Why worry about asteroid strikes or a massive volcanic eruption when you can worry about the collapse of the euro currency zone? This isn't one of those disasters that come on suddenly. It has a plot that has been building up for years. Though for most of that time the very idea that we were in a disaster plot was denied by the main writers. Now, however, too many plot complications have built up to the point where a disaster cliff hanger is clearly in view. Any outcome looks pretty bad and some of them are "buddy, can you spare me a dime?" doozies. Even collapse of the European Union is being mooted.
Europe is a pretty scenic and culturally rich place in which to have economic collapse, rioting in the streets, and general chaos. If it happens excellent news video feeds will boost ratings more than a terrorist attack. The British government is already preparing to deliver life support to Brits caught inside of failed states. Maybe NATO troops should be pulled out of Afghanistan in order to do nation-building in Europe?
A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.
“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.
Time to move US Marines helicopter carriers into position to evacuate Americans from Italy, Spain, and Portugal to England? Stock up US military bases with food? Or maybe dollar ATMs?
Also, there've got to be shady subplots of conspiracies afoot. Have the Bilderbergers have been plotting (benevolently of course) for this outcome in order to undermine Brussels as a competing power center? Is the Trilateral Commission on board? The Illuminati? Name your favorite group to hate or fear. They might have a role.
I don't happen to own a TV. But if I did I'd be clicking thru the channels looking for a news channel that covers the action in Europe more like a sports match. "In the last round heavily favored Germany had a setback and now Finland and Denmark are breaking past Germany. No predicting how this will turn out."
Now that even Germany – Europe’s most creditworthy country – is struggling to raise cash, there’s no haven left within the 17-member common currency. On Friday, two more countries, Hungary and Belgium, saw their credit ratings downgraded as Italy struggled with a bond auction that saw long-term borrowing coasts soar to unsustainable levels.
"The competition intensified after the 2008 near collapse of the whole field." "Some weaker teams are expected to drop out of the race".
A survey by Barclays Capital of almost 1,000 of its clients, published Wednesday, shows almost half now expect at least one country to leave the euro zone. And a mere 3% are expecting a workable solution to the crisis within the next three months.
"The PAC-17 is going to turn into PAC-10 at the rate things are going". "Yep, some of these countries are going to have to enter the Little League".
Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports this week examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.
It is hard for me to see how the United States avoids a recession as Euro countries default, reestablish their currencies in a hurry, and banks fail.
Simon Johnson says Europe's choice is between a Great Depression or a Great Inflation. Is that true? Which will they choose?
There is no way to have just a little debt restructuring for Italy. If Italian debt involves serious credit risk – i.e., a nonzero probability of default – then all sovereign debt in Europe will need to be repriced, downwards. There is a notion that Germany will remain a safe haven, but even that is far from clear. According to the IMF, gross government debt in Germany will be 82.6 percent of GDP at the end of this year (Statistical Table 7 of the IMF’s Fiscal Monitor; the net government debt number for 2011, in Statistical Table 8, is 57.2 percent). Reports of German fiscal prudence have been greatly exaggerated.
There is no way that the German policymakers or the German public will do well in the event of a major sovereign credit disaster. Credit would tighten across the board. German exports would plummet. The famed German social safety net would come under great pressure. If Germany had to call in the International Monetary Fund for advice, even informally and behind the scenes, how would that feel?
Will the Germans opt for inflation to hold the EU together? Or will southern members reestablish their currencies and then pursue inflationary monetary policies? In the latter scenario the euro's exchange rate will probably rise, putting the brakes on German exports and putting Germany into a recession.
Inflation or deflation? What's going to happen?
High IQ is dangerous when its concentrated in verbal skills only. Razib's take sounds right to me. But I'd say Razib's "probably" on Romney's analytical advantage is an unnecessary qualifier.
Is Newt Gingrich as smart as he thinks? He’s obviously not dumb like Rick Perry, or ignorant like Herman Cain. But I think Newt is a “high verbal” type who can impress the dull more than actually get anything done. I believe that Mitt Romney is somewhat higher in I.Q., but more critically he probably has a better practical skill set. Newt is not one known for contingency and coherency, and that’s a problem.
In politics high verbals show up more on the Left than the Right. One can say that's the major problem with the dominant liberal media. They can make better arguments than the evidence supports. So they end up being very persuasive for wrong positions. Then a bunch of grouchy right wingers listen and angrily pronounce "what a bunch of bullshit". The conservatives aren't heard much except on talk radio or in right wing blog comments.
A right winger with insufficient analytical skills and very high verbal IQ would just be a repeat of what goes wrong routinely on the Left but with all the blame getting heaped on the right wing brand by high verbal IQ lefties. Bad for the Right and bad for the country.
Tragically, our political system now favors the election of high verbals who are lacking in analytical rigor. So maybe Newt has a chance. I am reminded of something Steve Sailer posted about Newt several months ago: Newt is so convinced he knows everything that he doesn't know when to shut up and listen to people who know more than he does.
I've always kind of liked Newt, but he's a flake. I remember listening to a dinner table conversation in the 1990s about Newt between two people who were much more insiders than me, so I kept my mouth shut and paid attention. The first, who I won't name, was a woman who attained some prominence in politics in the 1990s, but struck me as a flake. She was highly enthusiastic about Newt running for President.
The other person was General William Odom, who had been Zbig's assistant for military intelligence in the Carter Administration, then head of the National Security Administration in the Reagan Administration. He was not a flake. Odom rolled his eyes at the idea of President Newt, and replied that when Gingrich had first obtained a leadership position in Congress in the 1980s, Odom had invited Gingrich over to get the two-hour NSA briefing reserved for the top few officials in Congress. When Newt showed up, however, he talked for two hours straight, giving Odom's staff Newt's two-hour tour d'horizon. Nobody left the room better informed than they had entered, except in terms of awareness of Newt's chief liability: Americans want leaders who give the impression that they know more than they are saying, but nobody could possibly know more than Newt says.
So really, Romney's the best bet for the Republicans. He's got very high analytical skills, understands finance, understands business management, and knows how to be a CEO. His Mormonism is not important. That he governed a liberal state from a moderate position was really the only choice he had as governor of Massachusetts. He's not a nut case or a dummy like some of the other Republican candidates. He harkens back to an earlier (and better) Republican party when executive competence mattered and ideological zeal was suspect.
The euro zone debt crisis continues to grow. Tyler Cowen opines on lack of good options as the markets start to price more southern European debt into default territory. The architects of the EU and the euro currency have created the conditions for a very big financial train wreck. Will the EU be discredited as a result?
I am seeing reports of 7.7 on the Italian ten-year bond, over eight percent on the two-year bond, 6.5 percent on the six-month note, and so on. Here is one account.
Maybe these markets simply will shut down soon. There is so much talk about what the Germans should do, but I don’t see the viable options. With Germany’s own credit status now in doubt, eighty percent debt to gdp ratio, massive welfare state, and unfavorable demographics, are they supposed to endorse — going to endorse — ten or fifteen percent price inflation for a few years’ time, all with no guarantee of reforms in the economically weaker countries? And is that inflation then followed by a subsequent deflation? Or does it continue forever? And would Germany have to move to a regime of wage flexibility for the professions too? How politically feasible is that? I don’t see how the Germans benefit from going down this road, even if you think, as I do, that the alternatives are quite dire.
7.7% is not a stable interest rate for any of the southern European countries. They either have to default or get bailed out. Since the bail-out option seems unlikely default seems more likely. But default means bankruptcy of many banks that hold sovereign debt. That drives already poor governments to try to bail out their banks. That, in turn, drives these governments to want to leave the Euro and regain their own currency with their own central bank to bail out the banks
You can find lots of commentary on why Germany should save the euro in its present form with all current members. But such a move would be incredibly expensive and just kick the ball down the road into an even bigger crisis. Why? A root cause: Spain Labor Market Incompatible With Euro. Read that. As long as southern European labor markets basically require periodic bouts of inflation the northern and southern European countries should not be in the same currency zone.
Jeremy Warner sees the markets have started to price in a major break in the euro. My guess is we will end up with a much smaller euro zone including Germany, some Nordic countries, Austria, and probably France.
No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency.
The EU dream is looking pretty tattered. Is this a dying brand? Or will it bottom out and then experience a resurgence? Will crisis enable Eurocrats to make it stronger? Niall Ferguson says it is legally easier for a country to leave the European Union than the euro currency zone.
Many people assume that the tipping point will come when one country — most likely Greece — leaves or is ejected from Europe’s monetary union. But the scenario that worries Eurocrats is different. They fear that a country could leave the European Union itself.
This is by no means an irrational anxiety. Under E.U. law, it would be much easier for Britain to leave the European Union than for Greece to leave the euro zone.
Ferguson sees Britain's exit from the EU as more probable than southern European countries leaving the euro currency zone. I'm not persuaded. Even if the Germans give large sums of money to the southern European countries and agree to a monetary policy that causes sustained inflation to inflate away some of the debt what happens 5 years hence? Mechanisms in the labor markets and politics of southern European countries will gradually cause them to become uncompetitive again.
Read this Washington Post article on how Americans see their soldiers, sailors, and airmen. Americans feel more pity than respect for men and women in military service.
The troops are lavished with praise for their sacrifices. But the praise comes with a price, service members say. The public increasingly acts as if it feels sorry for those in uniform.
American soldiers, especially the officers, find themselves in a strange place. They are not representative of the larger public. Their values are distinctly different from those of the larger public which they seek to protect. The US does not now face any serious threats. Yet the military is targeted by competing who use these soldiers as tools for assorted ethnic and ideological ambitions.
The pity might be a subconscious recognition of the pointlessness of many of the costs US soldiers pay. The Vietnam war made more sense than the Iraq war because at least in Vietnam we were fighting communists in a global context of a Cold War against communism. One could debate the accuracy of the Domino Theory or its applicability in a country whose communists were also fighting for ethnic nationalism. But at least the labeling of the enemy was honest of not complete.
“We, as a nation, no longer value military heroism in ways that were entirely common in World War II,” said retired Lt. Gen. David Barno, who commanded U.S. troops in Afghanistan.
Instead, praise from politicians and the public focuses largely on the depth of a service member’s suffering. Troops are recognized for the number of tours they have endured, the number of friends they have lost or the extent of their injuries.
Partly this reflects the feminization of school curricula. Boys are bored out of their minds by literature and history courses that emphasize feminine topics. War and martial valor aren't taught any more. This helps drive the imbalance in favor of females graduating from high school and going to college.
My take: Guys should find something better to do with their time than join the military. You aren't going to be appreciated. You are unlikely to be used for the common good of the American people. If you must join at least aim for development of technical or police skills that will have value when you return to civilian life. Though there is one way to go extreme military and make it pay: Join the special forces and then come out as a civilian contractor making a 6 figure salary for the CIA.
The more-assertive Saudi role has been clear in its open support for the ouster of Syrian President Bashar al-Assad, who is Iran’s crucial Arab ally. The Saudis were decisive backers of last weekend’s Arab League decision to suspend Syria’s membership (though they also supported the organization’s waffling decision Wednesday to send another mediation team to Damascus).
What I find curious here about the Saudi ruling family:
One wonders what the Saudis see as the odds of a popular revolt in Iran. Do the Saudis do anything to promote internal opposition to the Iranian government?
What I also wonder: Are the Saudis trying to use their influence to stoke up support in Washington DC for a US military strike against Iran? Are they allying with pro-Israel interests in DC toward this end?
More generally: What's a good way to get a measure of trends in influence-buying in DC and also internationally? Which governments are most buyable for foreign policy purposes by domestic and foreign influence buyers?
The demand for rule of law, high quality medical care, and a few attributes of modern British-founded countries makes them very attractive to wealthy Chinese.
What began as a trickle a decade ago when Li moved his family to Canada has become a flood as China’s new rich seek foreign passports or residency permits (commonly known as green cards in the U.S.) largely from the U.S., Canada, Australia, Singapore, and New Zealand. More than 500,000 Chinese have investable assets of over 10 million yuan ($1.57 million), according to a joint survey released in April by China Merchants Bank and Bain & Co. The study says almost 60 percent are considering emigrating, have begun the process, or have emigrated.
This is quite the opposite of the Ellis Island mythology of "give us your poor". That's so 19th century. Now its "give us your rich". Someone tell Newt Gingrich. If we only let in the rich and the very smart we'd be much better off.
Update: On the other hand, with more imported rich people we'd then have even more wealthy people bidding for influence over national government. They'd have even more allegiances to something other than the commonwealth. Would that make government even more an enemy of the people than it has already become?
The editors of the Washington Post, who already have front row seats to the on-going federal follies, are amazed at California's unsound plans for a high speed rail system.
THINGS JUST WENT from bad to worse for high-speed passenger rail in California. After the Golden State’s voters approved a $9 billion bullet-train bond issue in 2008, officials said they could build an 800-mile system by 2020, for $35.7 billion. The cost projection now, as issued by the state Nov. 1: $98.5 billion, with a completion date of 2033.
Time to pull the plug, right? Not according to Gov. Jerry Brown (D). The new “business plan is solid and lays the foundation for a 21st-century transportation system,” he said. Equally upbeat, Transportation Secretary Ray LaHood offered Mr. Brown his congratulations on “a sound, step-by-step strategy for building a world-class high-speed rail network.”
The Post editors are amazed at the brazen delusion.
This is unreal.
The state government still faces budget deficits and the need to cut spending further. But in spite of Jerry Brown's maverick persona he's in bed with the state public employee unions. Those unions (and faux independent Jerry) oppose cuts in their excessively high and unsustainable compensation.
California used to be a state with a rapidly rising living standard, high quality of life, and students who performed well in school. It led the country in many developments of a more positive nature. That was before it grew too large and imported a large lower class from Latin America. That was before the political system became thoroughly corrupted by public employees unions. Now California is the poster boy of governmental dysfunction while politicians like Jerry Brown still pretend the fundamentals have not changed. Perhaps when San Jose goes bankrupt (more here) and other cities get dragged into bankruptcy by employee retirement costs the state's fallen condition will become harder to deny.
BTW, $100 billion for a high speed rail system for a state of about 40 million works out to about $2500 per resident (can't really say per citizen). But the vast majority won't live close enough to use it much if at all. Also, the majority pays too little in taxes to contribute much toward its construction. In fact, just 1% of the state income tax filers pay almost half the state income tax. So effectively Jerry Brown's asking less than 150k taxpayers to pay about $50 billion over a couple of decades. What if they leave the state instead?
Necessity is a mother. Harvard economist Edward P. Glaeser looks at the rising ranks of elderly workers.
The numbers supply a vivid picture of America’s graying work force. Between 2007 and 2010, the number of working Americans over 65 years old jumped 16 percent; the number of under-65’s in the labor force shrank. The trend started before the current downturn: the number of Americans over 65 in the labor force increased from 10.8 percent in 1985 to 12.1 percent in 1995 to 15.1 percent in 2005 to 17.4 percent in 2010. Until 2001, most workers age 65 and older had part-time jobs; since 2001, full-time work has been far more common.
The need to work into old age is growing. I know people in their 60s who have saved nothing toward their old age. So they work out of absolute necessity. Some have suffered financial reversals. Others lived their lives with money flying in and flying out of their lives. Still others just didn't try that hard. They chose to do whatever was more fun and worked part time. Now they are in their 60s and have to keep on working into their 70s.
But even if you are a saver you need to consider the possibility of living into your 80s and 90s and how you'll take care of yourself as you get older. You'll have to pay a larger fraction of your health care costs out of pocket. Governments (not just the US government) will have to cut back on the richness of their old age medical programs. Too large a fraction of the population will be old with too small a working age population to support them.
Today nearly 450,000 Americans 65 and older are unemployed and looking to work. To get an idea of how dramatic a jump this is, consider this: the number of unemployed elderly job seekers has more than doubled in the last four years.
Tough economic times have caused a surge of 65+ looking for jobs. My advice: steer your career years in advance in directions that create opportunities for continued work in ways that beat working as a greeter at Wal-Mart. Back in the 1980s I met a guy who was in his late 60s working as a greeter at Wal-Mart. He invested in a real estate boom and found himself much poorer as a result. So there he was greeting people effusively. Don't wind up like him.
How much money will you have to save to cover your old age health care costs? If you haven't been saving for old age medical costs you probably need to work longer.
A man who has relatively average drug expenses needs to save $136,000 to have a 90% chance of covering his health-care costs in retirement, while a woman — given her likely longer lifespan — needs $156,000, according to the Employee Benefit Research Institute, a nonprofit, nonpartisan group. A couple with median drug expenses needs $287,000 to have a 90% chance of covering their costs. Read more about health-care costs on EBRI's site.
Advances in cell therapies, gene therapies, tissue engineering and other biotechnologies are going raise the life expectancy of most of the people reading this post. Start thinking about a longer work life and how to achieve it. Do you work for a company that will grow or shrink in the coming decades? Do you expect the area you live in to expand or shrink? Does your area have one or two or many employers who could potentially use your skill set? Do technological trends favor the continued existence of your job? If not, how can you shift into a longer lasting career path?
Money to spend in old age on medical treatments will have higher utility in the future because more treatments will be available to buy. Vat-grown replacement organs are already being grown for a few organs in small numbers and more for lab animals. Lots of other treatments will be coming down the pike even as government finances deteriorate. Your own buying power could make the difference in how many years you live. Work and save accordingly.
New York, NY, November 17, 2011—Premiums for employer-sponsored family health insurance increased by 50 percent from 2003 to 2010, and the annual amount that employees pay toward their insurance increased by 63 percent as businesses required employees to contribute a greater share, according to a new Commonwealth Fund report that examines state trends in health insurance costs. The report finds that health insurance costs are outpacing income growth in every state in the country. At the same time, premiums are buying less protective coverage: per-person deductibles doubled for employees working for large as well as small firms over the same time period.
Obviously, the fast ramp in medical spending is not sustainable. Medical costs have become too large a fraction of US GDP.
According to the report, State Trends in Premiums and Deductibles, 2003-2010: The Need for Action to Address Rising Costs, by 2010, 62 percent of the U.S. population lived in a state where health insurance premiums equaled 20 percent or more of earnings for a middle-income individual under age 65. Today there are virtually no states where premiums are relatively low compared to income. In 2003, there were 13 states where annual premiums constituted less than 14 percent of the median (middle) income; by 2010, there were none.
With stagnant and declining wages the increasing cost of co-pays means an even sharper rate of decline in living standards.
"Whether you live in California, Montana, or West Virginia, health insurance is expensive. Out-of-pocket costs for premiums and care are consuming a larger share of people's incomes at a time when incomes are down in a majority of states," said Commonwealth Fund Senior Vice President Cathy Schoen, lead author of the report. "Workers are paying more for less financial protection. The steady rise in costs from 2003 through 2010, before enactment of the Affordable Care Act, points to the urgent need for health insurance market and health care system reforms."
We need to cut costs by automation of health care: Web-based diagnostic expert systems; Medical testing done by going to a drug store to provide samples; Wearable sensors tied to web-based diagnostics; Surgical robots; Cheaper imaging systems with built-in image analysis. Boosting productivity of the medical sector would raise living standards.
Peter Orszag, formerly Obama's director of OMB (Office of Management and Budget), says the growth rate in Medicare spending is already slowing.
Even adjusting for these shifts, though, Medicare spending is still up less than 4 percent so far this year. The 2011 numbers come on the heels of relatively slow growth in 2010 as well. Last year, Medicare spending rose just a little more than 4 percent. Compare this with an almost 12 percent average annual growth rate in Medicare spending since the early 1970s.
On the other hand, the average cost of employer-provided health plans is still going up faster than the rate of inflation.
Employers' spending on health coverage for workers spiked abruptly this year, with the average cost of a family plan rising by 9 percent, triple the growth seen in 2010.
Family plan premiums hit $15,073 on average, while coverage for single employees grew 8 percent to $5,429, according to a survey released Tuesday by the Kaiser Family Foundation and the Health Research & Educational Trust. (KHN is an editorially-independent program of the foundation.)
Workers paid an average of $921 toward the premium of single coverage and $4,129 for family plans.
The results mark a sharp departure from 2010, when the same survey found average family premiums up only 3 percent.
Health care is now over 17% of the US economy and still rising. Your buying power for other goods and services is lower because health care costs are so high. Americans can expect higher co-pays, a continued shrink in the fraction of jobs that include health insurance, higher taxes to subsidize the health care of older and poorer and government employees, and lower cash compensation due to higher employer insurance premiums.
The high cost of health care cries out for automation. Measures to make health care delivery more efficient and more automated could reverse the rise in health care costs and at least slow the decline in American living standards. Other limits will still pull down American living standards. But the decline could at least be made less steep.
Many cans have been kicked down the road. The cans have grown larger and more numerous and the road is looking pretty blocked. Investors are beginning to panic. Ambrose Evans-Pritchard of The Daily Telegraph reports on Asian bond holders who are bailing out of European holdings.
Asian investors and central banks have begun to sell German bonds and pull out of the eurozone altogether for the first time since the debt crisis began, deeming EU leaders incapable of agreeing on any coherent policy.
This could turn into a stampede. How do you view your job security? Take a cold hard look at it. The financial markets are headed for rough waters.
Andrew Roberts, rates chief at Royal Bank of Scotland, said Asia's exodus marks a dangerous inflexion point in the unfolding drama. "Japanese and Asian investors are for the first time looking at the euro project and saying `I don't like what I see at all' and fleeing the whole region.
Felix Salmon says European banks are in a liquidity crisis. Unlike with US banks in 2008 and 2009 the European Central Bank is not tasked with assuring bank liquidity. The Germans look unlikely to support a massive expansion of the ECB's remit. Given that even German interest rates are rising as investors flee Europe it is not surprising that Germany and France have held talks about fracturing the Euro zone. It seems unlikely a single currency zone can survive.
The New York Times is reporting the same flight from European bonds. A serious liquidity crisis is brewing. If countries default on their sovereign bonds then a solvency crisis will follow as bank losses on sovereign bonds put them underwater.
Financial institutions are dumping their vast holdings of European government debt and spurning new bond issues by countries like Spain and Italy. And many have decided not to renew short-term loans to European banks, which are needed to finance day-to-day operations.
Tough talk from Euro elites on Greece have scared investors about Italy, Spain, and other at-risk countries. Can the mainstream consensus admit the Euro was a bad political idea??
In fact, aggressive remedies for Greece may have worsened Italy’s situation this week. The never-before-voiced suggestion that countries weren’t forever bound to the euro may have scared Greek leaders into submission, but it also scared bond markets into raising the price that Italy pays to borrow money to levels that forced Greece, Ireland and Portugal to take bailouts.
That’s precisely what European leaders didn’t want. Problems in the peripheral countries were always manageable — in the worse case, France and Germany’s hulking economies could swallow the cost of paying off the tiny ones. Italy, however, owes creditors $2.6 trillion — far too large an amount for France and Germany to backstop.
Instead of "too big to fail" we have "too big to save". America will get there eventually.
This debt crisis isn't of a short term nature. Slowing economic growth makes it much harder to service debt. The Western countries can't grow out of their debts because the Western countries (including the United States) are in decline. The American middle class has been getting poorer for decades. Putting both members of couples to work delayed the living standard decline for a while - at least for the married. But that way of compensating for decline has run out of steam.
The great hope is economic growth. American and European politicians still keep hoping for it. But Europe is heading back into recession and rising oil prices threaten to do the same for the United States.
Europe may be slipping into a “deep and prolonged recession” as high levels of government debt, financial market turmoil and political paralysis stoke a dangerous downward cycle, the European Commission said Thursday.
The Euro currency zone needs to drop about a half dozen members. Maybe the southern Europeans could shift to a Mediterranean currency called the Med.
Let me repeat some advice: Try harder to learn more valuable skills. Try harder in your career. Live a more frugal life. The economies of the Western democracies are in serious troubles that will take many years to work out.
Greece is relying on Iran for most of its oil as traders pull the plug on supplies and banks refuse to provide financing for fear that Athens will default on its debt.
Think about that. Greece is in such dire straits it is now reliant on Iran to keep the oil flowing. If I was a Greek I'd transfer all my money out of the country into a mix of German and American banks. I'd also be stocking up or looking for a job abroad. A foreign job would be best since the drachma will be a pretty weak currency and foreign-earned money will enable some Greeks to pick up cheap housing and cheap failed businesses back in Greece.
Mish has more. Mish thinks since the exit of some Euro currency zone members is inevitable we should move on to discussing how best to do that and which members should leave. He suggests Germany. Very contrary thinking.
German Chancellor Angela Merkel’s Christian Democratic Union party voted to allow euro states to quit the currency area, endorsing the prospect of a move not permitted under euro rules.
Greece's choices at this point are default within the Euro or default outside of the Euro. The problem is that default causes Greek banks to collapse as they are major holders of Greek government debt. The Greek government will have to try to save depositors even as it stiffs lenders. The Greek economy will contract much more once the government defaults and the Greek economy is already contracting this year.
The German government has been simulating a range of scenarios to prepare for a possible exit of Greece from the euro zone. Under a worst-worst-case scenario, the country could descend into a vicious circle of misery that could last decades.
Why are the Germans considering cutting Greece loose? One possibility: To save their powder for trying to save Italy and Spain. Italy is already paying an interest rate on new bond issues that it can't sustain. Anything above 6% is basically unsustainable danger zone. As old bonds get redeemed the higher interest rates on new bonds become too high a cost for a country with debt equal to around 100% of GDP.
Even with the change of government in Italy, a Monday auction of five-year bonds saw the government pay rates of nearly 6.3 percent — the highest since the country adopted the euro and more evidence that the ECB was not moving aggressively to hold down the country’s borrowing costs.
Meanwhile, rising interest rates on French debt threaten to undermine France's ability to participate in bail-outs for the southern European nations.
On Monday, the yield on France’s 10-year bond — the usual yardstick for a country’s borrowing costs — rose 0.05 percentage points to 3.42 percent. That’s nearly twice Germany’s and significantly more than the roughly 2 percent paid on 10-year U.S. Treasury notes.
Unless action is taken, Sweden will soon have a large new group of poor pensioners – immigrants with a weak attachment to the labour market. This gloomy future scenario is revealed by a new government inquiry on the pension system carried out by researchers from the School of Business, Economics and Law of the University of Gothenburg on behalf of the Social Council at the Ministry of Social Affairs. But the inquiry also shows that there are ways of improving the expected standard of living.
"When we looked at the economic resources of immigrants from a country outside the OECD area, we found that this group has far worse prospects of achieving a high standard living as pensioners than those born in Sweden. And the public pension system in its present form will not succeed in evening out these differences when the pensions are taken," says Lennart Flood, professor of economics and one of the members of the inquiry.
The better solution: stop letting in low-skilled immigrants. Will the pain on the public purse ever become large enough to stop the influx of the poor? This isn't the 19th century with lots of factories to give them jobs.
We would have higher living standards of US companies could earn returns on technology for as long as legally allowed. But China especially is sucking billions of dollars of trade secrets and technology out of US corporations every year.
Tens of billions of dollars of trade secrets, technology and intellectual property are being siphoned each year from the computer systems of U.S. government agencies, corporations and research institutions, said the Office of the National Counterintelligence Executive, which focuses on espionage against the United States.
The Russians, French, Israelis (yes, supposed allies), and other countries are stealing US technology as well.
Individual incidents are expensive.
A senior intelligence official, briefing reporters on the condition of anonymity, noted a few cases in which estimates were given in economic espionage prosecutions over the past six years: $100 million worth of insecticide research from Dow Chemical, $400 million worth of chemical formulas from DuPont, $600 million of proprietary data from Motorola, $20 million worth of paint formulas from Valspar.
What's the long run cost when a company gets beat in the market by a lower cost Chinese competitor that got the company's stolen secrets? Well, the Americans who developed the technology might end up getting laid off.
The shorter the period during which a company can earn returns on intellectual property the less incentive to develop intellectual property and the lower living standards will be. But my guess is companies focused on next quarter's earnings tend to put far too little effort into protecting intellectual property.
The US now runs a trade deficit even in many high tech goods. We need a national strategy to reduce the rate at which American technological secrets get stolen.
Hillary Clinton says the governments of Afghanistan and Pakistan are our "partners". Did you know that?
“I will be the first to admit that working with our Afghan and Pakistani partners is not always easy,” Clinton told the House Foreign Affairs Committee. “But these relationships are advancing America’s national security interests, and walking away from them would undermine those interests.”
The US government goes to considerable lengths to avoid offending Afghan President Hamid Karzai. A US Army general who made frank comments about the Afghan government got fired for criticizing our "partners".
Maj. Gen. Peter Fuller, the deputy commander for programs at the NATO Training Mission-Afghanistan, based in Kabul, was relieved of his duties by the top commander in Afghanistan, Gen. John R. Allen, after comments Fuller made to the news Web site Politico.
WPost reports these comments probably will lead to him being retired - i.e. booted from the Army.
Then there's our other partner Pakistan. Read the piece by Marc Ambinder and Jeffrey Goldberg in The Atlantic entitled The Ally From Hell.
Pakistan lies. It hosted Osama bin Laden (knowingly or not). Its government is barely functional. It hates the democracy next door. It is home to both radical jihadists and a large and growing nuclear arsenal (which it fears the U.S. will seize). Its intelligence service sponsors terrorists who attack American troops. With a friend like this, who needs enemies?
Feel like being scared? Check out how Pakistan moves its nukes around:
Nuclear-weapons components are sometimes moved by helicopter and sometimes moved over roads. And instead of moving nuclear material in armored, well-defended convoys, the SPD prefers to move material by subterfuge, in civilian-style vehicles without noticeable defenses, in the regular flow of traffic. According to both Pakistani and American sources, vans with a modest security profile are sometimes the preferred conveyance. And according to a senior U.S. intelligence official, the Pakistanis have begun using this low-security method to transfer not merely the “de-mated” component nuclear parts but “mated” nuclear weapons. Western nuclear experts have feared that Pakistan is building small, “tactical” nuclear weapons for quick deployment on the battlefield. In fact, not only is Pakistan building these devices, it is also now moving them over roads.
Pakistan, America's biggest foreign policy nightmare. Does fighting in Afghanistan make it harder or easier to reduce the chances that Pakistan's nukes will fall into the hands of terrorist groups?
Tyler Cowen points to a difference between the Lefta and Right on where they place individual responsibility and hard work in their value pecking orders. This is an area where I think the Left are just plain empirically wrong. If all of society placed individual responsibility first the society be far healthier than one where the Left's value pecking order was held by all.
I agree with most of Matt’s recent post, but one sentence struck me as noteworthy. Matt writes:
I suppose I agree with Will Wilkinson about the importance of “an ethos of initiative, hard work, and individual responsibility” though I have no real idea why he thinks most progressives are against such an ethos.
I could write that sentence without the “I suppose”! The final clause of the sentence I see as showing just how broad the perceptual gulf between progressives and conservatives/libertarians can be.
I would not quite say that progressives are “against such an ethos,” but where does it stand in their pecking order? Look at fiction, such as famous left-wing or progressive novels, or for that matter famous left-wing and progressive movies. How many of them celebrate “an ethos of initiative, hard work, and individual responsibility”? Is there one?
Click thru and read the whole thing. Tyler makes excellent points.
Higher education's average amount of delivered value has declined. The result? Waste, high costs, more debt, declining living standards. Only lower value (and easier) education has expanded.
Over the past 25 years the total number of students in college has increased by about 50 percent. But the number of students graduating with degrees in science, technology, engineering and math (the so-called STEM fields) has remained more or less constant. Moreover, many of today’s STEM graduates are foreign born and are taking their knowledge and skills back to their native countries.
So the number of students taking easier and lower value majors has soared while the number of native born taking the hard and most valuable majors has actually declined. Is it any wonder that living standards are declining? Plus, all these students in lower value majors are paying more to get a degree and entering the workforce (or trying to enter the workforce) deeply in debt.
This is not a recipe for prosperity and economic growth.
Consider computer technology. In 2009 the U.S. graduated 37,994 students with bachelor’s degrees in computer and information science. This is not bad, but we graduated more students with computer science degrees 25 years ago! The story is the same in other technology fields such as chemical engineering, math and statistics.
STEM (Science Technology, Engineering, and Math) majors have the greatest economic value.
The top 10 majors with the highest median earnings are: Petroleum Engineer ($120,000); Pharmacy/pharmaceutical Sciences and Administration ($105,000); Mathematics and Computer Sciences ($98,000); Aerospace Engineering ($87,000); Chemical Engineering ($86,000); Electrical Engineering ($85,000); Naval Architecture and Marine Engineering ($82,000); Mechanical Engineering, Metallurgical Engineering and Mining and Mineral Engineering (each with median earnings of $80,000).
Studying art or counseling is a recipe for very low pay and little or no generation of wealth.
The 10 majors with the lowest median earnings are: Counseling/Psychology ($29,000); Early Childhood Education ($36,000); Theology and Religious Vocations ($38,000); Human Services and Community Organizations ($38,000); Social Work ($39,000); Drama and Theater Arts, Studio Arts, Communication Disorders Sciences and Services, Visual and Performing Arts, and Health and Medical Preparatory Programs (each at $40,000).
Alex points to an article in The Nation where the writer bemoans the failure of the job market to create highly paid jobs for puppeteers. Leftism and common sense do not go hand-in-hand. What a bizarre and narcissistic sense of entitlement.
What astounds me is not that someone could amass $35,000 in student loans pursuing a dream of puppetry, everyone has their dreams and I do not fault Joe for his. What astounds me is that Richard Kim, the executive editor of The Nation and the author of this article, thinks that the failure of a puppeteer to find a job he loves is a good way to illustrate the “national nightmare” of the job market. Even in a wealthy society it’s a privilege to have the kind of job that Kim thinks are the entitlement of the middle class. And, as Tyler says, we are not as wealthy as we thought we were.
The Nation article is about Occupy Wall Street. One way to interpret it: the Executive Editor of The Nation thinks the US economy is failing (presumably due to evil bankers) because it does not generate high-paying jobs for people who choose to study solely for the pleasure they derive.
Studies have found that roughly 40 percent of students planning engineering and science majors end up switching to other subjects or failing to get any degree. That increases to as much as 60 percent when pre-medical students, who typically have the strongest SAT scores and high school science preparation, are included, according to new data from the University of California at Los Angeles. That is twice the combined attrition rate of all other majors.
The odds of getting more people to take hard STEM courses? Very low.
Other deterrents are the tough freshman classes, typically followed by two years of fairly abstract courses leading to a senior research or design project. “It’s dry and hard to get through, so if you can create an oasis in there, it would be a good thing,” says Dr. Goldberg, who retired last year as an engineering professor at the University of Illinois at Urbana-Champaign and is now an education consultant. He thinks the president’s chances of getting his 10,000 engineers is “essentially nil.”
What would raise the odds of more students doing STEM degrees: Cut out taxpayer subsidies for the lower value alternatives. No more loans or grants for students wanting to major in theater or art or communications studies.
This time is not different. Mish Shedlock has the details. Mish expects a 50% to 70% price drop. Though the Chinese government might opt for inflation to reduce the total price decline.
Why I care: If the Chinese economy contracts that will lower the price of oil and other natural resources enough to allow Western economies to grow - at least for a while. We live in an increasingly zero sum world where competition for natural resources drives up natural resource prices (especially oil prices) so high that economic growth in Western countries gets cut down. If China's government can't find a way to quickly the Chinese economy away from its lopsided focus on construction then we might get a year or two of growth in the Western countries while China's economy stalls.
We live in an era where big glaring problems go unfixed and grow in size. Example: The US government's retirement program Social Security. In 2010, several years early than expected, Social Security shifted to net outflow of funds. The old folks lobby blocks any change in benefits and Obama even supported cutting Social Security taxes to stimulate the economy.
Now, Social Security is sucking money out of the Treasury. This year, it will add a projected $46 billion to the nation’s budget problems, according to projections by system trustees. Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion. If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.
But while talk about fixing the nation’s finances has grown more urgent, fixing Social Security has largely vanished from the conversation.
The message from Senate Majority Leader Harry Reid is total denial.
“Let’s worry about Social Security when it’s a problem. Today, it is not a problem,” Reid said to applause.
Harry Reid is in office because the majority of voters in Nevada voted for him. I present this as evidence for a need to vet the competence voters.
In an MSNBC interview, he added: “Social Security does not add a single penny, not a dime, a nickel, a dollar to the budget problems we have. Never has and, for the next 30 years, it won’t do that.”
The better people in society need better ways to override the will of the majority. I do not know how best to filter for better voters. But the need is really. America's voters, like America's elites, do a bad job making decisions for the commonwealth. The resulting damage is building up and causing serious problems. I question the long term sustainability of democracy.
Also see my previous post Americans In Denial About Medicare And Social Security.
Update: In a review of Dietrich Dörner's The Logic Of Failure The Social Pathology (a blogger medical doctor writing under a pseudonym) opines the average man just is not up to voting intelligently on complex issues. Therefore he expects democratic government to fail over the long term.
Dorner's book also has implications for political theory: Take for example democracy. It would appear that the average man is suited to understanding simple and immediate problems and such would vote intelligently on such issues, but what about complex issues with long term consequences? Democratic government, given human cognitive limitations, is surely to fail over the long term since the bulk of men are not able to grasp the long term consequences of even moderately simple decision.
Does democracy slowly degrade? Do cognitive limitations of the overwhelming majority of voters doom democracy in the long term? This isn't just an IQ problem. Plenty of biases built into even high IQ brains cause systematic misunderstanding of big problems.
Update II: The Social Pathologist says we have a clear need to limit the voting franchise. I think improvement in the quality of voters is essential to prevent the decline of the democracies. And by that I do not mean transforming each voter into an excellent decision-maker. Clearly, that's not possible.
The stable democracies of the west were initially set up with a limited franchise, as the respective constitutional architects were well aware that limiting the power of a irresponsible or evil monarch was of no benefit if political power was passed onto to an irresponsible, stupid or evil mob. They wanted political power wielded by responsible hands to ensure system stability as they were well aware of both the malice of kings and the stenosophism of the proles. Something that seems to be forgotten in today's deification of the common man and unquestioning approval of the universal franchise. A lot of righties, who otherwise vigourously defend current democracy, fail to note that the leftward shift of modern culture is correlated with the expansion of the voting franchise.
Now, how you limit the franchise is open to honest debate. Personally, I'd like the qualification to be based on a proven ability of an individual to successfully manage their own affairs. A man who can't get his own stuff together has no right lecturing me on mine. Bankrupts, adulterers, criminals, people who still have a mortgage, certain welfare recipients, those who are not paying taxes, people possessing too much wealth, etc, would all be excluded the franchise in my scheme things. The point here is not where you draw the line, but in recognising that a line needs to be drawn. To many people on the right worry endlessly about the responsible and limited government power without paying any attention to responsible voting: not recognising that one is impossible without the other.
Democracy fails when the imprudent prevail.
The imprudent are winning.
In New York, three days after authorities confiscated their generators, hundreds of anti-Wall Street protesters struggled to stay warm and dry after the snow storm. Some got tips on how to deal with the cold weather from homeless people.
"They have the most amazing knowledge base for dealing with cold weather," protester Justin Stone-Diaz said. "So honestly, we're getting it from people with experience."
They grew up not learning how to stay warm outside in the cold weather?
OWS is a boon for the homeless. Here's this well-connected group of protestors who can set up tents in choice park locations where really lower class people (i.e. the homeless) wouldn't think to try to camp en masse. But once the protestor types set up shop the homeless can come on in and park right next to them.
In some cities the police and members of the public are losing patience with protestors. In some cities police have moved in and closed tent cities: Richmond Virginia police shut down their encampment. How long will the theater of OWS go on? Their shows give left-leaning pundits the opportunity to hold forth about inequality and declining living standards. If only this opportunity was put to constructive use. But no.
If the pundits on the Left would only drill down to root causes of declining living standards the OWS movement would serve a constructive purpose. But while the Left flirts with root causes I do not expect Leftists will shift away from class warfare and status warfare as primary concerns.