France Is Heading For The Biggest Economic Train Wreck In Europe

France: On the Edge of the Periphery

By JOHN MAULDIN

"The emotional side of me tends to imagine France, like the princess in the fairy stories or the Madonna in the frescoes, as dedicated to an exalted and exceptional destiny. Instinctively I have the feeling that Providence has created her either for complete successes or for exemplary misfortunes. Our country, as it is, surrounded by the others as they are, must aim high and hold itself straight, on pain of mortal danger. In short, to my mind, France cannot be France without greatness.

– Charles de Gaulle, from his memoirs

Recently there have been a spate of horrific train wrecks in the news. Almost inevitably we find out there was human error involved. Almost four years ago I began writing about the coming train wreck that was Europe and specifically Greece. It was clear from the numbers that Greece would have to default, and I thought at the time that Portugal would not be too far behind. Spain and Italy clearly needed massive restructuring. Part of the problem I highlighted was the significant imbalance between exports and imports in all of the above countries.

In the Eurozone there was no mechanism by which exchange rates could be used to balance the labor-cost differentials between the peripheral countries and those of the northern tier. And then there's France. I've been writing in this space for some time that France has the potential to become the next Greece. I've spent a good deal of time this past month reviewing the European situation, and I'm more convinced than ever that France is on its way to becoming the most significant economic train wreck in Europe within the next few years.

We shifted focus at the beginning of the year to Japan because of the real crisis that is brewing there. Over the next few months I will begin to refocus on Europe as that train threatens to go off the track again. And true to form, this wreck will be entirely due to human error, coupled with a large dollop of hubris. This week we will take a brief look at the problems developing in Europe and then do a series of in-depth dives between now and the beginning of winter. The coming European crisis will not show up next week but will start playing in a movie theater near you sometime next year. Today's letter will close with a little speculation on how the developing conflict between France and Germany and the rest of its euro neighbors will play out.

France: On the Edge of the Periphery

I think I need first to acknowledge that the market clearly doesn't agree with me. The market for French OATS (Obligations Assimilables du Trésor), their longer-term bonds, sees no risk. The following chart is a comparison of interest rates for much of the developed world, which I reproduce for those who are interested in comparative details. Notice that French rates are lower than those of the US, Canada, and the UK. Now I understand that interest rates are a function of monetary policy, inflation expectations, and the demand for money, which are all related to economic growth, but still….

France's neighbors, Italy and Spain, have rates that are roughly double France's. But as we will see, the underlying economics are not that much different for the three countries, and you can make a good case that France’s trajectory may be the worst.

"No: France Is Not Bankrupt" – Really?

We will start with a remarkable example of both hubris and economic ignorance published earlier this year in Le Monde. Under the headline "No: France Is Not Bankrupt," Bruno Moschetto, a professor of economics at the University of Paris I and HEC, made the following case. He apparently wrote this with a straight face. If you are not alone, please try not to giggle out loud and annoy people around you. (Hat tip to my good friend Mike Shedlock.)

No, France is not bankrupt .... The claim is untrue economically and financially. France is not and will not bankrupt because it would then be in a state of insolvency.

A state cannot be bankrupt, in its own currency, to foreigners and residents, since the latter would be invited to meet its debt by an immediate increase in taxation.

In abstract, the state is its citizens, and the citizens are the guarantors of obligations of the state. In the final analysis, "The state is us." To be in a state of suspension of payments, a state would have to be indebted in a foreign currency, unable to deal with foreign currency liabilities in that currency….

Ultimately our leaders have all the financial and political means, through the levying of taxes, to be facing our deadlines in euros. And besides, our lenders regularly renew their confidence, and rates have never been lower.

Four things leap to mind as I read this. First, Professor, saying a country is not bankrupt because it would then be insolvent is kind of like saying your daughter cannot be pregnant because she would then have a baby. Just because something is unthinkable doesn't mean it can't happen.

Second, contrary to your apparent understanding and the understanding of your partners in the Eurozone, especially Germany, France does not have its own currency. The Greeks, Portuguese, Italians, and Spanish have all found out that they cannot print their own currencies, no matter how much they wish they could. You are all bound up in a misguided economic experiment called the euro. Deal with it. For all intents and purposes you are in fact indebted in a foreign currency. On your current path you will soon have to go to Germany and the rest of Europe asking for a special dispensation simply because you are France. If this development weren't so potentially tragic, with horrific economic implications for the entire world, it would be especially amusing theater.

Third, I find the use of the term invited in the phrase "invited to meet its debt by an immediate increase in taxation" to be quite a wonderful French expression. Your tax rates are already among the highest in Europe. At a 75% top tax rate, your entrepreneurs and businesspeople are leaving the country in droves. That icon of economic enlightenment, tennis star Serena Williams, recently commented in Rolling Stone magazine that "75% doesn't seem legal." Gerard Depardieu and many others not quite so famous agree and have already left. You are going to collect less, not more, taxes from the rich with your remarkably ill-considered increase in the top tax rate. Just look across the channel to England and see how their raising their top rate merely to 50% worked out for them.

Fourth and finally, you clearly haven't done your homework on economic crises. The fact that your interest rates are low and that your loans routinely get rolled over simply says that you have not yet come to your own Bang! moment. Every country that falls into crisis is able to get financing at low rates right up until the moment it can't. It is all about investor confidence, and I readily admit that right now you have it. But through its policies the current government is doing everything it possibly can to destroy the confidence of the bond market as rapidly as it can. And France is particularly dependent upon non-French sources for the financing of its debt.

Let’s look at few facts, Prof. Moschetto:

The State protects its own

It cannot be trusted to police itself

After the My Lai massacre, only one person, William Calley, was charged, and then only after enormous public outcry. He ultimately served 3.5 years in house arrest for ordering and participating in the murder of at least 347 and possibly as many as 504 Vietnamese civilians, presuming he had no knowledge of the gang rapes and mutilations of bodies, which seems unlikely given eyewitness accounts.

The events of My Lai were initially covered up, itself a crime, but no one was ever charged for participating in the coverup.

During the massacre, Hugh Thompson, Jr. saved countless lives by ordering his helicopter crew to protect innocent civilians from execution. For his trouble, he was initially given a medal for a non-existent event in an attempt to shut him up, then condemned in public once the true events were revealed. The Chairman of the House Armed Services Committee, Congressman Mendel Rivers, went so far as to say that Thompson was the only person in the incident worthy of punishment.

Has the world changed much?

Today, it was announced that Bradley Manning, whose chief de facto offense was providing the US public with evidence of multiple war crimes, will be serving ten times the length of William Calley’s punishment, 35 years, and in a real prison rather than house arrest. The people who committed the war crimes he revealed evidence of will never be charged.

(On the latter, if you have any doubts that he revealed criminal activity, compare, as just one example, the video of the helicopter machine gunning of two Reuters reporters in Baghdad with the official DoD investigation report of the incident, which had full access to said video. Even if one can bring oneself to believe that the incident itself was not a crime (although it almost certainly was), the subsequent investigation was a fabricated tissue of lies. The events in the video and those described in the investigation report are manifestly not the same. Presumably those engaging in this coverup believed they could never be caught because the video was improperly classified to aid in the coverup, itself a crime. The coverup itself was a felony — but no one was charged but the messenger.)

The State protects its own. It cannot be trusted to police itself.

Show Trial

Everything about this case stinks to high heaven

By David Warren

The writings of Canada's most talented journalist, Mark Steyn, went on trial in Vancouver on Monday, in a case designed to challenge freedom of the press. It is a show trial, under the arbitrary powers given to Canada's obscene "human rights" commissions, by Section 13 of our Human Rights Act.

I wrote "obscene" advisedly. Before Canada's "human rights" tribunals, a respondent has none of the defences formerly guaranteed in common law. The truth is no defence, reasonable intention is no defence, nor material harmlessness, there are no rules of evidence, no precedents, nor case law of any kind. The commissars running the tribunals need have no legal training, exhibit none, and owe their appointments to networking among left wing activists.

I wrote "show trial" advisedly, for there has been a 100 percent conviction rate in cases brought to "human rights" tribunals under Section 13.

Take this in:

A group of Islamist fanatics, claiming to speak for every Muslim in Canada, charged Maclean's magazine with "spreading hatred against Muslims" for having printed a lucid and reasonable (if controversial) excerpt from Steyn's bestselling book, America Alone. This is a news story that should be on the front page of every newspaper in Canada, every day until it is resolved.

Everything about this case stinks to high heaven. It was brought before three different "human rights" tribunals simultaneously. The British Columbian venue was openly "jurisdiction shopped" because the province's human rights tribunals have an especially egregious record for ignoring respondents' most basic charter rights. The charges were brought more than a year after the article appeared. There was an open attempt at extortion, when representatives of the complainant called a press conference in which an offer was made to retract the charges for unspecified considerations. And so on: a layering of affronts to the most elementary standards of justice and decency.

The case is the more ludicrous because the allegations brought are semi-literate (for instance, Steyn's quotations of lunatic Islamist imams are confused with Steyn's own assertions). The remedies sought keep changing; the arguments keep changing; the explanation of why the complainant has brought the case and what he hopes to gain from it has kept changing. And now the show trial has begun, the prosecution is presenting a parade of entirely irrelevant testimony. (Has Steyn properly understood the Koran? Etc.)

Obamacare’s Hierarchy of Privilege

No one who favors the law wants to be bound by it

By Mark Steyn

On his radio show the other day, Hugh Hewitt caught me by surprise and asked me about running for the United States Senate from New Hampshire. My various consultants, pollsters, PACs, and exploratory committees haven’t fine-tuned every detail of my platform just yet, but I can say this without a doubt: I will not vote for any “comprehensive” bill, whether on immigration, health care, or anything else. “Comprehensive” today is a euphemism for interminably long, poorly drafted, and entirely unread — not just by the people’s representatives but by our robed rulers, too (how many of those Supreme Court justices actually plowed through every page of Obamacare when its “constitutionality” came before them?). The 1862 Homestead Act, which is genuinely comprehensive, is two handwritten pages in clear English. “The Patient Protection and Affordable Care Act” is 500 times as long, is not about patients or care, and neither protects the former nor makes the latter affordable.

So what is it about? On Wednesday, the Nevada AFL-CIO passed a resolution declaring that “the unintended consequences of the ACA will lead to the destruction of the 40-hour work week.” That’s quite an accomplishment for a “health” “care” “reform” law. But the poor old union heavies who so supported Obamacare are now reduced to bleating that they should be entitled to the same opt-outs secured by big business and congressional staffers. It’s a very strange law whose only defining characteristic is that no one who favors it wants to be bound by it.

Meanwhile, on the very same day as the AFL-CIO was predicting the death of the 40-hour week, the University of Virginia announced plans to boot working spouses off its health plan beginning January 1 because the Affordable Care Act has made it unaffordable: It’s projected to add $7.3 million dollars to the university’s bill in 2014 alone.

The Red Atlantis

Native American Reservations: “Socialist Archipelago”

by Andrei Znamenski

Imagine a country that has a corrupt authoritarian government. In that country no one knows about checks and balances or an independent court system. Private property is not recognized in that country either. Neither can one buy or sell land. And businesses are reluctant to bring investments into this country. Those who have jobs usually work for the public sector. Those who don’t have jobs subsist on entitlements that provide basic food. At the same time, this country sports a free health care system and free access to education. Can you guess what country it is? It could be the former Soviet Union, Cuba, or any other socialist country of the past.

Yet, I want to assure you that such a country exists right here in the United States. And its name is Indian Country. Indian Country is a generic metaphor that writers and scholars use to refer to the archipelago of 310 Native American reservations, which occupy 2 percent of the U.S. soil. Scattered all over the United States, these sheltered land enclaves are held in trust by the federal government. So legally, many of these land enclaves are a federal property. So there you cannot freely buy and sell land or use it as collateral. On top of this, since the Indian tribes are wards of the federal government, one cannot sue them for breach of contract. Indian reservations are communally used by Indian groups and subsidized by the BIA (the Bureau of Indian Affairs, Department of the Interior) with a current annual budget of about $3 billion dollars. Besides being a major financial resource that sustains the reservation system, BIA’s goal is also to safeguard indigenous communities, or, in other words, to make sure that they would never fail when dealing with the “outside” society. People in the government and many Native American leaders naively believe that it is good for the well-being of the Indians to be segregated and sheltered from the rest of American society.

This peculiar trust status of Indian Country, where private property rights are insecure, scares away businesses and investors.[1] They consider these forbidden grounds high risk areas. So, in Indian Country, we have an extreme case of what Robert Higgs famously labeled “regime uncertainty” that retards economic development.[2] In fact, this “regime uncertainty” borders on socialism. James Watt, Secretary of the Interior in the first Reagan administration, was the first to publicly state this. In 1983, he said (and then dearly paid for this), “If you want an example of the failure of socialism, don't go to Russia, come to America and go to the Indian reservations.”[3]

In the 1990s, I had a chance to travel through several reservations. Each time when I crossed their borders I was stunned by the contrast between the human landscapes outside and those within Indian reservations. As soon as I found myself within a reservation, I frequently had a taste of a world that, in appearance, reminded me of the countryside in Russia, my former homeland: the same bumpy and poorly maintained roads, worn-out shacks, rotting fences, furniture, and car carcasses, the same grim suspicious looks directed at an intruder, and frequently intoxicated individuals hanging around. So I guess my assessment of the reservation system will be a biased view from a former Soviet citizen who feels that he enters his past when crossing into Native America.

I am going to make a brief excursion into the intellectual sources of this “socialist archipelago.” Since the 1960s, the whole theme of Native America had been hijacked by Marxist scholarship and by so-called identity studies, which shaped a mainstream perception that you should treat Native Americans not as individuals but as a collection of cultural groups, eternal victims of capitalist oppression. I want to challenge this view and address this topic from a standpoint of methodological individualism. In my view, the enduring poverty on reservations is an effect of the “heavy blanket” of collectivism and state paternalism. Endorsed by the federal government in the 1930s, collectivism and state paternalism were eventually internalized by both local Native American elites and by federal bureaucrats who administer the Indians. The historical outcome of this situation was the emergence of “culture of poverty” that looks down on individual enterprise and private property. Moreover, such an attitude is frequently glorified as some ancient Indian wisdom — a life-style that is morally superior to the so-called Euro-American tradition.

Before we proceed, I will give you some statistics. Native Americans receive more federal subsides than anybody else in the United States. This includes subsidized housing, health, education, and direct food aid. Yet, despite the uninterrupted flow of federal funds, they are the poorest group in the country. The poverty level on many reservations ranges between 38 and 63 percent (up to 82 percent on some reservations),[4] and half of all the jobs are usually in the public sector.[5] This is before the crisis of 2008! You don’t have to have a Ph.D. in economics to figure out that one of the major sources of this situation is a systemic failure of the federal Indian policies.

These policies were set in motion during the New Deal by John Collier, a Columbia-educated social worker, community organizer, and utopian dreamer who was in charge of the Native American administration during FDR’s entire administration. English Fabian socialism, the anarchism of Peter Kropotkin, communal village reforms conducted by the Mexican socialist government, and the romantic vision of Indian cultures were the chief sources of his intellectual inspiration. Collier dreamed about building up what he called Red Atlantis, an idyllic Native American commonwealth that would bring together modernization and tribal collectivism. He expected that this experiment in collective living would not only benefit the Native Americans but would also become a social laboratory for the rest of the world. The backbone of his experiment was setting up so-called tribal governments on reservations, which received the status of public corporations. Collier envisioned them as Indian autonomies that would distribute funds, sponsor public works, and set up cooperatives. In reality, financed by the BIA, these local governments began to act as local extensions of its bureaucracy.

It is interesting that these so-called native autonomies received peculiar jack-of-all-trades functions: legislative, executive, judicial and economic — a practice that is totally unfamiliar in America. For example, in the rest of the United States, municipalities and counties do not own restaurants, resorts, motels, casinos, and factories. In Indian Country, by contrast, it became standard practice since the New Deal. By their status, these tribal governments are more interested in distributing jobs and funds than in making a profit. As a result, many enterprises set up on reservations have been subsidized by the government for decades. Under normal circumstances, these ventures would have gone bankrupt. This system that was set up in the 1930s represents a financial “black hole” that sucks in and wastes tremendous resources in the name of Native American sovereignty. This situation resembles the negative effect of foreign aid on Third-World regimes that similarly use the tribalism and national sovereignty excuse as a license to practice corruption, nepotism, and authoritarian rule.

The amazing double standards of the Miranda affair

For the Guardian to complain of a war on journalism is extraordinary

By BRENDAN O’NEILL

It helped to start this war that it’s now falling victim to

If there was a Nobel Prize for Double Standards, Britain’s chattering classes would win it every year. This year, following their expressions of spittle-flecked outrage over the detention of Glenn Greenwald’s partner David Miranda by anti-terrorism police at Heathrow airport, they’d have to be given a special Lifetime Achievement Award for Double Standards.

For the newspaper editors, politicians and concerned tweeters now getting het up about the state’s interference in journalistic activity, about what they call the state’s ‘war on journalism’, are the very same people – the very same – who over the past two years cheered the state harassment of tabloid journalists; watched approvingly as tabloid journalists were arrested; turned a blind eye when tabloid journalists’ effects were rifled through by the police; said nothing about the placing of tabloid journalists on limbo-like, profession-destroying bail for months on end; said ‘Well, what do you expect?’ when material garnered by tabloid journalists through illegal methods was confiscated; applauded when tabloid journalists were imprisoned for the apparently terrible crime of listening in on the conversations of our hereditary rulers.

For these cheerleaders of the state’s two-year war on redtop journalism now to gnash their teeth over the state’s poking of its nose into the affairs of the Guardianis extraordinary. It suggests that what they lack in moral consistency they more than make up for with brass neck.

Everything that is now being done to the Guardian has already been done to the tabloid press, a hundred times over, and often at the behest of the Guardian. For all the initial depictions of Mr Miranda as ‘just Glenn Greenwald’s partner’, in fact he was ferrying encrypted information from the NSA leaker Edward Snowden on flights paid for by the Guardian. That is, he was detained and questioned over journalistic material acquired through illegal means. That’s already happened to the tabloids. Over the past two years of post-phone hacking, post-News of the World harassment of tabloid hacks by the state, 104 people have been arrested, questioned, usually put on unjustly elongated bail, and sometimes imprisoned. These include many journalists but also office secretaries and other non-journalist types, like Mr Miranda, who stand accused of handling illegally acquired material. The 104’s crimes include ‘disclosure of confidential information’ – not that dissimilar to what Greenwald and Miranda have done in terms of getting hold of and publishing Snowden’s illegally leaked confidential material. Yet while the redtop writers rot in legal limbo, Mr Miranda becomes a chattering-class cause célèbre.

On Politics

If you want a better world to live in, build it yourself

Recently, I’ve seen much hubbub to the effect that the US Republican Party must adopt libertarian views to retain its popularity. For example, see this article which, in spite of its title, mostly discusses why the Republicans will fail if they don’t abandon “conservatism” for libertarianism.

As other examples, NPR had an extended segment on the news with a very similar topic about a day ago, and I’ve seen friends posting on similar themes.

I should like to take a radically orthogonal view.

I honestly don’t care what will or will not “save” either the Republican Party, or any other party for that matter. Political parties generally disgust me, being organized for much the same purpose as a gang of looters or a crime syndicate, and if only they could all go out of business and their members be sent to prison where they belong I would be pleased beyond measure.

What I do know is this, though: just as the Democrats keep talking about things like “civil liberties” while running Guantanamo and a surveillance state, and talk about “peace” while growing the military and intervening around the world, your odds will be excellent if you bet that a GOP that adopts “libertarianism” so it can win elections will give the ideas lip service while implementing entirely non-libertarian policies to serve their real goals: power and money for themselves and their cronies.

Many people will not understand this distinction between rhetoric and action. After all, few seem to notice it right now. If the rebranding is successful and the Republicans start winning elections, I fear that the public will start blaming “libertarianism” for increased government spending, foreign intervention, business regulation, torture, and whatever else they implement under the pretense of spending cuts, non-intervention, deregulation, civil liberties, and the like.

I suppose that is not really something I can help, though. The underlying problem is that people do not yet widely understand that the higher the political office, the more likely it is that the electoral contest is between two sociopathic con men.

Indeed, the US Presidential election is a sort of quadrennial Olympics for con men. The odds of of a randomly selected untrained amateur winning the Olympic 500m race are poor when hundreds or thousands of professionals train for years for the event. The probability of a decent human being winning the White House when competing against hordes of amoral grifters whose skills are honed to a razors edge by years of competition are even lower.

Worse, people do not understand that even if a decent human being by some astounding accident wins high political office, they are almost inevitably both thwarted and corrupted. The system is built to derail reform, not to enable it, and it holds temptations that few normal people can resist. One is faced with (to name but a few things) the powerful financial interests of the Military-Industrial Complex, blackmail by the intelligence community, lobbyists more numerous than locusts, fellow politicians who do not want their sustenance to end, a press almost as interested in preserving the status quo as the pigs at the trough, Sir Humphrey Appleby‘s spiritual kin, constant luxuries from banquets to private jets to soften one’s moral resistance, and an endless series of instances where one might bend the rules just this once, for the common good.

I would not even trust myself with the power of the Presidency — it should be no surprise that I trust no one else with it either.

I have been asked by some, “then what do you propose we should do, if electoral politics will not work? Surely you must work within the system you have, not the one you wish you had.” This viewpoint reminds me of a political cartoon featuring a pair of Aztec priests removing the heart from a victim. One says to the other, “it isn’t the best possible system, but it’s the one we’ve got.”

I think that until one thinks beyond the current system and its failures, one cannot get away from those failures. You cannot become celibate by increasing your frequency of sexual intercourse, shoot your way to nonviolence, gorge your way to weight loss, or vote your way to a system that respects inalienable rights not subject to the whims of the electorate.

The US’s founding fathers conducted an interesting experiment in whether a strong constitution could restrain the worst defects of democracy. (That was literally their intent, as the Federalist Papers reveal.) We would be fools to ignore the result of that experiment. To be sure, it was a partial success for a time, but it did not last. The rot began almost immediately.

(I have acquaintances who are attorneys who believe in a “living constitution.” They laugh at me when I say things like “but the plain intent of the words `Congress shall make no law[...] abridging the freedom of speech, or of the press’ is that Congress isn’t allowed to make laws on that topic.” Apparently a belief that words can have plain meanings is the height of naïveté and shows exactly how stupid I am.)

The only rational way forward I see is to try to build the world I want directly, and to leave the political mechanism, which I wish to see eliminated anyway, behind.

My message, and sadly the best path I have to offer (for it is not an easy one) is this: work on ways to achieve the world you want that do not involve politics, and work on letting others know that this is the only long term path to make the world a better place.

In other words, if you want to see people fed, work on ways to feed them — one Norman Borlaug beats a million “food security activists” begging for stolen money. If you want to see people better able to communicate in privacy or avoid censorship when they wish to speak in public, build computer protocols and software to help them do that regardless of the desires of bureaucrats. (The people who built Tor, PGP and the like did not wait to be given “permission” to do so, they simply built what they felt the world needed. You can, too.) If you want to help people live longer and healthier lives, do medical research or open a clinic.

So, if you want to be free, live as freely as you can right now, and help others to be free as well. Build the institutions and technologies you wish existed to support freedom today, not someday after “they” have given you permission to be free. “They” will never grant their permission, so you will be waiting forever. Besides, waiting for “them” to throw you crumbs of freedom is servile. Not only will the things you build improve your own life here and now, those things will also undermine the power of those who would enslave you. (“They” would prefer that you believe yourself to be powerless and dependent on what “they” choose to do. Ignore “them”.)

Most of all, do not believe the con men, do not join them, and do not aid them. (Try to help other people understand that they should not believe or aid them either.) The con men are not your friends. The last several millennia of experience with elections are not a fluke to be dismissed as mere experimental error. The next politician and the next election will not be different than all their predecessors. The next politician will not usher in “change”, or “hope”. The next politician will, if experience is any guide, care mostly about self-maximization. It doesn’t matter how hard they pander to your prejudices, they don’t care about what you want, they’re in it for what they want. If you want a better world to live in, build it yourself instead. 

'We Are Bastards of Communism'

Defending Democracy in Eastern Europe

Adam Michnik is editor-in-chief of Poland's leading daily and its most prominent former dissident. In a SPIEGEL interview, he talks about the threat of authoritarian regimes in Eastern Europe, the decline of the region's political culture and feelings of being treated like second-class citizens in Europe.

by Spiegel

We are sitting in a room on the sixth floor of the building occupied by the leftist-liberal Warsaw newspaper Gazeta Wyborcza. There are stacks of newspapers and books everywhere, and on the walls are certificates from American and German universities next to photos of Adam Michnik with statesmen from around the world. Michnik is sitting at the table smoking an electric cigarette. He is the editor-in-chief of Gazeta Wyborcza, Poland's most important nationwide daily newspaper, which started being published in 1989 as the first legal newspaper of the Solidarnosc (Solidarity) trade union. Michnik, 66, is the country's most prominent former dissident. He was sent to prison several times for his political convictions, starting at the age of 19. He wrote for underground newspapers and supported the independent Solidarity trade union. When the communist regime declared martial law in 1981, Michnik was detained. In the spring of 1989, he took part in the Round Table talks, as an adviser to Solidarity leader Lech Walesa, and negotiated the first free elections. Since then, he has focused his attention on the upheavals in Eastern Europe. For Michnik, the demonstrations in Bulgaria against the corrupt political class, the authoritarian tendencies in Hungary and nascent nationalism are all the delayed consequences of 40 years of oppression and patronization under communism. Michnik has a special relationship with SPIEGEL. When he was allowed to go to Paris in the 1970s to visit Jean-Paul Sartre, he called the SPIEGEL offices in Hamburg from Paris. He wanted to know whether its editors would like to print an essay he had written, which they did. "It was the first article I was able to publish in a truly important Western publication," Michnik says. "It sent a message to Poland's rulers that they could not sideline me with force."

---

SPIEGEL: Mr. Michnik, for more than six weeks now, thousands of people have taken to the streets in Bulgaria to demonstrate against their country's rotten political system. More than 20 years after Eastern Europe's democratic awakening, political conflicts are still characterized by turf wars and hatred. Why?

Michnik: We lack a political culture, a culture of compromise. We in Poland, as well as the Hungarians, have never learned this sort of thing. Although there is a strong desire for freedom in the countries of Eastern Europe, there is no democratic tradition, so that the risk of anarchy and chaos continues to exist. Demagoguery and populism are rampant. We are the illegitimate children, the bastards of communism. It shaped our mentality.

SPIEGEL: Hungarian Prime Minister Viktor Orbán, who is very radical in his approach to the press and the opposition, is not without his admirers in Eastern Europe. The same holds true in your country with conservative nationalist opposition leader Jaroslaw Kaczynski. Is the authoritarian brand of politician characteristic of the East?

Michnik: We still have politicians who strive for a different type of country: Kaczynski as well as Orbán in Hungary. They want a gradual coup. If Orbán stayed in power in Hungary or if Kaczynski were to win an election in our country, it would be dangerous. Both men have an authoritarian idea of government; democracy is merely a façade.

SPIEGEL: Orbán says that a "centralist majority democracy" is needed so that clear decisions can be made, by decree, if necessary. Otherwise, he says, dangers like the economic crisis cannot be averted.

Michnik: Hitler said the same thing when he issued special decrees and emergency regulations. It's the road to hell. To be honest, Hungary is the country where I would have least expected this to happen, but it was the first to cut a hole into the Iron Curtain. In Romania and Bulgaria, perhaps, but not in Hungary. What is happening there now stems from a disappointment in the Social Democrats, who were in power before and drove the country into economic ruin. Fortunately, Poland quickly implemented the most important reforms needed to make the transition to a market economy at the beginning of the 1990s. It was different in Hungary. That's why the population is now disappointed and is calling everything into question, even the things it once dreamed of achieving.

SPIEGEL: Do people suddenly no longer care that someone is removing judges or editors-in-chief who are not toeing the party line? Have they forgotten what it was like under the communists?

Michnik: A part of society in our countries would still prefer an authoritarian regime today. These are people with the mentality of Homo sovieticus. But they also exist in France -- just think of Le Pen -- and even in Finland and Sweden.

SPIEGEL: Orbán is trying to direct his country into a "system of national cooperation without compromises." What does he mean by that?

Michnik: British historian Norman Davies called this form of democracy a "government of cannibals." Democratic elections are held, but then the victorious party devours the losers. The gradual coup consists in getting rid of or taking over democratic institutions. These people believe that they are the only ones in possession of the truth. At some point, parties no longer mean anything, and the system is based, once again, on a monologue of power. The democratic institutions in the West are more deeply embedded in the West than in Eastern Europe. Democracy can defend itself there. Everything is still fragile in our countries, even two decades after the end of communism.

SPIEGEL: Orbán, Kaczynski and others talk about wanting to finally finish the revolution of 1989 and settle scores with the communists. Do former communist officials still pose a threat today?

Michnik: I think it was a good thing that Poland chose the path of reconciliation and not the path of revenge. Nevertheless, I'm still treated with hostility. I was a supporter of (former German Chancellor Konrad) Adenauer. He too had several options after the war: to send the people around him who had supported Hitler to prison or to turn them into democrats. He chose the second path. We also wanted our new Poland to be a Poland for everyone. The other path would have meant the opposition assuming power immediately in 1989 and not sharing it with the old regime. We would have had to hang the communists from the streetlights, and a small, elite group would have been in charge. That would have been anti-communism with a Bolshevik face.

SPIEGEL: Many say that the old boys' networks have become re-established. In Bulgaria, several thousand people, including many members of a new, urban middle class, are currently demonstrating against their country's political class.

Michnik: Yes, but there were also free elections in Bulgaria, where the opposition has just won. In a democracy, the government is a reflection of society because people are elected. Sometimes the type of person from the old machine, who is everything but an appealing figure, happens to win an election. But democracy applies to everyone, not just the noble and the clever.

The Pain in Spain Still Going Strong

IMF "Baseline Scenario" Projects Spain Unemployment Will Remain Above 25% for 5 Years with Little Growth

By Mike "Mish" Shedlock

I am normally critical of IMF forecasts, but their baseline unemployment projection for Spain of 25% or more with no more than .6% annual growth through 2017 seems reasonable. The pessimistic scenario is a toxic deleveraging downward spiral that continues right now.
The optimistic scenario assumes 2% growth, but that scenario does not start until 2018, and only if labor reforms in Spain and Europe take place.
Via Google translate from El Economista, please consider IMF estimates that Spain will grow by an average of 0.6% over the next five years 

 The team led by James Daniel, Chief of Mission of the International Monetary Fund (IMF) to Spain, estimates unemployment, which will remain above 25% over the next five years.

Ignoring the 1.6% downturn that the IMF expects the country to suffer this year, the average growth for the Spanish economy between 2014 and 2018 will be 0.6%. GDP growth will remain below 1% until 2017 and thereafter only begin to expand beyond these levels.

In 2018, the optimistic scenario in which reforms (both from Spain and Europe) are accelerated and gain ground would result in an acceleration of growth of 2% in 2018 and a significant increase in employment.

The pessimistic scenario starts immediately if deleveraging pressures and financial difficulties intensify. This scenario would create a toxic spiral between macro and financial context and would leave the public and private debt at high levels in the future, the country would not grow until 2017, and unemployment would remain above 27%.

No End in Sight to Italy's Economic Decline

Basta 'La Casta'

By Hans-Jürgen Schlamp

The Italian economy may be the third largest in the euro zone, but it is also plagued by inefficiency and continues to shrink. The country's political leadership has proven unable to implement badly needed reforms and the future looks grim.

The euphoria was evident. "We've done it!" Italian Prime Minister Enrico Letta tweeted earlier this month after the European Commission had provided his country with new financial leeway.

Letta had managed to convince Brussels that Italy would remain below the European Union's budget deficit limit of 3 percent of gross domestic product, if only by a hair, at a forecast 2.9 percent. The premier insisted that his country finally had the latitude to stimulate growth and promote new jobs, and that his administration had achieved "perhaps the most important result" of all time. That was at the beginning of July. Since then, politicians and lobbyists have been energetically arguing over how to take advantage of the new opportunity.

Former Prime Minister Silvio Berlusconi wants to abolish the property tax on first homes, which would cost €4 billion. And if the government were to refrain from a planned increase in the value-added tax, as has also been called for, it would forfeit an additional €2 billion ($2.6 billion) in revenues. Letta and the left, for their part, would like to invest €1.5 billion to create new jobs for young unemployed Italians.

The debate, and Letta's optimism, has temporarily obscured the difficult situation in which Italy finds itself. All the ideas under discussion for stimulating the country's economy will cost money -- and will require Rome to take on additional debt. Indeed, Standart & Poor's recently showed its lack of faith in the country when it downgraded Italian debt by a notch two weeks ago, a move which infuriated Italians.

The truth is that Italy, despite being the third-largest economy in the euro zone after Germany and France, finds itself in dire straits, having been in decline for years. Its GDP has dropped by 7 percent since 2007. The last few years, says Gianni Toniolo, an economics professor in Rome, represent "the worst crisis in (the country's) history," even more devastating that the period between 1929 and 1934.

Black Self-Sabotage

The tragedy of black predators preying on blacks

By Walter E. Williams

If we put ourselves into the shoes of racists who seek to sabotage black upward mobility, we couldn't develop a more effective agenda than that followed by civil rights organizations, black politicians, academics, liberals and the news media. Let's look at it.

First, weaken the black family, but don't blame it on individual choices. You have to preach that today's weak black family is a legacy of slavery, Jim Crow and racism. The truth is that black female-headed households were just 18 percent of households in 1950, as opposed to about 68 percent today. In fact, from 1890 to 1940, the black marriage rate was slightly higher than that of whites. Even during slavery, when marriage was forbidden for blacks, most black children lived in biological two-parent families. In New York City, in 1925, 85 percent of black households were two-parent households. A study of 1880 family structure in Philadelphia shows that three-quarters of black families were two-parent households.

During the 1960s, devastating nonsense emerged, exemplified by a Johns Hopkins University sociology professor who argued, "It has yet to be shown that the absence of a father was directly responsible for any of the supposed deficiencies of broken homes." The real issue, he went on to say, "is not the lack of male presence but the lack of male income." That suggests marriage and fatherhood can be replaced by a welfare check.

The poverty rate among blacks is 36 percent. Most black poverty is found in female-headed households. The poverty rate among black married couples has been in single digits since 1994 and is about 8 percent today. The black illegitimacy rate is 75 percent, and in some cities, it's 90 percent. But if that's a legacy of slavery, it must have skipped several generations, because in the 1940s, unwed births hovered around 14 percent.

Along with the decline of the black family comes anti-social behavior, manifested by high crime rates. Each year, roughly 7,000 blacks are murdered. Ninety-four percent of the time, the murderer is another black person. According to the Bureau of Justice Statistics, between 1976 and 2011, there were 279,384 black murder victims. Using the 94 percent figure means that 262,621 were murdered by other blacks. Though blacks are 13 percent of the nation's population, they account for more than 50 percent of homicide victims. Nationally, the black homicide victimization rate is six times that of whites, and in some cities, it's 22 times that of whites. I'd like for the president, the civil rights establishment, white liberals and the news media, who spent massive resources protesting the George Zimmerman trial's verdict, to tell the nation whether they believe that the major murder problem blacks face is murder by whites. There are no such protests against the thousands of black murders.

There's an organization called NeighborhoodScout. Using 2011 population data from the U.S. Census Bureau, 2011 crime statistics from the FBI and information from 17,000 local law enforcement agencies in the country, it came up with a report titled "Top 25 Most Dangerous Neighborhoods in America." (http://tinyurl.com/cdqrev4) They include neighborhoods in Detroit, Chicago, Houston, St. Louis and other major cities. What's common to all 25 neighborhoods is that their makeup is described as "Black" or "Mostly Black." The high crime rates have several outcomes that are not in the best interests of the overwhelmingly law-abiding people in these neighborhoods. There can't be much economic development. Property has a lower value, but worst of all, people can't live with the kind of personal security that most Americans enjoy.

Disgustingly, black politicians, civil rights leaders, liberals and the president are talking nonsense about "having a conversation about race." That's beyond useless. Tell me how a conversation with white people is going to stop black predators from preying on blacks. How is such a conversation going to eliminate the 75 percent illegitimacy rate? What will such a conversation do about the breakdown of the black family (though "breakdown" is not the correct word, as the family doesn't form in the first place)? Only black people can solve our problems. 

Our man in Moscow

He did it his way 

By Pepe Escobar 

So what is the "extremely disappointed" Obama administration, the Orwellian/Panopticon complex and the discredited US Congress to do? Send a Navy Seal Team 6 to snatch him or to target assassinate him - turning Moscow into Abbottabad 2.0? Drone him? Poison his borscht? Shower his new house with depleted uranium? Install a no-fly zone over Russia? 

Edward Snowden, under his new legal status in Russia, simply cannot be handed over to Bradley Manning's lynch mob. Legally, Washington is now as powerless as a tribal Pashtun girl facing an incoming Hellfire missile. A President of the United States (POTUS) so proud of his constitutional law pedigree - recent serial trampling of the US constitution notwithstanding, not to mention international law - seems not to have understood the message. 

Barack Obama virtually screamed his lungs out telling Russian President Vladimir Putin he had to hand him Snowden "under international law". Putin repeatedly said this was not going to happen.

Obama even phoned Putin. Nothing. Washington even forced European poodles to down Bolivian President Evo Morales's plane. Worse. Moscow kept following the letter of Russian law and eventually granted temporary asylum to Snowden. 

The Edward Snowden saga has turned the Pentagon's Full Spectrum Dominance doctrine on its Hydra-head. Not only because of the humbling of the whole US security state apparatus, but also for exploding the myth of Full Spectrum Dominance by POTUS. 

Obama revealed himself once again as a mediocre politician and an incompetent negotiator. Putin devoured him as a succulent serving of eggs benedict. Glenn Greenwald will be inflicting death by a thousand leaks - because he is in charge of Snowden's digital treasure chest. And Snowden took a taxi and left the airport - on his own terms. 

Layers and layers of nuances have been captured in this fascinating discussion at Yves Smith's blog - something impossible to find across Western corporate media. For POTUS, all that's left is to probably boycott a bilateral meeting with Putin next month, on the sidelines of the G20 summit in St Petersburg. Pathetic does not even begin to explain it.