Posts Tagged Germany
Sen. Bernie Sanders is calling for a Robin Hood tax. (photo: Kevin Dietsch/UPI/Newscom)
Robin Hood Tax to Reduce Wall Street Greed
By Bernie Sanders, Reader Supported News
02 March 13
tax on Wall Street speculators responsible for the worst recession since the 1930s was proposed today in Congress. Sen. Bernie Sanders cosponsored a bill that Sen. Tom Harkin introduced in the Senate. A companion measure by Rep. Peter DeFazio was filed in the House. “Both the economic crisis and the deficit crisis are a direct result of the greed, recklessness, and illegal behavior on Wall Street,” said Sanders. “This bill will reduce gambling on Wall Street, encourage the financial sector to invest in the job-creating productive economy, and significantly reduce the deficit. At a time when we have a record-breaking national debt, the very least we can do is demand that Wall Street pay its fair share in taxes.”
The tax would generate an estimated $352 billion over 10 years, according to the Congress’s Joint Tax Committee.
Ordinary, long-term investors would not be affected by the measure, which would place a small financial transactions tax (three cents per $100 in value) on non-consumer financial trades in stocks, bonds and other debts after an initial public offering. For example, there would be no tax on a loan to a company, but if the financial institution traded the debt, the trade would be subject to the tax. The fee would also cover all derivative contracts, options, puts, forward contracts, swaps and other complex instruments at their actual cost.
By setting the tax rate so low, the measure would not impact the market’s traditional role supporting economic activity. It would, however, reduce certain speculative activities like high-speed computer arbitrage trading. A speculation fee could help to shift Wall Street away from short-term trading. Given the very high volume of financial trading, it will raise considerable funds, badly needed to protect Medicare, Medicaid, and other important federal investments and for reducing deficits.
Earlier this year, a group of 11 European governments agreed to implement a financial transaction tax. The action allows for a tax of 10 basis points on stocks and one basis point on derivatives on financial transactions by the following countries: Germany, France, Italy, Spain, Belgium, Austria, Greece, Portugal, Slovakia, Slovenia, and Estonia.
- Robin Hood Tax to Reduce Wall Street Greed – Newsroom: Bernie @SenSanders – U.S. Senator for Vermont (robertlopez144.wordpress.com)
- Robin Hood Tax to Reduce Wall Street Greed (readersupportednews.org)
- Union Workers Call For ‘Robin Hood Tax’ (detroit.cbslocal.com)
- Investors, Take Note: The Robin Hood Tax Might Be Coming to America (dailyfinance.com)
- Robin Hood Tax! Yes! (fishandbicycles.com)
- Why Robin Hood Photobombed Jack Lew’s Confirmation Hearing (theatlanticwire.com)
- Photo of the Day: Robin Hood Photobombs Jack Lew in Senate Hearing (news.softpedia.com)
- Robin Hood Tax is Coming – Common Sense at Last! (philipcarrgomm.wordpress.com)
- Investors, Take Note: The Robin Hood Tax Might Be Coming to America (fromthetrenchesworldreport.com)
- Valiant Lowitz: Robin Hood: Taxing Men in Suits (huffingtonpost.com)
This week’s EU summit: The last chance to save the euro?
With Spain’s borrowing costs skyrocketing and Cyprus begging for billions in aid, Europe’s leaders find themselves with their backs against the wall
POSTED ON JUNE 26, 2012, AT 6:35 PM
The euro symbol is reflected in a puddle in front of the European Central Bank in Frankfurt, Germany: Eurozone leaders meet in Brussels Thursday to decide the monetary system’s fate.
MSN Money, MarketWatch, Der Spiegel
When European Union leaders meet on in Brussels, they will be under immense pressure to finally agree to the types of far-reaching reforms considered necessary to resolve the continent’s long-running debt crisis. This week, tiny became the fifth European country to seek a bailout, a sign that the crisis is only spreading. Spain’s borrowing costs have risen to perilous levels, even though European leaders have already announced a whopping for the country’s banks. And in another sign that the crisis has finally come to a head, on Monday billionaire went so far as to predict that Europe had a mere 72 hours to live. Is the upcoming summit the last chance to save the euro?
“This week’s summit of European leaders is the last real chance to save the euro,” . They must produce a long-term plan to bring the euro’s members under a central finance authority and share their debt burden, plus short-term plans to ease borrowing costs for Italy and Spain. If they don’t, “the momentum toward dissolution of the common currency will be irresistible.” And there are few reasons to be optimistic: “The euro is cooked. Stick a fork in it.”
“After two years of ‘kicking the can down the road,’ Europe seems to have now come to the end of the road,” . Analysts are hoping that a last-minute commitment to greater financial centralization will do the trick, but “underneath the surface of the European Union, strong forces of nationalism still exist.” Once the euro goes, “the result will most likely be global recession, even depression, double-digit unemployment across Europe, bank runs, currency devaluations, and economic chaos.”
“The worst can still be prevented, and Europeans still have the ability to save their common currency,” . It will be a massive task, but the costs of failing are simply too great. European countries “must surrender power to Brussels” while proving “that they could successfully reform and modernize their economies.” The “quarreling nations of the old continent” have proved equal to the challenge before, and history shows that “solutions are only reached in Europe when the continent has run out of options.”
- Ahead of EU summit, finance ministers to meet in Paris (thehindu.com)
- Pessimism growing ahead of EU Summit (forexlive.com)
- Greek PM to miss EU summit; hopes fade of major action – Reuters (reuters.com)
- Citi says to sell EUR/USD ahead of EU Summit (forexlive.com)
- Israel peace accord under threat as Morsi seeks links with Iran (thetimes.co.uk)
- George Soros: The coming EU summit is crucial for the future of Euro (businessinsider.com)
- Debt crisis: Peter Sands documents show warning to David Cameron of euro danger to Britain (telegraph.co.uk)
- Parents of ‘murdered’ student in court for trial (thetimes.co.uk)
- EU summit failure could be ‘fatal’: George Soros (theglobeandmail.com)
- Expect no decisions on Greece at EU summit, German spokesman says (ekathimerini.com)
MONDAY, JUNE 25, 2012
I’m surprised it has taken this long for Someone Serious to make the argument set forth in a new article by Simon Johnson at Bloomberg, which in short form says “You are dreaming if you think a European financial crisis stays in Europe.”
Johnson somewhat undercuts the urgency and importance of his article by working from the assumption that the eurozone dissolves back into its earlier configuration of one currency per nation. Economists and analysts have discussed other scenarios, such as a exit by Greece, which has the potential to precipitate contagion in Portugal, Spain, and Italy; an exit by Germany; a split into more economically homogeneous sub-groups (most likely north v. south). And Bloomberg refrains from putting the real sizzler in the headline: Johnson considers JP Morgan to be vulnerable and explains why.
No matter how you look at it, the most important step that needed to be taken to prevent the recurrence of a global financial crisis was to reduce the interconnectedness of the major players. That has not happened to any meaningful degree. There are efforts underway to move more activities to clearinghouses, but nothing is operational, and the industry is working hard to limit the scope of these plans. So despite all the brave talk about how much better capitalized the big banks are, they’ve beaten back, delayed, and weakened efforts to deal with the biggest source of risk.
Johnson flags one major risk: what happens if a country exits and by legislative fiat, redemoninates contracts entered into by its government, and say, by the banks it has chartered, from the euro to a new domestic currency? That question has gotten some attention with regards to Greek bonds, with experts focusing on how many bonds are governed by Greek law, where the government could redenominate them by fiat, versus those governed by UK law (note that Johnson finesses that issue by positing the dissolution of the eurozone, meaning the euro no longer exists). And with the restructurings of Greek debt leading to new, senior borrowings being put in place, the older Greek law bonds are subordinate and less of a source of bargaining leverage than they once were.
Nevertheless, there is a much more basic reason to be worried. If any country were to leave, it would redenominate the currency of deposits held in domestic banks. For any periphery country, the value of the new currency is presumed to be lower than that of the euro. So depositors lose.
This concern has led to deposit flight from Greek banks and slower-motion runs on other periphery country banks. If Greece were to exit, it isn’t hard to imagine an acceleration of deposit departure from banks in periphery countries. The ECB could step in, but Germany officials have repeatedly nixed the idea of deposit guarantees in the absence of a banking union, which is not something you put in place on a crisis timeframe.
Johnson focuses his worries on the biggest source of excessive connectedness, derivatives, and also debunks JP Morgan’s “fortress balance sheet” claim:
For example, in recently released highlights from its so-called living will, JPMorgan Chase & Co. revealed that $50 billion in losses could hypothetically bring down the bank. (All big banks must provide their regulators with a living will to show how they could be shut down in an orderly fashion if near default.)
JPMorgan’s total balance sheet is valued, under U.S. accounting standards, at about $2.3 trillion. But U.S. rules allow a more generous netting of derivatives — offsetting long with short positions between the same counterparties — than European banks are allowed. The problem is that the netting effect can be overstated because derivatives contracts often don’t offset each other precisely. Worse, when traders smell trouble at a bank that has taken on too much risk, they tend to close out their derivatives positions quickly, leaving supposedly netted contracts exposed.
People with experience regulating or analyzing financially distressed institutions greatly prefer to measure potential losses with the European approach, in which netting is allowed only when contracts expressly incorporate settlement on a net basis under all circumstances.
When one bank defaults and its derivatives counterpart does not, the failing bank must pay many contracts at once. The counterpart, however, wouldn’t provide a matching acceleration in its payments, which would be owed under the originally agreed schedule. This discrepancy could cause a “run” on a highly leveraged bank as counterparties attempt to close out positions with suspect banks while they can. The point is that the netting shown on a bank balance sheet can paper over this dynamic. And that means the JPMorgan living will vastly understates the potential danger.
According to my calculations with John Parsons, a senior lecturer at MIT and a derivatives expert, JPMorgan’s balance sheet using the European method isn’t $2.3 trillion but closer to $4 trillion. That would make it the largest bank in the world.
What are the odds that JPMorgan would lose no more than $50 billion on assets of $4 trillion, much of which is complex derivatives, in a euro-area breakup, an event that would easily be the biggest financial crisis in world history?
Note that the issue isn’t the magnitude of exposures to a single counterparty; one defaulting counterparty leaves supposedly netted positions suddenly not netted all across the banking industry. That leads to more defensive behavior, namely, cutting exposures (say by increasing haircuts or closing out positions) with the weakest players. That of course pushes them closer to the brink. In the worst of the crisis, banks weren’t able to repo Treasuries, that’s how extreme the fear of counterparty exposures had become. (For those who want to know more, Lisa Pollack provided a great primer on gross and net CDS exposures; it gives a simplified but useful example).
And the $2.3, or per Johnson and Parsons, $4 trillion of JP Morgan “balance sheet” exposures don’t tell the whole story. Banking expert Chris Whalen has described JP Morgan as a $2 trillion banks attached to a $75 trillion derivatives clearing operation. Why do you think, when Lehman and MF Global got wobbly, that JP Morgan became more and more difficult to deal with? Because their role as clearer made them particularly exposed.
Now you might say, “didn’t JP Morgan submit a preliminary plan for an orderly wind down? Surely we can manage this sort of thing now.” Don’t hold your breath. Top bankruptcy lawyer Harvey Miller objected to the decision to put Lehman into bankruptcy in haste, warning that the failure of a mid-sized broker/dealer (and Lehman was clearly bigger that) disrupted markets. JP Morgan’s outline assumes (and the FDIC has taken up this line) that in a worst case scenario, the authorities can wind down the holding company, wiping out equity holders and cramming down bondholders as needed, and keep the operating subs going. The problem is that neither the FDIC speech on this topic nor the JP Morgan presentation deal with derivatives, collateral, or repo. Derivatives contracts are not at the holding company level but are booked in the depositary. I’m told foreign counterparties would seek to terminate these agreements, and sources guesstimate that 30% to 50% of JP Morgan’s derivatives agreements are subject to UK law. Thus it is not hard to imagine that distress at the holding company will prove difficult to contain. In other words, there is likely to be a considerable difference between how the Orderly Liquidation Authority works in theory versus in practice.
Johnson’s warning is clear: a eurozone crisis is not likely to be contained, and the biggest US banks are exposed. And it is looking more and more likely that we’ll find out whether the regulators can, as they insist, manage a big bank failure without engaging in massive bailouts.
- Simon Johnson: The End Of The Euro: A Survivor’s Guide (huffingtonpost.com)
- Simon Johnson: The End Of The Euro: A Survivor’s Guide (huffingtonpost.com)
- The moral core (economist.com)
- The End Of The Euro: A Survivor’s Guide (baselinescenario.com)
- Eurozone crisis: Banking sector could be ‘wiped out’ if weakest nations leave (guardian.co.uk)
- Greece to Leave Euro Odds now at 30-50%: JPM (valuewalk.com)
- The moral core (economist.com)
- What History Tells Us About A Possible Greek Exit (businessinsider.com)
- Fitch: Impact of hypothetical Grexit on eurozone banks (ekathimerini.com)
- What Argentina tells us about Greece (economist.com)
The Downturn Is Hitting Germany
| Posted Friday, June 22, 2012, at 8:00 AM ET
German Chancellor Angela Merkel speaks during a press conference after a meeting with Dutch counterpart at the Chancellery on June 20, 2012 in Berlin.
Yesterday we saw that Germany posted its second straight negative-PMI month, turning in the worst performance by this measure of industrial output in three years. Today the German business confidence index has also come down more than expected, this time posting the worst result since March 2010.
To be clear, the German economy is still in much better shape than Italy or Spain. But with Spain in a deep depression, recession conditions affecting Italy and France and the United Kingdom and the large developing nations of China, Brazil, and India all slowing down simultaneously how’s an export kingpin going to stay afloat? In a loose political sense one could argue that some economic pain in Germany would be a good thing, reducing that country’s sense that the inherent gritty determination of the German industrial worker somehow renders it immune to systemic economic problems. But the fact that a nation specializing in capital goods exports is vulnerable to shocks from abroad was eminently predictable so I’m not super-keen on the theory that German prosperity accounts for its political class’ attitude toward the situation.
The good news, such as it is, is really that Angela Merkel has become diplomatically isolated with the International Monetary Fund and the governments of France, Spain, and Italy all urging a different approach. A veteran German politician told me months ago that Merkel’s characteristic approach to the crisis was to hold off on making concessions until the last possible moment, and then fold and make agreements with no conditionality. It wasn’t a compliment, but as a guide to the future course of things it’s held up pretty well.
- Cartoon: Greece v Germany, the Bailout Game (englishblog.com)
- Angela Merkel’s mania for austerity is destroying Europe (ypervasi.wordpress.com)
- Angela Merkel: Germany cannot save the euro on its own (telegraph.co.uk)
- Germany Knocks Greece Out Of Euro Championship (wnyc.org)
- Greece vs. Germany Spills Off Soccer Field (nytimes.com)
- Germans on edge as key Greek austerity vote nears – msnbc.com (economywatch.msnbc.msn.com)
- Should Germany Leave The Euro And Reissue Deutsche Mark? (ibtimes.com)
- Angela Merkel’s mania for austerity is destroying Europe (newstatesman.com)
- Dow Jumps 150 Points; Housing Data Impresses, Germany to the Rescue? (blogs.barrons.com)
- Merkel: no pressure from Germany on Spain aid – Boston.com (boston.com)
16 June 2012
Germany’s Merkel urges Greek commitment to austerity
Mrs Merkel has come under pressure over austerity with many countries insisting on growth policies
German Chancellor Angela Merkel has urged Greek voters to elect leaders who will stick to austerity measures.
Mrs Merkel was speaking on the eve of crucial elections which could determine the country’s future in the eurozone.
She said Europeans cannot make commitments which they then ignore.
The main contenders, the left-wing Syriza and right-wing New Democracy, are at odds over whether to broadly stick with the tough EU bailout deal, or reject it and boost social spending.
Tough austerity measures were attached to the two international bailouts awarded to Greece, an initial package worth 110bn euros (£89bn; $138bn) in 2010, then a follow-up last year worth 130bn euros.
Many Greeks are unhappy with the conditions attached to deals which have been keeping Greece from bankruptcy.
The poll, the second in six weeks, was called after a vote on 6 May proved inconclusive.
Sunday’s vote is being watched around the world, amid fears that a Greek exit from the euro could spread contagion to other eurozone members and send turmoil throughout the global economy.
Germany, the biggest economy in Europe, has been a key advocate of austerity as a way for Greece to reduce its debt.
It says that Greece, like other member-states which have received international bailouts, must abide by the austerity conditions.
On the eve of the vote, Chancellor Angela Merkel said: “It is extremely important that tomorrow’s Greek elections lead to a result in which those who form the government say, ‘Yes, we want to keep to our commitments.”
The head of New Democracy, Antonis Samaras, told supporters on Friday that he would lead the country out of the financial crisis, while staying in the eurozone.
He broadly accepts Greece’s international bailout, but says he will renegotiate the terms of the agreement to seek a better deal for Greeks.
“We will exit the crisis; we will not exit the euro. We will not let anyone take us out of Europe,” Mr Samaras said.
The youthful head of Syriza, Alexis Tsipras, rejects the bailout, but wants Greece to stay in the eurozone, saying a bailout is possible without the kind of drastic cuts demanded of Greece.
“Brussels expect us, we are coming on Monday to negotiate over people’s rights, to cancel the bailout,” he told a final rally on Thursday.
The BBC’s Europe editor, Gavin Hewitt, says the vote is likely to leave big questions for Europe’s leaders when they meet for an EU summit at the end of the month in Brussels.
Chancellor Merkel was one of several European leaders who took part in a video conference on Friday ahead of a G20 summit, starting in the Mexican resort of Los Cabos on Monday, which is set to be dominated by the eurozone crisis and the aftermath of the election.
Greek bailout: Where the parties stand
Stance on bailout
Share of vote May
Keep bailout but more time for restructuring and EU help to stimulate growth
Keep bailout but subject it to a “structured and courageous revision”; implement fiscal adjustment over three years, not two
Cancel bailout, nationalise banks and freeze privatisations, but stay inside eurozone
Reject bailout but remain in eurozone
Gradually disengage from bailout but stay in eurozone
Unilaterally cancel debt, leave the EU and restore Greece’s own currency
Tear up the bailout but not necessarily abandon the euro
- Greek election: Parties make final push for votes – BBC News (bbc.co.uk)
- Greek Elections: A Referendum on the Euro? (world.time.com)
- Uproar over FT Deutschland giving election tips (ekathimerini.com)
- Is Grexit good for the euro? (economist.com)
- The European countdown (bbc.co.uk)
- Alexis Tsipras: Angela Merkel’s Europe ‘belongs to the past’ (telegraph.co.uk)
- Merkel declines to offer Greeks voting advice (ekathimerini.com)
- Q&A | Greece elections on Sunday pose a crucial dilemma (kansascity.com)
- Lone, fragile future beckons the Greeks (smh.com.au)
- European leaders hold video conference to avert a market meltdown next week (guardian.co.uk)
Against The Grain: Germany Should Just Exit The Euro
Posted: June 14, 2012
Here is a fresh take on the Eurozone and the Euro for you. With all of the talk about the PIIGS and the Euro, the angle always seems to be rather Greece, Spain, Portugal and Italy can ultimately remain in the Euro. What about another take out there on this matter entirely? What if Germany just preemptively throws in the towel and exits the Euro? That is what a TrimTabs report is suggesting as Germany’s best solution right now.
A German exit would create massive financial turmoil. Even after the latest election results, it seems almost impossible that Germany’s leadership would embrace an exit of the Euro today. Still, that is today’s stance. TrimTabs calls this move as “the only practical solution to the debt crisis in Europe is a breakup of the Eurozone.” The warning is rather dire: “Germany needs to salvage what it can financially and leave the Eurozone as soon as possible.”
TrimTabs suggests that there are no good solutions to the Eurozone debt crisis as debt is reaching such a high figure. The report even says “the market pressure is so intense that it’s now a matter of choosing the best of bad options.” The move would allow Germany to establish its own strong currency and salvage what it can financially. The warning admits that Germany would suffer big losses on its euro-denominated holdings but ultimately it will be dragged down with Eruozone partners if it does not exit and that the global economy will end up being much worse off.
TrimTabs even refers to the Eurozone efforts as fatal structural flaws and the report calls other widely advocated solutions unrealistic regarding more bailouts and more currency printing. And here is the real crux of the argument over the effort and the timing: “They’d require changes to treaties and constitutions that would take months if not years, even if politicians could agree on them immediately. The markets won’t wait that long.”
What TrimTabs is proposing here is a twofold argument: it is unique, and the stable market theorists would call this financial heresy. The argument is even harder to consider when so many investors think of the Euro as just a watered-down Deutsche Mark.
Just yesterday Charles Biderman showed in this video that central banks cannot solve the problem… those central banks are the problem.
Again, the talk is almost always regarding whether or not Greece, Spain, Portugal, and Italy can ultimately stay in the Euro. This is a 180-degree thought. If Germany just pulled the ripcord now there would be a massive shakeout in the markets. But what if that is the best solution?
Scary on the surface… but food for thought.
JON C. OGG
- Against The Grain: Germany Should Just Exit The Euro (247wallst.com)
- Domino rally (economist.com)
- UK ‘s Osborne: Germany might have to sacrifice Greece to save the Euro (forexlive.com)
- George Osborne: Greek euro exit may be needed to convince Germany to take action (telegraph.co.uk)
- Your dithering Greek exit must stop now: Osborne warning to eurozone leaders (dailymail.co.uk)
- Euro: Could Germany Save Eurozone by Leaving it? (alfredmeier.me)
- George Osborne’s Greece-euro view is ‘shared’, says Downing Street (independent.co.uk)
- Germany Should Leave the Euro but Probably Can’t (blogs.hbr.org)
- Germany takes tough line over euro crisis solutions (itv.com)
- Yes, Spanish Crisis Has Triggered the Euro’s Endgame (forbes.com)
Angela Merkel’s fireside chat
On one level it seems surreal that even an epic mistake involving an abstract concept like “money” — a tool, like the euro, meant to facilitate exchange and serve as a store of value — can now inflict immense suffering on millions. Life’s savings lost, jobs scarce, firms shuttered, the prospects of a generation darkened. All through a storm not of their own making.
How can people in Greece and Spain make sense of what’s happening? I certainly can’t claim to have wrapped my mind around it all.
But one thing is clear: Europe’s probable calamity — I hate to write those words, but that’s what it looks like to me, even if the can has a few good kicks left in it — throws into relief the profound way elites have failed. The euro crisis is a reminder of how much depends, in the end, on the quality of a society’s elites. This is an unfashionable sentiment in Western democracies, but it’s true nonetheless.
Consider a partial catalogue of elite miscalculations or misbehavior here:
First, elites across Europe decided that giving up the power to run an independent monetary policy was a good idea for a nation — even though that meant there would no longer be a way for individual countries to fight economic downturns by cutting interest rates, or to cure a loss of competitiveness by devaluing the national currency.
Next, elites assumed that at some point ordinary Europeans would agree to hand control over much of national spending and taxes to some pan-European authority as well. Huh?
What’s more, in a move that quietly helped fuel today’s crisis, regulators decided banks didn’t need to hold any capital in reserve against loans made to European governments. As a result, banks stocked up on sovereign debt that turned out not to be riskless but very risky indeed. Top bankers were happy to go along with this charade because running banks with even less capital and more leverage than the already reckless U.S. system turned out to be a way for bank executives to pay themselves more (since bonuses are often tied to a bank’s return on equity, which, at any given level of profit, rises the more leverage you employ).
What kind of “leaders” pursue such an irresponsible, shortsighted course? To ask the question is to answer it.
Which brings us to Angela Merkel. The German chancellor should listen to Franklin D. Roosevelt’s first fireside chat, delivered on March 12, 1933, eight days after Roosevelt took office. Banks had failed in droves, as citizens who’d lost confidence in the system withdrew their cash. Fear and panic were palpable. Some version of this psychology could afflict big chunks of Europe soon.
Even at a distance of eight decades, FDR’s 13-minute address is a marvel. The new president explains in clear terms what’s happened, and what the government is doing about it. He treats Americans like adults who can be trusted to back a plan that’s reasonable. He’s honest about the pain some will suffer but confident the country will come out the other side. Listening to the scratchy recording today, one can imagine the reassurance the talk gave a scared nation.
If it comes, Merkel’s televised chat will face greater challenges. For one thing, she needs to address not just her countrymen but the broader citizenry of Europe. Merkel’s talk will need translation, a jarring reminder to those outside Germany that a foreigner is shaping your fate. (Imagine Americans listening to a speech from a Mexican or Chinese leader on whose actions our well-being suddenly depended, and you see how alien the prospect seems.)
Merkel will need to explain how the European project came to this pass — a tale of good intentions gone awry. She’ll have to honor and give voice to all the emotions roiling the continent. Of course Greeks are angry about being thrust into a depression and bullied by foreigners, she’d acknowledge; of course her fellow Germans resent rescuing spendthrift nations whose people seem to work less hard than they do.
In short, Merkel will need to summon an almost superhuman empathy with the entirety of Europe. And she’ll need to marshal that understanding to sell a course of action so compelling that hundreds of millions of people over whom she has no jurisdiction will accept her authority to steer them through these trying days.
If ever the historical moment makes the man or the woman, we’re about to find out.
The details would involve things such as Europe-wide deposit insurance and bank-rescue authority. Maybe it would mean emergency legislation that sunsets these temporary powers in five years, so that nations can decide in calmer times how much sovereignty (if any) they really wish to concede. They could amend (or end) the euro in an orderly way later. But now, to avert apocalypse, a German leader needs to act, and get everyone to follow.
There’s a tragic logic to what’s unfolding. And no good options. It’s a matter of apportioning pain in hopes of rebuilding for a better day some years hence. There will be 11th-hour attempts to put patches on things, to buy time. But, absent a sudden flowering of the kind of leadership that would earn Mrs. Merkel a place in history’s pantheon, it’s hard not to have a terrible feeling about where this crisis is headed.
- Merkel backs two-speed Europe (ekathimerini.com)
- In A Brilliant New Speech, George Soros Reveals The Exact Moment That Angela Merkel Started The Euro Crisis (businessinsider.com)
- UK News: Osborne ‘optimistic’ on euro crisis (walesonline.co.uk)
- The Accidental Empire (project-syndicate.org)
- Eurozone crisis live: Spain faces bond auction test as rescue looms (guardian.co.uk)
- Spain warns euro ‘finished in months’ without banking and fiscal union (guardian.co.uk)
- Harper in Paris stresses need for euro plan (cbc.ca)
- German Chancellor: Countries must cede responsibilities to Europe (newstalk.ie)
- German Banks Catch the Euro Bug (rendezvous.blogs.nytimes.com)
- Harper, Merkel on same page on debt crisis (ctv.ca)
In Economic Deluge, a World That Can’t Bail Together
By FLOYD NORRIS
Published: June 2, 2012
Less than four years ago, with the world’s financial system in danger of collapsing, major countries managed to come together on a coordinated course that averted a global depression.
Jock Fistick/Bloomberg News
Chancellor Angela Merkel of Germany has urged greater austerity.
Thierry Charlier/Agence France-Presse — Getty Images
Europe’s central bank president, Mario Draghi, has called for a common form of deposit insurance and regulation.
Central banks pumped vast amounts of cash into economies, and banks were bailed out, with vows that they would be subject to stronger regulation.
By early 2009, financial markets had bottomed out and begun strong recoveries. Economies were slower to follow; by last year, slow growth seemed to be the global pattern, spurring hope that the crisis had passed.
But within the last few weeks, much of that hope seems to have faded.
In Europe, the crisis has grown worse, not better, and the disputes among European leaders have intensified as much of the Continent appears to have drifted into a new recession. In China, growth remains robust by Western standards. But concern is rising over the possible end of a property boom that had been fueled in part by local government borrowing and spending.
In the United States, which had been an oasis of relative calm with a growing economy and rising employment, job growth in May, reported Friday, was a puny 69,000. To make the outlook even gloomier, earlier numbers were revised lower. That capped a series of three disappointing monthly reports.
Moreover, there seems to be little willingness — or perhaps lit-tle ability — for the major countries to act together again. Squabbles have grown, some countries are in fiscal distress, and others face daunting domestic problems. The European situation is the most pressing. Banks are under pressure in many countries, for a combination of reasons. They did not raise as much capital as they might have when markets were more buoyant last year. In some cases, they appear to have been slow to recognize their real estate loan losses.
But the most important factor may be that national governments are weak — in every way possible. There is no doubt that some countries could not afford to bail out their banks again; some, in fact, now rely on those same banks for loans to keep the governments functioning at a time when private investors are unsure about their creditworthiness. The president of the European Central Bank, Mario Draghi, suggested last week some type of common European deposit insurance and bank regulation, but there seems to be no consensus.
Nearly every major government in Europe has been thrown out by unhappy voters when an election rolled around, the latest being France. It is not a matter of left versus right. The only major leader to have been re-elected since 2008 is Chancellor Angela Merkel of Germany, but recent state elections there have been won by the opposing party, and even the German economy seems to be losing strength.
The most worrying electoral situation is in Greece, which seems to be mired in permanent recession and unable to comply with the rigid demands for austerity made by its European partners. With one election ending in deadlock among a variety of parties, it will try again on June 17. Many fear that the result could be a disorderly exit for Greece from the euro zone. Others think it could lead to the end of the euro altogether.
For governments that need to borrow money, this is either the best or the worst time ever. It is hard to believe just how low rates are for Germany and the United States. The yield on two-year United States Treasury notes is about one quarter of 1 percent. But comparable German notes this week were yielding one one-hundredth of a percent. At that rate, the government could borrow a million euros and pay 100 euros a year in interest.
But other countries have difficulty borrowing money at all, and pay far higher interest rates to get what money they can. It is not that anyone thinks the yields available on German and United States government bonds are attractive. It is that those bonds are deemed safe by fearful investors.
If throwing cash at the problem was the solution to the last crisis, now many deem that the cause of the current problems. Greece spent its way into its predicament while failing to collect the taxes it was owed and hiding the problem from the rest of Europe. But Spain was running budget surpluses before its own real estate bubble burst, leaving the government reeling. Yet all the troubled countries are being told — largely by Germany — to adhere to rigid austerity. With a common currency, it is hard to see how some of the countries can return to international competitiveness.
In the United States, the ease of borrowing has not made it politically easier to increase the pace of spending. Instead, there is the possibility of “Taxmageddon,” the threat that the unwillingness of politicians to compromise could lead to a combination of big automatic spending cuts and tax increases in 2013 that could devastate economic growth. All this is taking place in the midst of an election campaign that is widely expected to be the nastiest ever.
Moreover, the consensus that financial regulation should be strengthened and standardized has evaporated. In Europe and the United States, banks say that institutions across the Atlantic have unfair advantages, and regulators complain that the other continent has not taken the needed steps.
In the United States, a major push by the banks to weaken rules may or may not have been badly damaged by the multibillion-dollar trading loss suffered recently by JPMorgan Chase. But many in Congress, primarily but not exclusively Republicans, have gone back to the old belief that it was excessive government regulation that created the problem.
The widespread pessimism could dissipate as rapidly as it accumulated. Some surprisingly good economic news in the United States and China would help. More important would be for Europe’s leaders to reach agreement on a course of action that offered hope for recovery in the most stricken areas of the Continent while assuring that the common financial system would have the support of common institutions if needed. Europe has previously managed to cobble together something when disaster appeared to loom, and perhaps it could do so again.
Germany — the country that would have to pick up most of the bill to rescue its neighbors — could decide that not spending the money created greater dangers. The United States could find ways to help out despite fiscal pressures and Congressional hostility to foreign aid. A new consensus on common bank regulation could emerge. But, for now at least, the outlook is far darker than it seemed to be only a couple of months ago.
- In Economic Deluge, A World That’s Unable To Bail Together (mysanantonio.com)
- News Analysis: In Economic Deluge, a World That’s Unable to Bail Together (nytimes.com)
- As Soros Starts A Three Month Countdown To D(oom)-Day, Europe Plans A New Master Plan (zerohedge.com)
- A central-bank failure of epic proportions (economist.com)
- ECB may cut rates as eurozone crisis deepens (ekathimerini.com)
- Euro currency setup unsustainable, bank chief warns (ctv.ca)
- Eurozone is ‘unsustainable’ warns Mario Draghi (jhaines6.wordpress.com)
- Mario Draghi Provides the Right Analysis, But the Wrong Solution (txwclp.org)
- Is It (Finally) Crunch Time in Europe? (blogs.the-american-interest.com)
- The Emerging Markets Slowdown Trifecta (247wallst.com)
German teen Shouryya Ray solves 300-year-old mathematical riddle posed by Sir Isaac Newton | Information, Gadgets, Mobile Phones News & Reviews | News.com.au
German teen Shouryya Ray solves 300-year-old mathematical riddle posed by Sir Isaac Newton
May 27, 2012 5:12PM
· German 16-year-old solves centuries-old riddle
· Problem posed by Newton more than 300 years ago
· Shouryya Ray puts it down to “curiosity, naivety”
A GERMAN 16-year-old has become the first person to solve a mathematical problem posed by Sir Isaac Newton more than 300 years ago.
Shouryya Ray worked out how to calculate exactly the path of a projectile under gravity and subject to air resistance, The (London) Sunday Times reported.
The Indian-born teen said he solved the problem that had stumped mathematicians for centuries while working on a school project.
Mr Ray won a research award for his efforts and has been labeled a genius by the German media, but he put it down to “curiosity and schoolboy naivety”.
“When it was explained to us that the problems had no solutions, I thought to myself, ‘well, there’s no harm in trying,’” he said.
Mr Ray’s family moved to Germany when he was 12 after his engineer father got a job at a technical college. He said his father instilled in him a “hunger for mathematics” and taught him calculus at the age of six.
Mr Ray’s father, Subhashis, said his son’s mathematical prowess quickly outstripped his own considerable knowledge.
“He never discussed his project with me before it was finished and the mathematics he used are far beyond my reach,” he said.
Despite not speaking a word of German when he arrived, Mr Ray will this week sit Germany’s high school leaving exams, two years ahead of his peers.
Newton posed the problem, relating to the movement of projectiles through the air, in the 17th century. Mathematicians had only been able to offer partial solutions until now.
If that wasn’t enough of an achievement, Mr Ray has also solved a second problem, dealing with the collision of a body with a wall, that was posed in the 19th century.
Both problems Mr Ray resolved are from the field of dynamics and his solutions are expected to contribute to greater precision in areas such as ballistics.
- German teen Shouryya Ray solves 300-year-old mathematical riddle posed by Sir … – NEWS.com.au (news.com.au)
- Shouryya Ray solves puzzles posed by Sir Isaac Newton that have baffled mathematicians for 350 years (dailymail.co.uk)
- 350-Year-Old Newton’s Puzzle Solved By 16-Year-Old (science.slashdot.org)
- Indian boy solves 350-year-old Math problem (ibnlive.in.com)
- Indian-origin student solves centuries-old math puzzles (thehindu.com)
- Schoolboy cracks age-old maths problem (m.thelocal.de)
- Schoolboy cracks age-old maths problem (thelocal.de)
- Teen Solves Centuries-Old Math Problem (personalliberty.com)
- Isaac Newton Biography (livescience.com)
- Sir Isaac Newton’s life rendered as KML (go.theregister.com)
Germany sets new solar power record, institute says
BERLIN | Sat May 26, 2012 7:02pm BST
(Reuters) – German solar power plants produced a world record 22 gigawatts of electricity per hour – equal to 20 nuclear power stations at full capacity – through the midday hours on Friday and Saturday, the head of a renewable energy think tank said.
The German government decided to abandon nuclear power after the Fukushima nuclear disaster last year, closing eight plants immediately and shutting down the remaining nine by 2022.
They will be replaced by renewable energy sources such as wind, solar and bio-mass.
Norbert Allnoch, director of the Institute of the Renewable Energy Industry (IWR) in Muenster, said the 22 gigawatts of solar power per hour fed into the national grid on Saturday met nearly 50 percent of the nation’s midday electricity needs.
“Never before anywhere has a country produced as much photovoltaic electricity,” Allnoch told Reuters. “Germany came close to the 20 gigawatt (GW) mark a few times in recent weeks. But this was the first time we made it over.”
The record-breaking amount of solar power shows one of the world’s leading industrial nations was able to meet a third of its electricity needs on a work day, Friday, and nearly half on Saturday when factories and offices were closed.
Government-mandated support for renewables has helped Germany became a world leader in renewable energy and the country gets about 20 percent of its overall annual electricity from those sources.
Germany has nearly as much installed solar power generation capacity as the rest of the world combined and gets about four percent of its overall annual electricity needs from the sun alone. It aims to cut its greenhouse gas emissions by 40 percent from 1990 levels by 2020.
Some critics say renewable energy is not reliable enough nor is there enough capacity to power major industrial nations. But Chancellor Angela Merkel has said Germany is eager to demonstrate that is indeed possible.
The jump above the 20 GW level was due to increased capacity this year and bright sunshine nationwide.
The 22 GW per hour figure is up from about 14 GW per hour a year ago. Germany added 7.5 GW of installed power generation capacity in 2012 and 1.8 GW more in the first quarter for a total of 26 GW capacity.
“This shows Germany is capable of meeting a large share of its electricity needs with solar power,” Allnoch said. “It also shows Germany can do with fewer coal-burning power plants, gas-burning plants and nuclear plants.”
Allnoch said the data is based on information from the European Energy Exchange (EEX), a bourse based in Leipzig.
The incentives through the state-mandated “feed-in-tariff” (FIT) are not without controversy, however. The FIT is the lifeblood for the industry until photovoltaic prices fall further to levels similar for conventional power production.
Utilities and consumer groups have complained the FIT for solar power adds about 2 cents per kilowatt/hour on top of electricity prices in Germany that are already among the highest in the world with consumers paying about 23 cents per kw/h.
German consumers pay about 4 billion euros ($5 billion) per year on top of their electricity bills for solar power, according to a 2012 report by the Environment Ministry.
Critics also complain growing levels of solar power make the national grid more less stable due to fluctuations in output.
Merkel’s centre-right government has tried to accelerate cuts in the FIT, which has fallen by between 15 and 30 percent per year, to nearly 40 percent this year to levels below 20 cents per kw/h. But the upper house of parliament, the Bundesrat, has blocked it.
- Germany sets new solar-power record, equal to 20 nuclear plants at full capacity (uk.reuters.com)
- Germany sets new solar power record, institute says (reuters.com)
- Germany Sets New Solar Power Record (hardware.slashdot.org)
- German Company Installs Record-Breaking 1GW of Solar Power (energyrefuge.com)
- Germany Swaps Nuclear for Solar and Wind Power (yesmagazine.org)
- Solar power gets public vote (evoenergy.co.uk)
- Germany Close to Slashing Solar Subsidies (triplepundit.com)
- Solar power to generate majority of electricity by 2060 (evoenergy.co.uk)
- Saudi Arabia Promises $109 Billion in Solar Power Investment (inhabitat.com)
- Military Base Solar Takes Aim At Gird Parity (earthtechling.com)