained. Some banks, he said, “would lose the critical mass needed to survive.”

The Scam Wall Street Learned From the Mafia

How America's biggest banks took part in a bid-rigging conspiracy

by MATT TAIBBI

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo.

But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

German firms eye investment in crisis-battered euro states

Crisis vs Opportunity

By Annika Breidthardt

German companies are setting their sights on southern Europe as fears of a euro zone breakup fade and economic reforms transform the crisis-battered region into an attractive place to invest once again.

Countries like Portugal, Italy, Greece and Spain are still struggling with deep recessions and high unemployment but have also attracted attention for the opportunities they present, not just the risks.

Strong companies are attracting interest among the "Mittelstand", medium-sized and often family-owned manufacturing firms to which Germany owes much of its exporting prowess.

That is in large part due to the economic and labour market reforms bailout countries have been forced to implement - making it easier to hire and fire and reducing wage costs - which less stricken countries such as France have been slower to embrace.

"For financially strong German Mittelstand firms, the crisis is turning out to be an opportunity. They are increasingly active with acquisitions in Spain," said Christoph Himmelskamp, a consultant at Roedl & Partner who advises smaller German firms on deals with Spanish counterparts.

Himmelskamp says he has seen a 30 to 40 percent increase in German acquisitions of Spanish firms since 2009, when the euro zone debt crisis first flared in Greece.

"The mood was subdued when there was speculation Spain could leave the euro. Some of our clients started putting the brakes on transactions ... Once that discussion ended, investment returned."

German firms are buying up strong competitors, clients or suppliers at a time when those companies are struggling to stay afloat through years of recession in their home markets and as shaky banks restrict access to credit.

AZ Group, a German fittings maker, bought Italian competitor Fiber in 2012, when insolvency loomed under its previous owner.

German material producer SGL Carbon bought Portugal's fibre maker Fisipe last year.

And Happich, an interior outfitter of buses, acquired its rival Auto Carrocerias Riu last year. A previous attempt failed when the Barcelona-based firm decided to seek a Spanish buyer which never materialised.

Himmelskamp's firm is currently closing a deal where a German buyer is taking over a Spanish rival in Madrid. While these firms rarely publish the amount they pay for acquisitions, Himmelskamp said the price tag was in the low double-digit million euros range.

A study by DZ bank showed last year that one in four Mittelstand firms already present in euro zone crisis countries was willing to invest more there, in contrast with 14 percent of all Mittelstand firms.

How America Can Deal With Militant Islam

First, shut down the empire and let Muslim rulers deal with Muslim radicals

By PATRICK J. BUCHANAN

I do not know the method of drawing up an indictment against a whole people,” said Edmund Burke of the rebellious Americans.

The same holds true of Islam, the majority faith of 49 nations from Morocco to Indonesia, a religion that 1.6 billion people profess.

Yet, some assertions appear true.

Islam is growing in militancy and intolerance, evolving again into a fighting faith, and spreading not only through proselytizing, but violence.

How to justify the charge of intolerance?

The Taliban blew up the Bamiyan Buddhas. The Sufi shrines of Timbuktu were blown up by Ansar Dine. In Saudi Arabia, Iran and Afghanistan, Christian converts face the death sentence.

In Nigeria, the Boko Haram attacks churches and kills Christians, as in Ethiopia and the Sudan, where the south seceded over the persecution.

Egyptian Copts are under siege. Assyrian and Chaldean Christians in Iraq have seen churches pillaged, priests murdered. In Indonesia, churches are being shut on the demand of Islamists. Sharia law is being demanded by militants across the Middle East, as Christianity is exterminated in its cradle.

Has Islam become again a fighting faith?

Chechnya, Dagestan and Ingushetia are the sites of Islamist uprisings using terror to rip these statelets from Russia. Muslim Uighurs are fighting to tear off a chunk of China and create an East Turkestan. Muslim Malays in south Thailand have fought a decade-long war of secession. Albania has acquired two sister Muslim states in Europe, Bosnia and Kosovo, both born in blood.

“Islam has bloody borders,” wrote the late Samuel Huntington.

They are bloodier today.

At the time of 9/11, al-Qaida seemed confined to Afghanistan.

Al-Qaida may now be found in the Maghreb, Mali, Iraq and Yemen. Its Syrian auxiliary, the al-Nusra Front, is dominant in the anti-Assad rebellion.

Bankers and the Bourgeois Virtues

The world is what it has always been, a wicked place 

by Theodore Dalrymple

When I was young banks were as solid as a rock and those who managed them were respectable if slightly boring members of the community (probity being the dullest of virtues). Nowadays, however, I doubt that the words ‘bank’ or ‘banker’ would evoke many flattering epithets or synonyms in a word association test. ‘Casino,’ ‘Ponzi scheme’ or ‘card-sharp’ would perhaps be the least unfavorable of them.

As is all too often the case, I cannot quite make up my mind whether my dislike of banks is purely rational or a manifestation of Man’s eternal search for a scapegoat. I really only began to object to my banks’ practices after the crisis became manifest. Until then I had been rather flattered that, when I was slightly overdrawn, the bank sent someone round to my house to ask if I wanted to borrow much more money; and when, within five minutes on another occasion, it offered to lend me a million dollars. How different this was from the days of my youth, when – not more than five dollars overdrawn – I received a stern letter of rebuke from the bank, highly moralistic in tone, telling me that it expected me to ‘correct’ this situation without delay.

Even before the crisis I had observed, more with amusement than in anger, some of the banks’ less principled practices. For example, when I sent what for me was a large sum from my bank in England to my bank in France, the sum was deducted immediately from my account in England without being credited to my account in France. In fact it was not so credited for a period of ten days: and I had fondly thought that we lived in the age of instantaneous electronic transfer! How, then, did the bank send the money? In centime pieces by carrier pigeon? Where was the money in the meantime? Did the sending and recipient banks go fifty-fifty on the profits of the delay, that is five days each? I bothered neither to inquire nor to complain. I am small, the banks are large and would never tell the truth in any case. Financially it didn’t matter to me.

I had an illustration of the banks’ lack of commitment to strict truth not long ago. I have an account in US dollars in England into which I pay US checks. I noticed that the bank took from the sum paid in what seems to me rather a large amount, indeed a considerable proportion of the smaller check. I went to the bank to inquire why this was.

Everyone's Missing the Bigger Picture in the Reinhart-Rogoff Debate

The monetary and economic policy of the last 3 years has helped the wealthiest and penalized everyone else

by George Washington 

You've heard that an incredibly influential economic paper by Reinhart and Rogoff (RR) - widely used to justify austerity - has been "busted" for "excel spreadsheet errors" and other flaws.

As Google Trends shows, there is a raging debate over the errors in RR's report:

Even Colbert is making fun of them.

Liberal economists argue that the "debunking" of RR proves that debt doesn't matter, and that conservative economists who say it does are liars and scoundrels.

Conservative economists argue that the Habsburg, British and French empires crumbled under the weight of high debt, and that many other economists - including Niall Ferguson, the IMF and others - agree that high debt destroys economies.

RR attempted to defend their work yesterday:

Researchers at the Bank of International Settlements and the International Monetary Fund have weighed in with their own independent work. The World Economic Outlook published last October by the International Monetary Fund devoted an entire chapter to debt and growth. The most recent update to that outlook, released in April, states: “Much of the empirical work on debt overhangs seeks to identify the ‘overhang threshold’ beyond which the correlation between debt and growth becomes negative. The results are broadly similar: above a threshold of about 95 percent of G.D.P., a 10 percent increase in the ratio of debt to G.D.P. is identified with a decline in annual growth of about 0.15 to 0.20 percent per year.”

This view generally reflects the state of the art in economic research

***

Back in 2010, we were still sorting inconsistencies in Spanish G.D.P. data from the 1960s from three different sources. Our primary source for real G.D.P. growth was the work of the economic historian Angus Madison. But we also checked his data and, where inconsistencies appeared, refrained from using it. Other sources, including the I.M.F. and Spain’s monumental and scholarly historical statistics, had very different numbers. In our 2010 paper, we omitted Spain for the 1960s entirely. Had we included these observations, it would have strengthened our results, since Spain had very low public debt in the 1960s (under 30 percent of G.D.P.), and yet enjoyed very fast average G.D.P. growth (over 6 percent) over that period.

China 2.0 Is in Trouble

A political/financial system that is incapable of meaningful reform

Despite the many differences between China and the U.S., their basic problems are remarkably similar: an economy that increasingly serves a tiny Elite, and a political/financial system that is incapable of meaningful reform

by Charles Hugh-Smith
Setting aside the latest bird flu outbreak and sagging indicators of growth, China 2.0 is in trouble (with 1.0 being the Communist era of 1949 -1977 and 2.0 being the modernization/globalization era of 1978 - 2013), for it remains overly reliant on unsustainable growth dynamics.

The following is my summary of the excellent talks given by Jim Chanos and Michael Pettis at Mish's insight-packed Wine Country Conference in Sonoma earlier this month. (Any errors in presenting the speakers' views are of course mine.)

Here are Chanos' lecture slides and interviews with Chanos and Pettis:

Jim Chanos On China's 'Edifice Complex'

Jim Chanos on Daily Ticker: Stay Away From U.S. Tech Firms

Michael Pettis Interview with Lauren Lyster: Decade of Slower Growth for China

Michael Pettis observed that he'd spent time in Haiti earlier in his career, and pockets of poverty in China today equal those he'd witnessed in Haiti. Experienced China hands know the central government takes pains to limit media exposure of this level of poverty, as it reflects poorly on China's claim to being a superpower.

He then described in some detail how the Chinese leadership has created a "no-win" policy by encouraging a dependence on fixed investment to fuel rapid growth of GDP. If it shifts income to households to enable more consumer spending, GDP growth will decline. But if it continues borrowing and spending on increasingly marginal fixed investments, growth will also slow.

In effect, China has suppressed wages to fuel GDP growth. Financial repression (low interest rates) has further suppressed household income and encouraged misallocation of capital on a vast scale.

Pettis said the Chinese government is pushing a "go west" campaign. While "go west" worked in America's development, it failed miserably in Soviet Russia and Brazil. The difference, he said, is that in America, the private sector moved west and the government simply followed. In China, Russia and Brazil, the government pushed infrastructure west but without private-sector participation. Pettis reported that private sector contractors go west to build the infrastructure and then return east once the work is done.

In Pettis' view, the key metrics are debt and the ability to service debt: 
if debt is rising but the ability to service that debt (disposable income) is stagnant, then the system is unsustainable. He said this is the case in China: debt is rising but the ability to service that debt is not.

Given the political power of the state-owned enterprises (SOEs), China's political and financial systems do not have self-correcting mechanisms. Such mechanisms require transparency and feedback that is lacking in China.

Pettis flatly stated that the PBoC (China's central bank) is insolvent. Debt levels are high and much of the collateral is impaired.

Russia multiplies gas routes to Europe

This message has many intended audiences

By Vladimir Socor
Russian President Vladimir Putin and Gazprom are announcing colossal plans to expand the capacities of existing gas export pipelines and build new ones, all in Europe beyond Russia's territory.
Gazprom already co-owns and controls export pipeline capacities amounting to some 110 billion cubic meters (bcm) per year in Europe beyond Russia (Nord Stream One and Two, Yamal-Europe, the export pipelines to the Baltic States and Finland, and Blue Stream), including more than 90 bcm per year in pipelines located within the European Union. 

Apart from this, Russia remains the sole user (albeit at decreasing annual usage levels) of Ukraine's state-owned pipeline system with its westbound transit capacity of 140 bcm per year. Moscow now proposes to build new pipelines with capacities amounting to some 130 bcm per year (Nord Stream Three and Four, "Yamal-Europe Two", South Stream), all within EU territory. 

Thanks to the recently completed Nord Stream One and Two (2011–2012), Russia has some 250 bcm per year in export pipeline capacities at its disposal in Europe; and would increase that to a grand total of some 380 bcm per year, if the new projects are completed as proposed. Meanwhile, Gazprom's current sales in Europe are down to some 150 bcm of gas annually in the framework of long-term supply commitments, with only scant hopes to regain Gazprom's pre-crisis export levels of some 180 bcm annually in a post-crisis Europe. Moreover, Russia faces the prospect of a net loss of overall market share due to growing competition from liquefied gas on European markets. 

The Biggest Price-Fixing Scandal Ever - Everything Is Rigged

This is corruption at the molecular level of the economy

The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix

by MATT TAIBBI

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.

"It's a double conspiracy," says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. "It's the height of criminality."

The Collapsing of the American Skull

The parameters in which we allow ourselves to think about vital issues shrink remorselessly

By mark steyn
One of the most ingenious and effective strategies of the Left on any number of topics is to frame the debate and co-opt the language so effectively that it becomes all but impossible even to discuss the subject honestly. Take the brothers Tsarnaev, the incendiary end of a Chechen family that in very short time has settled aunts, uncles, sisters, and more across the map of North America from Massachusetts to New Jersey to my own home town of Toronto. Maybe your town has a Tsarnaev, too: There seems to be no shortage of them, except, oddly, back in Chechnya. The Tsarnaevs’ mom, now relocated from Cambridge to Makhachkala in delightful Dagestan, told a press conference the other day that she regrets ever having gotten mixed up with those crazy Yanks: “I would prefer not to have lived in America,” she said.

Not, I’m sure, as much as the Richard family would have preferred it. Eight-year-old Martin was killed; his sister lost a leg; and his mother suffered serious brain injuries. What did the Richards and some 200 other families do to deserve having a great big hole blown in their lives? Well, according to the New York Times, they and you bear collective responsibility. Writing on the op-ed page, Marcello Suarez-Orozco, dean of the UCLA Graduate School of Education and Information Studies, and Carola Suarez-Orozco, a professor at the same institution, began their ruminations thus:

“The alleged involvement of two ethnic Chechen brothers in the deadly attack at the Boston Marathon last week should prompt Americans to reflect on whether we do an adequate job assimilating immigrants who arrive in the United States as children or teenagers.”

Maybe. Alternatively, the above opening sentence should “prompt Americans to reflect” on whether whoever’s editing America’s newspaper of record these days “does an adequate job” in choosing which pseudo-credentialed experts it farms out its principal analysis on terrorist atrocities to. But, if I follow correctly, these UCLA profs are arguing that, when some guys go all Allahu Akbar on you and blow up your marathon, that just shows that you lazy complacent Americans need to work even harder at “assimilating” “immigrants.” After all, Dzhokhar and Tamerlan were raised in Cambridge, Mass., a notorious swamp of redneck bigotry where the two young Chechens no doubt felt “alienated” and “excluded” at being surrounded by NPR-listening liberals cooing, “Oh, your family’s from Chechnya? That’s the one next to Slovakia, right? Would you like to come round for a play date and help Jeremiah finish his diversity quilt?” Assimilation is hell.

How hard would it be for Americans to be less inadequate when it comes to assimilating otherwise well-adjusted immigrant children? Let us turn once again to Mrs. Tsarnaev:

“They are going to kill him. I don’t care,” she told reporters. “My oldest son is killed, so I don’t care. I don’t care if my youngest son is going to be killed today. . . . I don’t care if I am going to get killed, too . . . and I will say Allahu Akbar!”

You can say it all you want, madam, but everyone knows that “Allahu Akbar” is Arabic for “Nothing to see here.” So, once you’ve cleared the streets of body parts, you inadequate Americans need to redouble your efforts.

There is a stupidity to this, but also a kind of decadence. Until the 1960s, it was assumed by all sovereign states that they had the right to choose which non-nationals were admitted within their borders. Now, to suggest such a thing risks the charge of “nativism” and to propose that, say, Swedes are easier to assimilate than Chechens is to invite cries of “Racist!” So, when the morgues and emergency rooms are piled high, the only discussion acceptable in polite society is to wonder whether those legless Bostonians should have agitated more forcefully for federally mandated after-school assimilationist basketball programs.

Credit Expansion in Europe – Going the Way of Japan?

Banks Battling to Survive

By  Pater Tenebrarum

Yesterday we had the opportunity to attend a presentation by the treasurer of a European bank, which discussed the problems the European banking sector faces since the beginning of the crisis era in 2008.

Many of these problems are obvious, but some of them are perhaps less so. There are on the one hand the regulatory pressure to increase capital, a plethora of new regulations and taxation that refers to the size of a bank's balance sheet, regardless of its profitability. While such taxation only amounts to about 20 basis points, it has to be seen in the context of currently available margins in the banking business, which are dismal – once on does that, the number actually strikes one as quite large.

Regarding the regulatory regime, European bank managers these days apparently spend more time satisfying the demands of a whole horde of regulatory bodies (a bank with a decent pan-European presence can count on having to deal with up to 25 different regulators), all of which continually want to play through stress test scenarios or are demanding data on this or that. Everything has to be done to the perfect satisfaction of the bureaucrats concerned with these oversight activities, down to the color of the paper the presentations are printed on. The problem is of course that this is distracting managers from what they should actually be doing, namely focus on the business.

Given the crisis situation, one should not be surprised at this sudden avalanche of regulatory demands. However, as we have often pointed out here,  in a free banking system with 100% reserved sight deposits, all of this would be completely unnecessary.

The most important problem faced by banks though are their funding costs relative to the interest rates they can charge on loans.

Exploding Funding Costs, Shrinking Interest Rate Margins

As a side effect of the crisis and the reaction of the ECB as well as the Brussels  based eurocracy to it, banks now have to deal with a funding situation that is markedly different from what pertained prior to 2008.