Deal Could Double German Exports to US

The report found that all members of the planned free trade area would benefit from the deal

By Florian Diekmann

The EU and the US are set to start negotiations on a trans-Atlantic free trade agreement in July. A deal could have huge benefits for Germany and the rest of the EU. But there would also be losers according to a new study.

If the United States and the European Union are able to come together on a far-reaching free trade agreement, Germany would be one of the greatest beneficiaries. Fully 181,000 new jobs could be expected and per-capita income would spike by 4.68 percent. That is the result of a study released this week by the Bertelsmann Foundation together with the Munich-based Center for Economic Studies.

The report found that all members of the planned free trade area would benefit from the deal, with the US emerging as the biggest winner. But European Union member states stand to make large gains as well.

The report comes as the EU and the US agreed on Monday to begin talks on the sweeping new deal next month. European Commission President José Manuel Barroso said on Monday on the sidelines of the G-8 in Northern Ireland that talks were starting and that it would offer "huge economic benefits" on both sides of the Atlantic. US President Barack Obama said that reaching agreement on a deal is "a priority of mine" and that he is "confident we can get it done."

According to the study, the Trans-Atlantic Trade and Investment Partnership (TTIP) would provide the greatest benefits to the US and to Great Britain. Gross domestic product per capita would rise by 13.4 percent in the US and by 9.7 percent in the UK. More than a million new jobs would result in America. That number would be 400,000 in Britain.

Tearing Down Trade Walls with the US President

Obama in Berlin

By Gregor Peter Schmitz and Severin Weiland

The shine has come off Obama's image since he was last in Berlin in 2008. This week's visit is set to be overshadowed by the NSA surveillance scandal, which Chancellor Merkel says she fully intends to address. Free trade will likely top the agenda.

The weather is perfect. After a spring full of rain, Barack Obama and his family will be able to enjoy a balmy summer evening in Berlin. And the city is looking its best too. Even the trunks of the trees out in front of the US Embassy got a new coat of paint last week.

Other preparations have been made too, of course. Barriers have been erected, streets have been closed, police are in position and helicopters are ready to begin buzzing overhead. Anticipation ahead of the US president's visit is in the air, even if he will only be staying 25 hours.

But the Obama who's visiting the German capital this week isn't the same man who received a rapturous reception five years ago, when he gave a speech at the Victory Column during his presidential election campaign in 2008.

The mood these days is far more sober. Obama, it turns out, is not going to revolutionize national security policy. He is the leader of a superpower, one who pursues his country's own interests first and foremost.

Post-2009 Faux Prosperity Part A

Ιt was possible only so long as government could keep spending at rates far higher than the growth rate of the national economy

By David Stockman

After the US economy liquidated excess inventory and labor and hit its natural bottom in June 2009, it embarked upon a halting but wholly unnatural “recovery.” The artificial prolongation of the Bush tax cuts, the 2 percent payroll tax abatement and the spend-out of the Obama stimulus pilfered several trillions from future taxpayers in order to gift America’s present day “consumption units” with the wherewithal to buy more shoes and soda pop.

But there has been no recovery of the Main Street economy where it counts; that is, no revival of breadwinner jobs and earned incomes on the free market. What we have once again is faux prosperity. In fact, the current Bernanke Bubble is an even sketchier version of the last one and consists essentially of the deliberate and relentless reflation of financial asset prices.

In practice, this amounts to a monetary version of “trickle down” economics. By September 2012, personal consumption expenditure (PCE) was up by $1.2 trillion from the prior peak, representing a modest 2.2 percent per year (0.6 percent after inflation) gain from the level of late 2007. Yet half of this gain—more than $600 billion—reflected the massive growth of government transfer payments, and much of the rebound which did occur in private consumption spending was concentrated in the top 10–20 percent of households. In short, the Fed’s financial repression policies enabled Uncle Sam to fund transfer payments for the bottom rungs of society at virtually no carry cost on the debt, while they juiced the top rungs with a wealth effects tonic that boosted spending at Nordstrom’s and Coach.

The Fed’s post-Lehman money printing spree has thus failed to revive Main Street, but it has ignited yet another round of rampant speculation in the risk asset classes. Accordingly, the net worth of the 1 percent is temporarily back to the pre-crisis status quo ante. Needless to say, successful speculation in the fast money complex is not a sign of honest economic recovery: it merely marks the prelude to another spectacular meltdown in the canyons of Wall Street next time the music stops

The making of a global security state

You may have secrets, but you are not a secret - and you know it

By Tom Engelhardt 
As happens with so much news these days, the Edward Snowden revelations about National Security Agency (NSA) spying and just how far we've come in the building of a surveillance state have swept over us 24/7 - waves of leaks, videos, charges, claims, counterclaims, skullduggery, and government threats. When a flood sweeps you away, it's always hard to find a little dry land to survey the extent and nature of the damage. Here's my attempt to look beyond the daily drumbeat of this developing story (which, it is promised, will go on for weeks, if not months) and identify five urges essential to understanding the world Edward Snowden has helped us glimpse. 
1: The urge to be global
Corporately speaking, globalization has been ballyhooed since at least the 1990s, but in governmental terms only in the 21st century has that globalizing urge fully infected the workings of the American state itself. It's become common since 9/11 to speak of a "national security state". But if a week of ongoing revelations about NSA surveillance practices has revealed anything, it's that the term is already grossly outdated. Based on what we now know, we should be talking about an American global security state. 
Much attention has, understandably enough, been lavished on the phone and other metadata about American citizens that the NSA is now sweeping up and about the ways in which such activities may be abrogating the First and Fourth Amendments of the US constitution. Far less attention has been paid to the ways in which the NSA (and other US intelligence outfits) are sweeping up global data in part via the just-revealed PRISM and other surveillance programs. 
Sometimes, naming practices are revealing in themselves, and the National Security Agency's key data mining tool, capable in March 2013 of gathering "97 billion pieces of intelligence from computer networks worldwide", has been named "Boundless Informant". If you want a sense of where the US intelligence community imagines itself going, you couldn't ask for a better hint than that word "boundless". It seems that for our spooks, there are, conceptually speaking, no limits left on this planet. 

Cyprus president calls for bailout overhaul to save economy

Mr Anastasiades is in effect asking for More eurozone loans on top of the existing €10bn sovereign bailout

By Peter Spiegel

Cyprus’ president has asked eurozone leaders for a complete revamp of his country’s €10bn bailout, warning Nicosia may not be able to meet the rescue’s current terms because it has harmed the country’s economy and banking system even more than expected.

In a letter sent last week and obtained by the Financial Times, Nicos Anastasiades wrote that the restructuring of the country’s two largest banks was “implemented without careful preparation”, wiping out the working capital of many Cypriot companies and requiring unprecedented capital controls that were suffocating the island’s economy.

 “[The] economy is driven into a deep recession, leading to a further rise in unemployment and making fiscal consolidation all the more difficult,” Mr Anastasiades wrote to the heads of three EU institutions and the International Monetary Fund. “I urge you to review the possibilities in order to determine a viable prospect for Cyprus and its people.”

Mr Anastasiades has asked EU leaders to unwind the complex restructuring and partial merger of its two largest banks, which account for 80 per cent of the domestic banking sector, backed by further eurozone loans.

A senior eurozone official directly involved in the Cypriot talks said EU officials were “puzzled” by the letter, adding finance ministers would discuss it at a regularly scheduled meeting on Thursday.

“Essentially he is asking for a complete reversal of the programme,” the official said, adding that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which initially voted down a rescue package before accepting a similar deal nine days later.

Obama Escalates Syria’s Civil War

If the ouster of Assad is what the Sunni powers of Turkey, Saudi Arabia and Egypt demand, why not let them do it?

By Patrick J. Buchanan 

Barack Obama has just taken his first baby steps into a war in Syria that may define and destroy his presidency.

Thursday, while he was ringing in Gay Pride Month with LGBT revelers, a staffer, Ben Rhodes, informed the White House press that U.S. weapons will be going to the Syrian rebels.

For two years Obama has stayed out of this sectarian-civil war that has consumed 90,000 lives. Why is he going in now?

The White House claims it now has proof Bashar Assad used sarin gas to kill 100-150 people, thus crossing a “red line” Obama had set down as a “game changer.” Defied, his credibility challenged, he had to do something.

Yet Assad’s alleged use of sarin to justify U.S. intervention seems less like our reason for getting into this war than our excuse.

For the White House decided to intervene weeks ago, before the use of sarin was confirmed. And why would Assad have used only tiny traces? Where is the photographic evidence of the disfigured dead?

What proof have we the rebels did not fabricate the use of sarin or use it themselves to get the gullible Americans to fight their war?

Yet why would President Obama, whose proud boast is that he will have extricated us from the Afghan and Iraq wars, as Dwight Eisenhower did from the Korean War, plunge us into a new war?

He has been under severe political and foreign pressure to do something after Assad and Hezbollah recaptured the strategic town of Qusair and began preparing to recapture Aleppo, the largest city.

Should Assad succeed, it would mean a decisive defeat for the rebels and their backers: the Turks, Saudis and Qataris. And it would mean a geostrategic victory for Iran, Hezbollah and Russia, who have proven themselves reliable allies.

Syria and Egypt can't be fixed

Syria and Egypt are dying

By Spengler 

They were dying before the Syrian civil war broke out and before the Muslim Brotherhood took power in Cairo. Syria has an insoluble civil war and Egypt has an insoluble crisis because they are dying. They are dying because they chose not to do what China did: move the better part of a billion people from rural backwardness to a modern urban economy within a generation. Mexico would have died as well, without the option to send its rural poor - fully one-fifth of its population - to the United States. 

It was obvious to anyone who troubled to examine the data that Egypt could not maintain a bottomless pit in its balance of payments, created by a 50% dependency on imported food, not to mention an energy bill fed by subsidies that consumed a quarter of the national budget. It was obvious to Israeli analysts that the Syrian regime's belated attempt to modernize its agricultural sector would create a crisis as hundreds of thousands of displaced farmers gathered in slums on the outskirts of its cities. These facts were in evidence early in 2011 when Hosni Mubarak fell and the Syrian rebellion broke out. Paul Rivlin of Israel's Moshe Dayan Center published a devastating profile of Syria's economic failure in April 2011. [1] 

Sometimes countries dig themselves into a hole from which they cannot extricate themselves. Third World dictators typically keep their rural population poor, isolated and illiterate, the better to maintain control. That was the policy of Mexico's Institutional Revolutionary Party from the 1930s, which warehoused the rural poor in Stalin-modeled collective farms called ejidos occupying most of the national territory. That was also the intent of the Arab nationalist dictatorships in Egypt and Syria. The policy worked until it didn't. In Mexico, it stopped working during the debt crisis of the early 1980s, and Mexico's poor became America's problem. In Egypt and Syria, it stopped working in 2011. There is nowhere for Egyptians and Syrians to go. 

It is cheap to assuage Western consciences by sending some surplus arms to the Syrian Sunnis. No-one has proposed a way to find the more than US$20 billion a year that Egypt requires to stay afloat. In June 2011, then French president Nicholas Sarkozy talked about a Group of Eight support program of that order of magnitude. No Western (or Gulf State) government, though, is willing to pour that sort of money down an Egyptian sinkhole. 

Egypt remains a pre-modern society, with nearly 50% illiteracy, a 30% rate of consanguineal marriage, a 90% rate of female genital mutilation, and an un- or underemployment rate over 40%. Syria has neither enough oil nor water to maintain the bazaar economy dominated by the Assad family. 

A Nation of Kids on Speed

Six million children in the U.S. have already been diagnosed with ADHD. Plenty more will follow

By PIETER COHEN AND NICOLAS RASMUSSEN

Walk into any American high school and nearly one in five boys in the hallways will have a diagnosis of attention-deficit hyperactivity disorder. According to the Centers of Disease Control and Prevention, 11% of all American children ages 4 to 17—over six million—have ADHD, a 16% increase since 2007. When you consider that in Britain roughly 3% of children have been similarly diagnosed, the figure is even more startling. Now comes worse news: In the U.S., being told that you have ADHD—and thus receiving some variety of amphetamine to treat it—has become more likely.

Last month, the American Psychiatric Association released the fifth edition of its Diagnostic and Statistical Manual of Mental Disorders—the bible of mental health—and this latest version, known as DSM-5, outlines a new diagnostic paradigm for attention-deficit hyperactivity disorder. Symptoms of ADHD remain the same in the new edition: "overlooks details," "has difficulty remaining focused during lengthy reading," "often fidgets with or taps hands" and so on. The difference is that in the previous version of the manual, the first symptoms of ADHD needed to be evident by age 7 for a diagnosis to be made. In DSM-5, if the symptoms turn up anytime before age 12, the ADHD diagnosis can be made.

It's also easier to diagnose adult ADHD. Before, adults needed to exhibit six symptoms. Now, five will do. These changes will undoubtedly fuel increased prescriptions of the drugs that doctors use to treat ADHD: stimulants such as Ritalin and Adderall.

Even before DSM-5, doctors were already on track to prescribe enough stimulants this year for each American man, woman and child to receive the equivalent of 130 mg of amphetamine (about 40 five-mg pills of Adderall) and an even greater amount of the very similar drug Ritalin. In this era of excessive prescribing, we seem to have forgotten the cautionary history of amphetamines in America—a history that shows how over prescribing stimulants leads to widespread dependence and addiction.

Rotting, Decaying And Bankrupt

If You Want To See The Future Of America Just Look At Detroit

by Michael Snyder

Eventually the money runs out.  Much of America was shocked when the city of Detroit defaulted on a $39.7 million debt payment and announced that it was suspending payments on $2.5 billion of unsecured debt, but those who visit my site on a regular basis were probably not too surprised.  Anyone with half a brain and a calculator could see this coming from a mile away.  But people kept foolishly lending money to the city of Detroit, and now many of them are going to get hit really hard. 

Detroit Emergency Manager Kevyn Orr has submitted a proposal that would pay unsecured creditors about 10 cents on the dollar.  Similar haircuts would be made to underfunded pension and health benefits for retirees.  Orr is hoping that the creditors and the unions that he will be negotiating with will accept this package, but he concedes that there is still a "50-50 chance" that the city of Detroit will be forced to formally file for bankruptcy. 

But what Detroit is facing is not really that unique.  In fact, Detroit is a perfect example of what the future of America is going to look like.  We live in a nation that is rotting, decaying, drowning in debt and racing toward insolvency.  Already there are dozens of other cities across the nation that are poverty-ridden, crime-infested hellholes just like Detroit is, and hundreds of other communities are rapidly heading in that direction.  So don't look down on Detroit.  They just got there before the rest of us.

The following are some facts about Detroit that are absolutely mind-blowing...

1 - Detroit was once the fourth-largest city in the United States, and in 1960 Detroit had the highest per-capita income in the entire nation.

2 - Over the past 60 years, the population of Detroit has fallen by 63 percent.

3 - At this point, approximately 40 percent of all the streetlights in the city don't work.

4 - Some ambulances in the city of Detroit have been used for so long that they have more than 250,000 miles on them.

5 - 210 of the 317 public parks in the city of Detroit have been permanently closed down.

6 - According to the New York Times, there are now approximately 70,000 abandoned buildings in Detroit.

7 - Approximately one-third of Detroit's 140 square miles is either vacant or derelict.

8 - Less than half of the residents of Detroit over the age of 16 are working at this point.

9 - If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.

10 - According to one very shocking report, 47 percent of the residents of Detroit are functionally illiterate.

11 - Today, police solve less than 10 percent of the crimes that are committed in Detroit.

12 - Ten years ago, there were approximately 5,000 police officers in the city of Detroit.  Today, there are only about 2,500 and another 100 are scheduled to be eliminated from the force soon.

13 - Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.

14 - The murder rate in Detroit is 11 times higher than it is in New York City.

15 - Crime has gotten so bad in Detroit that even the police are telling people to "enter Detroit at your own risk".

A Triumph for Common Sense

Supreme Court: No One Can Patent Our Genes 

The Supreme Court's unanimous ruling against Myriad Genetics is a triumph for common sense and the common good, and for scientific research and legal fundamentals as well. The decision means that all of the existing patents on human genes—some 15,000 of them—are no longer valid. It affirms a century of legal precedent that prohibits patents on “products of nature.” And it puts U.S. law in line with the assertion of UNESCO, the World Medical Association and the Human Genome Organization that the human genome is part of the “common heritage of humanity.”

The Supreme Court cut through a tangle of legalistic confusion to assert that “a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated.” The Court explicitly avoided ruling on “method claims” or “new applications of knowledge” [italics in the judgment; PDF here]. This seems reasonable; researchers can freely investigate isolated DNA but can presumably only patent something they invent. 

However, the Court said that patents on so-called cDNA may be allowable, as long as these synthetic copies of DNA are not “obvious.” The interpretation of this aspect of the decision may take some time to clarify.

The ruling in the lawsuit, argued by the ACLU and Public Patent Foundation on behalf of a group of plaintiffs including researchers, genetic counselors, women’s health organizations and breast cancer patients, should significantly bring down the bloated cost of Myriad’s test for genes that elevate the risk of breast cancer. And it will reassure scientists doing basic genetic research that they won’t be sued for patent infringement.

The Struggle for Istanbul

It is a challenge to the belief that democracy is the ballot box and nothing more

By Sean R. Singer
On May 29 thousands gathered on the shores of the Golden Horn in the historic neighborhood of Balat to celebrate the 560th anniversary of the Ottoman conquest of Istanbul. It was the kind of early summer Istanbul evening that gives a slight taste of the thick humidity to come in June and July. The city’s Mayor Kadir Topbas arrived by boat and in his opening address described the conquest as marking the transition from the darkness of Europe’s Middle Age to the Modern Age. “With the conquest, the differences between language, religion, race and sect disappeared", Topbas said. “With the conquest a message of peace was given to the world.”

The atmosphere was festive. Vendors sold Turkish flags, cotton candy, and sunflower seeds. There was a mix of families, couples, young adults and children standing or sitting on temporary wood platforms, looking out towards a stage installed for the evening’s entertainment, which included an extravagant laser show, the premiere of a historical film about the conquest, a performance by an Ottoman period band in full costume and fireworks.

Prime Minister Recep Tayyip Erdogan, speaking at the opening of an archery lodge in Okmeydani earlier in the day, praised Mehmet the Conqueror’s pledge to defend the lifestyles, beliefs, and freedoms of the city’s residents in the conquest’s aftermath. “In our civilization, conquest is not only the taking of lands, countries, cities; at the same time it is the winning of hearts, the conquering of hearts.” The following morning the city’s police would attempt to conquer the hearts of protestors in nearby Gezi Park with tear gas.

But that night as fireworks streaked across the sky a crowd was gathered in Gezi Park, across the Golden Horn and adjacent to Taksim Square; it was the third consecutive night of protests against the demolition of the park in favor of a shopping mall. The assembled were mostly in their twenties and thirties. Some sat on the grass drinking beer and wine; others stood towards the park’s rear entrance by a stage and sang songs in unison.

Erdogan had addressed the protestors directly earlier in the day. “Do whatever you like", he told them. “We’ve made the decision, and we will implement it accordingly. If you have respect for history, research and take a look at what the history of that place called Gezi Park is. We are going to revive history there.”

The Responsibility to Protect It’s Fatally Flawed

P2P is not flawed because it's hard to implement; it's hard to implement because it's a paragon of moral illogic

by Rajan Menon

It is now a commonplace belief that a worldwide diffusion of human rights norms occurred following the Cold War, creating a consensus favoring humanitarian intervention. The cachet acquired by the “Responsibility to Protect” (R2P) is proffered as proof of this proposition.

This is wishful thinking. Armed humanitarian interventions since the aftermath of the Cold War have been selective, poorly executed, strategically naive, morally incoherent and even dangerous. Far from reflecting, let alone having contributed to, a global consensus, they have been divisive. This is so not because the world has just done it wrong at this early stage of R2P awareness; it is so because of flaws in the concept itself. 

The widespread support for R2P as evidenced in official speeches and government and UN documents is profoundly misleading. R2P cannot withstand tough tests that could theoretically transform it into a template for future action. The reason is that when wars in support of (supposedly) transcendent ideals entail significant costs and risks, the major democratic powers—above all the United States—whose involvement is essential will pull back, not least because their citizens are far less enamored of such odysseys than are the high priests of humanitarian intervention. The latter see altruistic sacrifice undertaken by states in the name of their societies on behalf of others who are not their own citizens as moral, but they are dismissive of the notion that protecting and pursuing sovereign self-interest can ever be virtuous or moral as well. The assumption that disinterestedness is what qualifies action as moral is a form of ethical illiteracy. R2P is fundamentally flawed not because it can’t be implemented; it can’t be implemented because it is fundamentally flawed.

By the latter half of the 1990s, an impassioned debate arose on how the world could best respond to mass atrocities resulting from governments’ cruelties or incapacities. By then, several bloody post-Cold War conflagrations had occurred, and the response was, insofar as proponents of humanitarian intervention were concerned, dismaying. NATO’s three-week bombardment of Bosnian Serb redoubts brought Slobodan Milosevic to the bargaining table, enabling the 1995 Dayton Accords to freeze Bosnia’s civil war. But what emerged was a post-conflict polity that granted the Serbs much of their territorial gains and consisted of separate ethnic enclaves. Moreover, it took three years of ethnic cleansing, mass rape, concentration camps and the shelling of towns to get to Dayton. Bosnian Serb troops exposed the fecklessness of NATO and the United Nations as they assaulted or captured the “safe areas” that the unfortunately named UN Protection Force (UNPROFOR) had vowed to defend. Some 100,000 people were slaughtered in Bosnia. Prognostications of a burgeoning planetary concord on human rights sounded surreal, not least because the Bosnian war followed an even bigger disaster in Rwanda. 

The Responsibility to Protect is An Evolving Hope That's Here to Stay

R2P can be a prod for effective humanitarian intervention

By Seyom Brown & Ronald E. Neumann

Those who cheered “Benghazi One” as a validating triumph of the Responsibility to Protect (R2P) doctrine and those who regard “Benghazi Two” as its death-knell are both mistaken. The first act of the Libyan drama in March 2011, when the international military intervention arguably saved thousands of civilians in and around Benghazi from Qaddafi’s murderous forces, was only a partial “success”, even according to R2P principles. The second, on the eleventh anniversary of 9/11, when anti-American jihadists with virtually free reign in the post-Qaddafi anarchy murdered the U.S. Ambassador to Libya and three other officials, is not reducible simply to the governance vacuum left by an R2P-driven intervention. 

R2P principles are only partially new, in any event, and they are more complex than press quotes suggest. They are noticeably weak so far as a guide to action, yet they are with us to stay. They may be fixable. It is therefore important to understand the issues they pose in all their complexity.

R2P principles were certainly a driver of the intervention that toppled the Qaddafi dictatorship, and therefore also of its chaotic aftermath. But their role should not be exaggerated, nor should they be expected to resolve the recurring debates over the weight that humanitarian obligations should be given in U.S. foreign policy, as distinct from geostrategic interests or non-intervention norms. The choices facing the United States in Egypt, Syria and Mali, for example, continue to be more complex than can be deduced from any abstract doctrine, and these choices are themselves no less complex than the dialectic between state-sovereignty and “justice” imperatives that recur throughout history.

Viewed in historical perspective, the R2P concept is a facet of the still-evolving state system. It is not its antithesis, as both some of its champions and detractors are wont to claim. Indeed, the concept is derived largely from traditional just war criteria for employing military force.

Euro Becomes the Port in a Storm

As Central Banks Mull Pullback of Easy Money, Investors Turn to Relatively Stable European Currency

By MATTHEW WALTER and NICOLE HONG

The euro is emerging as an unlikely oasis in the latest bout of market turmoil.

Assets ranging from Japanese stocks to emerging-market bonds to U.S. Treasurys have slumped this spring, as investors brace for the possible pullback from easy-money policies by the world's major central banks. But the euro has largely avoided the volatile trading that has whipsawed other currencies, including the dollar and the Japanese yen, gaining about 4% against the greenback over the past four weeks to trade late Friday at $1.3345, near a four-month high.

It is a dramatic reversal for a currency that frequently has been at the center of global market turmoil in the past few years. Investors had put on record bets that the euro would fall, fueled by Europe's economic slump and questions about the long-term viability of the currency union.

Bearish euro positions have tumbled 90% in the past two weeks, according to the Commodity Futures Trading Commission. Despite problems that include stunted European economic growth, rising unemployment and large debt loads in southern European economies, many investors say the euro is a relatively safe bet these days, thanks to its status as a heavily traded reserve currency and ebbing fears of an imminent crisis.

The prospect of an early end to Federal Reserve stimulus has prompted many traders to hastily unwind bets on emerging markets and other high-yielding assets. As these positions unravel, some investors are taking shelter in the euro, which they see as having more in common with havens such as the dollar and yen than riskier, more thinly traded, higher-yielding currencies like the Australian dollar.

"It's hard to bet against the euro," said Sam Katzman, chief investment officer for New York-based Constellation Wealth Advisors, which invests about $5 billion in various funds on behalf of clients. "Until we stop printing money in the U.S., or they start, the wind is at the back of the euro."

Driving the euro's strength is an unwinding of the "carry trade," in which investors borrow a low-yielding currency like the euro, sell it and then use the proceeds to buy higher-yielding assets like U.S. stocks and Mexican bonds. Carry trades, which helped power solid gains in riskier asset classes for the past few years, rely on a steady interest-rate differential to make money.

Chinese Fairy Tales

What you don't know can kill you!

by Mark J. Grant

It is difficult enough, in our world, to ferret out the truth and then make rational decisions based upon what you have found. Europe is a good example of this as liabilities are not acknowledged or counted while the propaganda machines roll out the officially mandated numbers. It doesn't take Sherlock Holmes to get at some of the truth though and liabilities, counted or not, still have to be paid. In the case of Europe a great deal of enlightenment may be found in the data available from the Bank for International Settlements and that has been my primary source for arriving at some reality.

Every Chinese joke starts in the same way. "First you look over your shoulder."

In the case of China, and trying to find some glimmer of truth there, the situation is far more difficult. There is no source of real data available and the official numbers do not often add up in any rational way. The country operates as a one party system and it is just the normal course of business that they provide the data they want and when they wish to provide it. It is quite problematical especially if it begins to appear that a severe slowdown in growth is underway. It is difficult to substantiate or quantify what is actually happening.

The game of "Hide and Seek" is a great sport for children. When the Chinese learned to play it though they marked it, "Adults only."

Market Punditry As Astrology

Markets may remain irrational longer than one can remain solvent

By Monty Pelerin

Is recent market behavior the beginning of a market turndown? No one knows, although it is easy to find people providing “answers.” The value of these predictions approach those of astrologers and fortune-tellers. What follows are some thoughts regarding markets.

History and Markets

History is a summary of what historians consider relevant. Selectivity of a limited number of events is required. Behind these events are millions of other events and processes that must be ignored. Many of these are causal elements and not even known to the historian. What is reported is the outcome(s) of these complex interactions. Historians then focus on a few causes that rationalize the outcome(s). Often these are correlative; never do they fully explain the outcome they purport to. That is the nature of all history.

Discussing the performance of the stock market is an exercise in history. It is subject to similar simplification. At the end of each market day, analysts “explain” why the stock market went up or down. These explanations are more rationalizations than explanations. Stock market outcomes can never be explained in terms of one or two variables, regardless of how relevant they might appear to be or how enlightened the analyst sounds. Soundbites preclude more than a couple of variables. Yet complexity does not care about soundbites.

To retain the aura of “expert,” these self-professed gurus must provide short, pithy and incorrect answers. A truthful answer would go something like the following:

I have no idea why stocks went up or down today. Nor does anyone else. There are literally thousands (millions?) of variable affecting peoples’ decisions to buy or sell stocks. No one knows them all and no one knows how to measure or weight them on a particular day. The market went up (down) because more buyers (sellers) participated today.

On some days, one or two major news items may ostensibly move markets, but that doesn’t change the fact that numerous other variables also had impact.

Enduring Empire

The history of the idea of empire in the west is largely the history of successive imitations of Rome

by Thomas R. Martin

After 24 centuries, the remnants of Rome still dominate the landscape of the Western mind. Like the ruined temples, arenas, theaters, and aqueducts spread across the lands of the Mediterranean, the literature, political institutions, philosophers, heroes, and words of the Romans permeate our culture both high and low, from the columns and architraves of the Capitol in Washington to the lurid fantasies of the cable-television series Spartacus. As the Roman poet Horace bragged of his poetry, a great part of Rome has escaped death.

The improbable story of Rome's rise to preeminence is fascinating, as these three new histories ably demonstrate. Rome began as poor, small clusters of thatch-roofed huts surrounded by scores of ethnically related but differing tribal settlements jostling each other on the plains of central Italy. As Brian Campbell, a professor of Roman history at Queen's University in Belfast, notes, around 40 separate Italic languages and dialects such as Oscan, Volscian, Venetic, and Umbrian were spoken by Rome's neighbors until Latin became the dominant dialect of this region on the heels of Rome's military success. In addition to these Italian rivals, Celtic Gauls dominated the Po River valley to the north, and closer to Rome in Tuscany the mysterious Etruscans developed a sophisticated civilization that according to myth dominated early Rome. Greek colonies commanded Southern Italy as far north as modern Naples, and Phoenician colonists in North Africa, western Sicily, Sardinia, and Corsica sparred with the Greek cities for control of Mediterranean trade. As Greg Woolf, who teaches ancient history at the University of St. Andrews, writes, "Rome emerged from Italy into a hostile world." Given these formidable competitors, we can share in the wonder of the Greek historian Polybius when he wrote that only the "worthless or lazy" would not want to know "how and under what government the Romans have brought under their sole rule almost the whole of the inhabited world."