By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Yet another interesting night in Europe. Spain managed to over sell as it latest auction with €6.03 billion sold versus €3.5 billion targeted which in the current environment is seen as a good result. Medium term paper had lower yields and lower bid/cover ratios, while longer term paper had higher yields but better bid/cover. Given that the markets are on edge and are therefore hyper-senstive about these preceedings this is a good result, with Spain paying 5.545% on 10 year issuance. The big question is whether the latest night’s auction result was spurred on by the new ECB long term repo operations which could be encouraging Spanish banks to purchased their nations sovereign bonds and then front up to the ECB. This would make sense because the spread between the ECB’s refinance rate and euro-sovereign bond yields is very wide which means it is a profitable transaction for the private banks, although I would expect to see this result further towards the short term paper.
If this is the case, then this is obviously a positive for struggling sovereigns because the ECB liquidity operations are providing a small sovereign backstop. This is a good thing for the Spanish government in the short term, but it doesn’t help solve the issue that the private sector will continue to deflate as banks attempt to repair their balance sheets after the fallout of the housing boom:
Repossessed houses in Spain are worth 43 percent less on average than the valuations assigned on the mortgages for the properties, according to Fitch Ratings.
Price declines range from 20 percent to 58 percent, analysts Juan David Garcia and Carlos Masip in Madrid wrote in a report analyzing 8,235 properties funded by loans from banks including Banco Santander SA (SAN) and Bankia SA. The mortgages are in asset-backed securities with high loan-to-value ratios.
“Fitch does not expect lending to recover in 2012, as financial institutions are more focused on optimising their balance sheets, while their access to funding is limited,” the analyst wrote. “Lending is likely to remain concentrated on existing high-quality borrowers and on potential buyers of banks’ repossessed properties.”
With Spain’s private sector continuing to struggle and the government promising more austerity I am not sure the LTRO is going to be enough to save the Spanish banking system. Just don’t tell Mario Draghi, who continues to live on a planet detached from Europe’s economic realities:
Europe’s top central banker said on Thursday that euro zone governments are on the right track to restore market confidence but reminded them that an emergency program to buy their bonds was “neither eternal nor infinite”.
Mario Draghi’s comments came after a smooth Spanish bond auction eased fears of an accelerating slide in European markets following a summit last week that failed to reassure investors the single currency area is closer to resolving its debt crisis.
The European Central Bank chief said in a speech in Berlin that the 17 euro zone governments “are now on the right track and they are right in implementing budgetary consolidation resolutely.
“The unavoidable short-term (economic) contraction may be mitigated by the return of confidence,” he said.
To mitigate risk aversion rife in markets, Draghi said more policy clarity was necessary, and he urged politicians to “speak unambiguously”, then “deliver”.
I’m not going to go through this again, you can read my followups to Draghi’s last press conference (here and here). In summary the new fiscal compact is a recipe for deflation which will be anything but short-term, and everything else Draghi said he learned from the unicorns.
In my opinion Christine Lagarde has a far better grasp on the situation, even if she does work for an organisation that is part of the problem:
The European debt crisis is growing to the point that it won’t be solved by one group of countries, Christine Lagarde, the managing director of the International Monetary Fund said today.
Lagarde said that if countries don’t work together, the world will face a situation similar to the 1930s, before the world slid into World War II.
“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super- advanced economies that will be immune to the crisis that we see not only unfolding, but escalating at a point where everybody would actually have to focus on what it can do,” Lagarde said.
If the international community doesn’t work together, “the risk from an economic point of view is that of retraction, rising protectionism, isolation,” Lagarde said. “This is exactly the description of what happened in the ‘30s and what followed is not something we are looking forward to.”
The trouble with that statement is we already know that the US is finished helping the Europeans until they start helping themselves and the contribution from other nations is likely to be as subdued, even if the Russians have promised to do more. Most of the world is telling the ECB to provide more assistance to Europe or they aren’t going to bother, meanwhile the ECB is telling Europe that deflationary policy is bound to lift investor confidence so there is no need for additional action. Let’s hope actions speak louder than words.
In other news Merkel’s coalition party is falling to pieces which is not her only domestic problem, and let’s not forget the banks as well and the Eurozone continues to contract, although at a slightly slower pace.
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Spain managed to over sell as it latest auction with €6.03 billion sold versus €3.5 billion targeted which in the current environment is seen as a good result. Medium term paper had lower yields and lower bid/cover ratios, while longer term paper had higher yields but better bid/cover.
Wonderful.
Unfortunately, one day later Italy paid a record (since Euro inception) 6.5% to sell merely 2-3bn 5yr bonds.
Only 400bn+ left to go next year…
oops–250bn left to go for next yr, not 400bn.
As for Lagarde’s view–what exactly can the rest of the world do? There’s simply not enough money (or productivity) to get out of this mess.
Spain managed to sell more than its target thanks to the Sarko Trade……
————–
http://uk.reuters.com/article/2011/12/09/uk-eurozone-ecb-idUKTRE7B80OA20111209
French President Nicolas Sarkozy said the ECB’s increased provision of funds meant governments in countries like Italy and Spain could look to their countries’ banks to buy their bonds. “This means that each state can turn to its banks, which will have liquidity at their disposal,” Sarkozy told reporters at the summit in Brussels.
————–
Please, enough of this “good news” about the ECB
We want more negative rant. We are overwhelmed at present by far too much Yuletide Cheer and need more of the dark snarling as regards EuroZone debt.
Please, please … have pity! ;^)
Oh, yes! Thank you. Thank you.
That’s more like it!
I’m sure Mario will take your comment to heart and loosen the spigot … as soon as Merkel stops sitting on his you-know-whats.
The European Central Bank chief [Mario Draghi] said in a speech in Berlin that the 17 euro zone governments “are now on the right track and they are right in implementing budgetary consolidation resolutely.
“The unavoidable short-term (economic) contraction may be mitigated by the return of confidence,” he said.
Is there any psychological, anthropological or sociological research that supports the assertion that austerity measures actually do restore confidence? I mean, the psychological and behavioral effects of various government polices would seem to be more within those disciplines areas of expertise than that of economics.
So, given the certainty with which Mr Draghi (and others) assert this “restoring confidence” rational, I was wondering: what is the empirical evidence to support it? What psychological/sociological models exist to account for that effect?
Because, as far as I can tell, from my admittedly naive perspective, people don’t seem to work that way.
You are, of course, right.
Imprisoning the criminal bankers might restore confidence. Giving everyone strong social welfare guarantees might restore confidence. Embarking on massive infrastructure spending might restore confidence.
“Austerity” is just going to remove confidence, and there’s actually strong evidence, from surveys, that it DOES remove confidence.
How many times now have we been told we are in some updated echo of the ’30’s and headed for our very own WWII if we do not do “x” since the European phase of this began in earnest?
This is not the Great Depression (please tell Ben). The world now did not like theirs, just experience a horrific global war, a massive pandemic and an utterly botched Peace. It did have a decade of explosive deployment/roll-out growth of several major, maturing technologies, loose everything, asset bubbles via cheap money/credit that all went bust at a time when the average American lived to his 40’s not ’80’s. The distribution of global power was totally different, with several Great Powers still in good measure run by the same fools as brought them their Great War, not the completely lopsided global power structure today – while well past peak, the US remains far and away the strongest and best positioned of any player – just goes to show how immensely wealthy the US really was that it has been able to waste money on this sort of scale yet still dwarf the rest.
Anyway, all to say that nothing remotely resembling WWII awaits us should Europe “fail”. The conflict will not cyrstallize between nations but portions of their populations against their own elites who’ve seamlessly morphed into mere representatives of powerful supranational interests. Nobody has a meaningful military. So inside any of these countries, a range of things is possible, not all of them by necessity bad.
The crisis facing Europe is not a collapse of the real European economy. That will continue in slow motion for years and years unless and until the individual countries return to currency issuer status. However, that slow motion collapse would be a best case scenario. The real European crisis involves financial implosion caused by a collapse of trust and refusal to lend. This is a developing mushroom cloud caused by the grotesque imbalance between debt and collateral which has resulted from off balance sheet gymnastics (repo). All the institutions know that any of their counterparties may make MF Global look like JP Morgan (in 1907). Thus, they will continue to demand increasing haircuts to lend at all, and they will deny borrowers perceived as shaky any access to credit. The result is a gigantic credit squeeze and a meltdown of asset values which may have already begun although nobody knows for certain. Meanwhile, the ECB fiddles, pretending that the problem can be solved by country by country austerity. Nonsense. The collateral deteriorates on a daily basis while the political struggle grinds on. Nothing but a gigantic helicopter operation can possibly save Europe and those banks which have made losing bets on Europe, including US investment banks which have CDS exposure in the trillions which nobody has said boo about in months and months, but which remains festering nevertheless.
Because the only alternative is complete financial collapse, and the only solution requires nothing more than some computer terminals and electricity, we can be certain that helicopter operations will be undertaken sooner rather than later. The only question is how many shaking financial firms will collapse before the helicopters are deployed. Then we will see how well all these book entry systems such as DTC really work. I have my fingers crossed.
Europe is utterly screwed unless it throws off the financial elite the European branch of which is desperately trying to keep its position as the local managers of the US-based global empire. Ditto Japan. And, finally the US itself, within 5 years, should it not come to grips with that same predatory system.
Helicopter drops maintain the same enormous power assymetry, keeping elites in place and again pounding the lower 3 quintiles. My own best hope is massive debt restructuring, defaults for insolvent banks and countries and turfing (at minimum) all senior managers private and public responsible for this stupidity/criminal negligence/pure predation, recap the necessary portions of banks, and in general, an orderly unwind of truly stupendous imbalances created by globalized capital that now views countries as no more than profit centres to be squeezed for all they’re worth.
What I think will happen is you get your ECB print after Greece (and perhaps 1 more) defaults, with the Fed launching no later than March. It will not help Europe. Nor Japan. It will temporarily help the US (2-3 years). But only fundamental change can actually help any of us going forward.
Well said, but difficult to execute. If you’re the Treasury Chief and you have personal relationships with the heads of the baking community, hard to turn your back on them, thereby allowing a new group of “upstarts” to take the helm.
That was the case in Japan in the early 90s.
We must praise FDR’s choice of Joe Kennedy at the SEC, who was happy to turn on his colleagues (fellow thieves)….
Five years? I gave myself leeway by asserting that it would be 10 years before total US federal collapse.
The question is why did the Fed and Treasury sit around on their hands while American TBTF banks sold CDS on this stuff to the Europeans. Was it actual policy to facilitate and grease the European ponzi, to keep it going with the implicit agreement that the American banks would never be asked to honor their CDS. Or was it simply another expression of the mentality: bank the fees today and if it all blows up, throw yourself on the government backstop tomorrow.
Also the Fed’s current dollar swaps program already is a subsidy for European banks because it provides them with cheap dollar liquidity, much cheaper than if the program did not exist.
No matter which explanation is valid it is damning. Bottom line: it looks like the U.S. was trying to inflate a Eurobubble. And we succeeded. Now what?
Hi Hugh,
I think Buffett was being quite literal when he first called derivatives “weapons of mass financial destruction” – that’s exactly what they are, i.e., weapons. They certainly knew they’d created a Doomsday Machine by the time they installed Mr. Depression (Bernanke) at the Fed in 2006, someone they knew would rather see the Sun explode than catch a whiff of deflation, even if they had not planned it from the get-go.
So to my mind, there’s simply no doubt they view Europe as a sitting duck from which they can, and will extort and extract trillions, with the CDS as insurance not against default, but against anyone doing anything about it. JPM for one will make money on every side of this shakedown. Fed and Treasury are full participants. NONE of these lizards give a flying F about mere people.
“we already know that the US is finished helping the Europeans until they start helping themselves”
More precisely, we know that the Fed says we are done. But they already have a track record for massive secret bailouts, so I am not so 100% sure the US is actually finished.
LaGarde made her Great Depression 2 comments as Hillary Clinton’s guest. I would hardly assume that Ben Bernanke’s muted statement that the U.S. won’t bail out Europe is the last word. It seems to me the Obama Administration is already laying the groundwork for the position that it must be done, just as happened in 2008. As soon as the American banksters start squealing we can expect a full-court press of doomsaying from the WHite House. The question is whether the GOP Tea Party wing has enough clout to hold out against the onslaught from the Wall Street mob. My money is on Wall Street (so to speak).
The other alternative is to just do it without talking about it. Easier to ask for forgiveness than to ask for permission, as they say.
Or better yet, as in 2008, have a public debate about a smaller bailout while running a much larger one in secret.
Yup, there are several ways to do it on the sly. The only question is whether the Tea Party GOP pols really investigate and fight or just pretend to in order to appease their base. Pretend fighting to appease the base, of course, is an ObamaCrat specialty but I’m sure the TP GOPers can do it just as well. I know it sounds trite but I urge everyone to call his or her Congresspeople and demand no more bail outs under any guise. Who knows? Maybe some vestige of democracy will momentarily reanimate. In the end, we will all know what they have done to us.
“The unavoidable short-term (economic) contraction may be mitigated by the return of confidence,” he said.
It’d really be quite fascinating watching these fascist psychopaths operate if it wasn’t to the detriment of mankind.
So by restoring confidence you don’t mean allowing insolvent banks to fail and bad actors being put in jail so that people could rest assured that some semblence of reality/honesty permeated our economic system once again.
Rather, Mr. Draghi, you mean the populaces of the EU have to put aside any ideas of freedom/sovereignity and exhibit full-faith in their technocratic leaders or the “beatings will continue” through the imposition of ever more harsh austerity packages, right?
I mean, really.
It seems what you really hope to be able to say one day in the near future, “We’re confident the serfs have been broken.”
The Confidence Men, indeed.
Is this a good time to buy a Spanish villa overlooking la mancha? or would next year be better?
A more suitable location to mount an ascension to the “eternal and infinite” could not be found. And there will be plenty of labor for the fields.
The risk of course is that foreign direct investment pours in and ruins everything. How can a man ride a mule for adventure beside a 10 lane highway to a Spanish Wal-Mart? This is absurd and undignified.
What work will they do? I can think of a series of book burnings and a job opending for a Grand Inquisitor, possibly someone from the Bundesbank — perhaps Mr. Weidmann himself — which should keep the population subdued long enough for us to rescue them in Grand style.
All we need is a cheap but luxurious villa, plenty of Rioja, a donkey and somebody who knows MMT to ride confidently with us and consult as needed.
‘Is this a good time to buy a Spanish villa overlooking la mancha? or would next year be better?’
If Spain remains in the euro, you can probably wait 20 or 30 years to buy, without missing much upside. Think ‘stagnant pool, slow absorption.’
On the other hand, if Spain reverts to a cheap peseta, you should take the next flight over, with a fistful of dollars.
Serape, cowboy hat, bandolier, and steely gaze optional …
you will need more than a “Serape, cowboy hat, bandolier, and steely gaze…”
to enjoy your Spanish villa overlooking la mancha bought on the cheap with a fist full of dollars…
you will need a discreet contingent of a couple dozen Eastwoodesque mercs if you hope to enjoy your spread in anything approaching peace and quiet.
‘A return to the Great Depression’: IMF boss ramps up pressure on EU with gloomy new recession warning
‘No economy in the world is immune to the crisis’
By TIM SHIPMAN
Last updated at 12:02 AM on 16th December 2011
“The world is heading for a new Great Depression, the head of the International Monetary Fund warned yesterday.
“In an apocalyptic assessment of the debt crisis, Christine La;garde said the disaster in the eurozone was escalating – despite last week’s treaty designed to prop up the currency.
“Delivering a clear warning that Europe has still not done enough to prevent the collapse of the euro, she insisted every country in the world would need to help boost growth.
http://www.dailymail.co.uk/news/article-2074743/IMF-boss-Christine-Lagarde-ramps-pressure-EU-new-recession-warning.html#ixzz1gjDmjHbm
apparently we can’t all “just get along.”
France fuels row with fresh attacks on British economy
By Michael Mainville (AFP) – 10 hours ago
“PARIS — France fuelled a cross-Channel row on Friday, describing the state of Britain’s economy as “very worrying” as the press in London reacted with fury to French calls for British debt to be downgraded.
“The row comes after Britain clashed with France at an EU summit and refused to join members of the eurozone currency bloc in a new fiscal pact, prompting French President Nicolas Sarkozy to declare there are now “two Europes.”
“Despite widespread condemnation in London of criticism from Paris on Thursday, Finance Minister Francois Baroin picked up the issue again, saying the French economy was in better shape than the British one.
“It’s true that the economic situation in Great Britain is very worrying and that we prefer being French rather than British on the economic front at the moment,” Baroin said on Europe 1 radio.
“We don’t want to be given any lessons and we don’t give any,” he said.
“Baroin’s comments came as the British press on Friday slammed French officials for suggesting that ratings agencies were targeting the wrong country for a debt downgrade by looking at France.”
http://uk.finance.yahoo.com/news/france-fuels-row-fresh-attacks-112319697.html
“We don’t want to be given any lessons…” spoken like a nation ready and willing to ignore history.
It’s all part of the man-made Global Cooling I warned of recently.
US vs. China…new tariffs on GM.
France vs Great Britain.
Cold wars breaking out all over the place.
I would also advise for you to marry into a prominent Spanish family to minimize any government action.
Chorizo in Rioja, mmmmm, yummy.
We will first acquaint ourselves with local wine and women — as many as possible under 150 pounds, this may take a year or more and require reliable supplies of chorizo and manchego and olives and roasted game to sustain us physically during our hard work — while we develop a plan to rescue Spain from the Grand Inquisitor.
We will have a donkey to transport us and our plan must not rely upon such honorifics as academic titles that mean nothing to a man of wisdom, but may persuade the feebleminded and ignorant to resist us and align themselves with the Inquisitor and his agents in the church.
We will ride from village to village and lecture in the public squares, enlightening the citizens about MMT and inflaming their native passions for justice and honor.
Within the year we should be successful. Our financial agents will of course consider what course of strategy may provide us with prosperity when the Inquisitor removes himself and his powers from the people’s neck — let us be direct about this — and it may be our donkey can be retired in favor of horses and leather of the finest quality made by local craftsmen who would be under our employ.
This is an ambitious but entirely workable plan for men of determination and valor. The Inquisitor himself does not have God as a natural ally, but relies for authority on a devil’s potion of deceit and ostentation made more intolerable by the obfuscation of mathematics, which he cites as if it were a Latin mass. Our natural modesty, along with our evident virtue, will prove a superior force and will defeat his prevarications.
Nice work. Well done.
P.S., Watch out for the windmills, they’re more dangerous than they look.
By the way, if you like MMT, you will love FMMT (Fast Modern Money Theory) – the only one preferred by the modern man, who would not have anything slow.
You also run the risk that Spain will begin to quadruple property taxes on residential foreign-owned property. Or increase taxes on any rental income on said property.
“everything else Draghi said he learned from the unicorns.”
I am willing to bet those who trained Draghi did have horns, but I don’t think they were unicorns.
We have all seen this innumerable times before. A period of crisis followed by a pause and/or a few greenshoots. But it doesn’t last because the underlying problems not only remain unaddressed they continue to worsen. I liken the situation to a cancer patient with end-stage disease. They have good days and bad days even as the disease that will shortly kill them continues to progress.
I think there was a popluar song in the ’70s called ‘Do you believe in Voodoo Magic?’
“European leaders last week agreed to outfit the International Monetary Fund with 200 billion euros to assist countries in the common currency zone. But Germany’s central bank has its doubts: Some heavyweight countries are balking, and it also increases risks for German taxpayers. ”
http://www.spiegel.de/international/europe/0,1518,804228,00.html
operating from the belief that the only stupid question is one not asked…
how is providing the IMF with 200 billion euros to lend any different than floating bonds?
understanding that in six months (if that long) they will back where they started and in need of another 200 billion—if not more.
Draghi’s position is that it is simply not legal for the ECB to print without Treaty changes. There is that irritatingly democratic German Constitutional ruling to contend with, among other political hurdles to clear.
Leaving aside whether fiscal union is desirable, or necessary (I believe neither)I find is remarkable how many people would prefer Europe just chuck the Law out the window in order to appease “markets”, when it’s absolutely evident “markets” are being used as a weapon by the global financial elite’s tactical arm, still anchored in the US – the same bunch that shredded what was left of the Fed’s/Congress’/Executive’s pretense of lawful conduct.
It’s either infinite ECB backstop, or Eternal Pain because “markets” can’t wait, certainly not on account of some stupid notions like the Law or Democratic accountability. The reason ANY of this is happening has been precisely a childlike fear of “markets”, as if “markets” were Elemental Forces, not the manifestation of the grotesque power plays of a few hundred altogether despicable individuals.
Did even 1 of those charged with resolving this crisis at any time in the US even consider closing all but the vital functions of markets and insolvent banks while planning orderly defaults/restructurings? Why NOT? Let me guess – it might upset “markets”. Has the US at any time considered a coordinated “holiday” with Europe to keep essential functions operating while vital decisions could be made with some measure of wisdom without the constant, daily barrage of threats from the supreme financial leeches that ARE the “markets”?
What we see is the Overton Window methodology taken to its logical extreme. We are paralyzed with deliberately inculcated fear. Instead of accepting that the world of 2007 is GONE, that the now-revealed truth that “growth” for its own sake is NOT the answer, that the attempt to resurrect it is quite insane, that the only way to avoid a far greater crisis than slow, stupid “growth” is going to mean far less mindless consumption in the developed world, far greater re-distribution of income all around, far more flexibility than is afforded by mammoth global supply chains and systems integration, and the return of significant portions of developed economies from all manner of labour-replacing machines back to labour. The elite no longer values the majority of the population, precisely because it now sees it as WORTHLESS. Just printing to buy more time for the brutal ethic of THAT system to further consolidate its power is a solution for “markets” and a dead loss for everyone else.
If the ECB can’t print, it shouldn’t have a monopoly on printing. That’s pretty plain.
Either the ECB is allowed to print, or the individual governments are allowed to print (technically they own the printing presses), or every single European country should get out of the ECB suicide pact. Including Germany.
I want to be quite clear: there’s no need to bail out the banks. But printing money is, in fact, one of the *essential functions* which needs to be available during a system shutdown. The question of bailing out the banks is the question of who the printed money should go to. It should actually go to the people (10000 euros per citizen of the EU would probably do the trick)
“The elite no longer values the majority of the population, precisely because it now sees it as WORTHLESS. ”
To the extent the elite believes this, the elite is both monumentally wrong and monumentally stupid.
Farms don’t tend themselves and machinery doesn’t build itself. Nothing delivers itself. The elite don’t even oppress the workers themselves, they hire people to do it.
The elite are massively dependent on a massive number of people (who would have been called “servants” in the old days), and failing to recognize that is fatally stupid.
Fiver writes: “The reason ANY of this is happening has been precisely a childlike fear of “markets”, as if “markets” were Elemental Forces, not the manifestation of the grotesque power plays of a few hundred altogether despicable individuals.”
Oh, good. I’d been wondering what “the markets” were. Now I know!
If you believed in markets, you would’ve sat on your hands in March 2009 – perhaps to this day. If you believed in “markets” you would’ve put as much as you could spare into them in March 2009, then again when QE2 was announced. You could’ve hung up the spurs at that point. Note that since March 2009 all big moves revolve around known future political and policy decision points, Jackson Hole, debt ceiling, Greek Crisis 1 “Resolution”, Greek Crisis 2 “Resolution”, etc. We’ve had a run of “deadlines” come and go in Europe for the last several months, each good for big moves down, followed by big moves up. We have a critical one in March. If the summit fails, the Fed steps in big time. If the summit “succeeds” the ECB steps up big time.
How do you suppose an entity like BlackRock quintupled its assets under management (now roughly $3.5 trillion) over the past 3 years? Think your pension is secure? Think again.
So since the federal reserve just prints money especially when they monetize it they could just print money and loan it at 0% interest to build solar and wind power plants which wouldn’t cost tax payers money and destroy the money as its paid back and when its all said and done we could export coal, natural gas and oil with GTL tec. at no less than 10 billion dollars a day and if we could collect a 30% tax on the export than it would equal almost 50% of the federal gov. budget all with no tax money spent.
guess you can have your cake and eat it too
So since the federal reserve just prints money especially when they monetize it they could just print money and loan it at 0% interest to build solar and wind power plants … American slave
No doubt windmills make sense to you. To others they are a ridiculous boondoggle. Maybe you are right, maybe they are right.
Here’s how to handle the dispute. Let government spend freely on what it decides makes economic sense but let its money be legal tender, de facto as well as de jure, for government debts only. Then, if government spending makes economic sense, its money will retain or even gain value. However, if the spending does not make sense then oops, more taxes are needed. Ouch!
Also, lending money into existence is not a good idea since the money must be repaid which is, of course, deflationary.
For the umpteenth time, F. Beard, why do you think legal tender laws have any economic meaning whatsoever? They don’t exist, never existed in many countries. Not a particle of economic difference. Repeal ’em tomorrow. They’re curiosities, like a law against walking around with a duck on your head on Sundays. Who cares?
They exist in pretty much all countries as a specification for what the government will accept for tax payments.
Anything else is dangerously arbitrary, as the government could choose to accept one man’s tax payments, and say that another man’s tax payments, in the same currency, are “no good” and declare him a tax deadbeat.
So most legitimate governments have a form of law regarding legal tender for payment of debts to the government.
Yes but if the wind was blowing and the sun shining than they could shut off the coal and gas power plants and send it to export terminals earning profits and taxes.
I know what you are saying but:
“The best laid schemes of mice and men
Go often askew,
And leave us nothing but grief and pain,
For promised joy!” from “To a Mouse” by Robert Burns 1785 from http://en.wikipedia.org/wiki/To_a_Mouse
Small, crafty, cowering, timorous little beast,
O, what a panic is in your little breast!
You need not start away so hasty
With argumentative chatter!
I would be loath to run and chase you,
With murdering plough-staff.
I’m truly sorry man’s dominion
Has broken Nature’s social union,
And justifies that ill opinion
Which makes thee startle
At me, thy poor, earth born companion
And fellow mortal!
I doubt not, sometimes, but you may steal;
What then? Poor little beast, you must live!
An odd ear in twenty-four sheaves
Is a small request;
I will get a blessing with what is left,
And never miss it.
Your small house, too, in ruin!
Its feeble walls the winds are scattering!
And nothing now, to build a new one,
Of coarse grass green!
And bleak December’s winds coming,
Both bitter and keen!
You saw the fields laid bare and wasted,
And weary winter coming fast,
And cozy here, beneath the blast,
You thought to dwell,
Till crash! the cruel plough passed
Out through your cell.
That small bit heap of leaves and stubble,
Has cost you many a weary nibble!
Now you are turned out, for all your trouble,
Without house or holding,
To endure the winter’s sleety dribble,
And hoar-frost cold.
But little Mouse, you are not alone,
In proving foresight may be vain:
The best laid schemes of mice and men
Go often askew,
And leave us nothing but grief and pain,
For promised joy!
Still you are blest, compared with me!
The present only touches you:
But oh! I backward cast my eye,
On prospects dreary!
And forward, though I cannot see,
I guess and fear! “To a Mouse” by Robert Burns 1785 from http://en.wikipedia.org/wiki/To_a_Mouse
Delusional: Lagarde is as delusional as usual when she says
“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super- advanced economies that will be immune to the crisis that we see not only unfolding, but escalating at a point where everybody would actually have to focus on what it can do,” Lagarde said.
If the international community doesn’t work together, “the risk from an economic point of view is that of retraction, rising protectionism, isolation,” Lagarde said. “This is exactly the description of what happened in the ‘30s and what followed is not something we are looking forward to.”
No, no, no. WORKING TOGETHER IS NOT NECESSARY. Not fundamental. STOP ATTACKING YOUSELF is what is necessary for each nation to do. Tend your own garden! Each Eurostate should deliver an ultimatum – make the Euro different, not a suicide pact, RIGHT NOW. Or we will get out of the suicide pact.
Lagarde “forgets” the good things that happened in the 30s. The demise of the gold standard. The rise of non-insane, non-innumerate (“Keynesian”) economics. FDR’s “magnificently right” (Keynes) evil-nationalistic-isolationist torpedoing of the London Conference plan to “internationally cooperate” to continue to enslave all to banksters. Explicit state job programs. The WPA & even Adolf’s. The FDIC. etc, etc.
“STOP ATTACKING YOUSELF is what is necessary for each nation to do. ”
Absolutely right. The reason my mind continues to boggle at the behavior of the 0.1% is that they are smashing the source of their own wealth. Likewise, I am amazed to watch the Republicans (with Obama’s help) destroy the United States, amazed to watch Cameron (with Clegg’s help) do his best to wreck Britain, and amazed to watch Merkel relentlessly attempt to destroy the German economy.
The FDIC. etc, etc. Calgacus
The FDIC was a mistake. Instead the US Government should have provided a risk-free fiat storage and transaction service that makes no loans and pays no interest.
Why is Lagarde afraid of protectionism?
It would actually work in the current crisis (as much an authority as Krugman has said so) provided the individual governments pursued locally sane policies. (The UK and Germany and Ireland and the US have proven that most of them won’t, of course….)