The small glass jugs filled with green or gold coloured extra virgin olive oil are familiar and traditional for restaurant goers across Europe but they will be banned from 1 January 2014…The use of classic, refillable glass jugs or glazed terracotta dipping bowls and the choice of a restaurateur to buy olive oil from a small artisan producer or family business will be outlawed…The European Commissions justification for the ban, under special Common Agriculture Policy regulations, is “hygiene” and to protect the “image of olive oil”…”It will seem bonkers that olive oil jugs must go while vinegar bottles or refillable wine jugs can stay.”
At least they’re fiddling with olive oil. It could be a lot worse.
more than six out of 10 women who give birth in their early 20s are unmarried. That is census data, from census demographers, from the very government that then becomes responsible for many, if not most, of those unmarried women and children. If that isn’t an astonishing statistic, it should be.
the French political system is terminally sick. The historical background certainly confirms this. For more than 30 years, every French government has lost every election. With a single exception, you have to be over 50 today to have voted in the last election, in 1978, when the incumbent majority held on to power: Nicolas Sarkozy managed to get a conservative majority re-elected in 2007 only because he profiled himself, dishonestly, as a new broom and as a rebel against the roi fainéant, his former mentor Jacques Chirac. Add to this the fact that in 2005 the referendum on the European constitution produced a ‘no ‘vote — that is, a disavowal of the entire political establishment — and you are confronted with a bitter reality: the French electorate hates its politicians and takes every chance to vote against them. François Hollande’s election last May was therefore not a victory but only his predecessor’s defeat. He was elected with 48 per cent of the votes, if you include spoilt and invalid ballots, and 39 per cent of the registered voters. His election was especially unimpressive considering the widespread revulsion at Sarkozy’s personal bling and at his betrayal of his own voters. But even so, Hollande’s catastrophic poll rating has broken all records. When in March he became the most unpopular president after ten months in office, his rating stood at 31 per cent. Now it is 26 per cent.
With unemployment nearing 11%, what do you expect?
Major depositors in Cyprus’s biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed…the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros…At Bank of Cyprus, about 22.5 percent of deposits over 100,000 euros will attract no interest. The remaining 40 percent will continue to attract interest, but will not be repaid unless the bank does well…Cypriots and foreigners are allowed to take only up to 1,000 euros in cash when they leave the island
So the Germans have raided the bank accounts of the Russians. Who knows how this will play out? Guardian: “Angela Merkel – who speaks fluent Russian and grew up in communist east Germany – did not have the same rapport with Putin as her predecessor. Her aides recall how during one meeting in Sochi, Putin deliberately let his dog sniff the chancellor’s legs; Merkel has a well-known aversion to dogs. ‘Typical KGB,’ one of the chancellor’s aides complained.”
Bloomberg on Cyprus, where large bank depositors are finding out that 30% of their money is gone:
the plan will spare the Mediterranean island a financial catastrophe by winding down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a “good bank”. Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalize Bank of Cyprus…
Christos Stylianides said: “We averted a disorderly bankruptcy which would have led to an exit of Cyprus from the euro zone with unforeseeable consequences.” Asked about the level of losses on uninsured depositors in Bank of Cyprus, he told state radio: “The assessment is that it will be under or around 30 percent.”
Of course this is not as bad as things were in 1930, when the large Fed member, the Bank of the United States, was allowed to fail, and deposit withdrawals spread far and wide. But why would anyone, or any company, now keep any significant deposits in a bank in the PIIGS, or in other countries in Europe, and then, and then…… We’ll see.
To stay one night in London, the VP booked approximately 136 hotel rooms for 893 room nights at a hotel. The bill for the hotel alone was $459K (his hotel bill for one night in Paris was almost $600K):
When Winston Churchill came to America in late 1941, he stayed at the White House for three weeks and the bill was $0. What passes for normal today is surreal, bizarre, but no one seems to notice.
The decision to expropriate Cypriot savers – even the poorest – was imposed by Germany, Holland, Finland, Austria, and Slovakia, whose only care at this stage is to assuage bail-out fatigue at home and avoid their own political crises.
For the only amusing part of the Cyprus situation, there’s this.
The former head of the Central Bank of Cypress (video here):
What we have seen in the last few days is a very serious blunder by the European governments that are essentially blackmailing the government of Cyprus to confiscate the money that belongs rightfully to the depositors in the banking system in Cyprus
Not a wealth tax. A surprise, ex post facto asset tax, that, had it been announced in advance as an upcoming policy, would have raised essentially zero revenue. Another word for this sort of asset tax might be “confiscation.” Robert Tracinski explains. It is hard to overstate how incredibly stupid this is, and we’ll be surprised if it takes effect. But it tells you what you need to know about politicians and bureaucrats.
Last July it looked as if the Large Hadron Collider had identified the Higgs Boson. BBC says that further measurements have now confirmed this. Let’s go back to the time of the tentative identification last year. Reuters:
Scientists at Europe’s CERN research centre have found a new subatomic particle, a basic building block of the universe, which appears to be the boson imagined and named half a century ago by theoretical physicist Peter Higgs. “We have reached a milestone in our understanding of nature,” CERN director general Rolf Heuer told a gathering of scientists and the world’s media near Geneva on Wednesday. “The discovery of a particle consistent with the Higgs boson opens the way to more detailed studies, requiring larger statistics, which will pin down the new particle’s properties, and is likely to shed light on other mysteries of our universe.” Two independent studies of data produced by smashing proton particles together at CERN’s Large Hadron Collider produced a convergent near-certainty on the existence of the new particle. It is unclear whether it is exactly the boson Higgs described…
Higgs, now 83, from Edinburgh University was among six theorists who in the early 1960s proposed the existence of a mechanism by which matter in the universe gained mass. Higgs himself argued that if there were an invisible field responsible for the process, it must be made up of particles. He and some of the others were at CERN to welcome news of what, to the embarrassment of many scientists, some commentators have labeled the “God particle”, for its role in turning the Big Bang into a living universe. Clearly overwhelmed, his eyes welling up, Higgs told the symposium of fellow researchers: “It is an incredible thing that it has happened in my lifetime.”
Here is a picture of the machine that looked for the boson:
The Large Hadron Collider (LHC) began operating in 2008 to test the validity and limitations of the Standard Model. (Among the questions: Where has all the anti-matter gone? Does the Higgs boson exist?) The collider is cooled to an operating temperature of 1.9K, which is pretty darn cold. Here are some other great pictures of this huge, awesome machine, located in Switzerland and France.
According to the latest semi-annual report issued by the Bank for International Settlements, the gross market value of outstanding over-the-counter derivatives is $25.4 trillion—yes, trillion—with 75 percent of the contracts linked to interest rates: forward rate agreements, swaps, options. In June 2008, shortly before the crash, the gross market value of outstanding OTC derivatives was $20.4 trillion, with 46 percent linked to interest rates.
So what has actually changed since the precrisis financial situation? Instead of tamping down speculative betting on interest rates in favor of rational market pricing of loanable funds, the Fed’s monetary policies are stimulating it. No wonder traditional financial intermediation—the kind that used to channel depositor funds toward promising new businesses—is now oriented toward gaming various hunches about the Fed’s next move. Even smaller banks are learning to churn their Treasury holdings rather than make loans to private-sector borrowers—especially since federal regulators are evaluating their portfolios.
Productive economic activity requires a commitment of resources based on faith in the future; it’s inherently risky, but that’s the nature and genius of capitalism. Unfortunately, the Fed’s tactics for suppressing interest rates have brought about conditions antithetical to entrepreneurial capitalism: loose money, tight credit.
At Bretton Woods, 44 countries voted to make the dollar the world’s reserve currency. Any chance they’d re-up on that today? HT: PL
the ECB professes itself helpless in the face of 11.8pc unemployment, a post-EMU record and rising each month…Italian and Spanish companies still pay twice as much to borrow as German rivals. The North-South gap is becoming hard-wired into the system. He calculates that a string of states need drastic rate cuts this year under the classic `Taylor Rule’ or shortfall in potential output: 150 basis points for France, 230 for Holland, 240 for Ireland, 330 for Portugal, 350 for Spain, and 400 for Italy. For Greece, theoretically 1100, “no amount of easing would appear sufficient. You cannot cut below zero. That is why you do quantitative easing, a crude proxy.
Meanwhile, the Fed sees no current danger of excessive inflation from QE4 or whatever it is. Dreary times. HT: KD
Following up on a recent post, we look in on the BBC and knife research:
The research is published in the British Medical Journal. The researchers said there was no reason for long pointed knives to be publicly available at all. They consulted 10 top chefs from around the UK, and found such knives have little practical value in the kitchen. None of the chefs felt such knives were essential, since the point of a short blade was just as useful when a sharp end was needed…The researchers say legislation to ban the sale of long pointed knives would be a key step in the fight against violent crime. “The Home Office is looking for ways to reduce knife crime. We suggest that banning the sale of long pointed knives is a sensible and practical measure that would have this effect.”
How do these chefs deal with the prime rib? (We suppose the answer is that you can still have a long knife, but it has to be rounded at the end — but then can’t you still slash with its long sharp edge?) Very strange world we have. HT: FPM
In England a 61 year old man was convicted of the crime of having a Swiss Army knife in his glove compartment. However, you can buy the same knife online at the UK Boy Scouts website. (Some US scouts buying the knife would have committed a crime in the UK by doing so because they were too young.) There are a number of videos made by Englishmen attempting to make sense of the situation, but frankly we were more confused by the explanations. Apparently you can have a knife for camping but not an “assault knife” if we understand correctly, even if they are the very same knife. Coming soon to a country near you. Merry Christmas! HT: PL
A total of 326 billion euros ($425 billion) was pulled from banks in Spain, Portugal, Ireland and Greece in the 12 months ended July 31, according to data compiled by Bloomberg. The plight of Irish and Greek lenders, which were bleeding cash in 2010, spread to Spain and Portugal last year. The flight of deposits from the four countries coincides with an increase of about 300 billion euros at lenders in seven nations considered the core of the euro zone, including Germany and France, almost matching the outflow. That’s leading to a fragmentation of credit and a two-tiered banking system blocking economic recovery and blunting European Central Bank policy in the third year of a sovereign-debt crisis.
“Capital flight is leading to the disintegration of the euro zone and divergence between the periphery and the core,” said Alberto Gallo, the London-based head of European credit research at Royal Bank of Scotland Group Plc. “Companies pay 1 to 2 percentage points more to borrow in the periphery. You can’t get growth to resume with such divergence.” The erosion of deposits is forcing banks in those countries to pay more to retain them — as much as 5 percent in Greece. The higher funding costs are reflected in lending rates to companies and consumers. The average rate for new loans to non-financial corporations in July was above 7 percent in Greece, 6.5 percent in Spain and 6.2 percent in Italy, according to ECB data. It was 4 percent in Germany, France and the Netherlands.
Some of the decline in deposits is because German and French banks are reducing their exposure. They cut lending to their counterparts in the four peripheral countries plus Italy by $100 billion
Greece should be getting another tranche of a bailout shortly. It’s hard to see how the euro is sustainable in what has emerged as a two-tier banking system; in fact, the euro was in part supposed to fix that. But this has gone on far longer than we would have thought possible several years ago.
• Iran’s continued development of nuclear weapons capability, as detailed recently by the International Atomic Energy Agency, as we do nothing.
• Continued funding of Egypt to the tune of $1.5 billion in aid a year, along with generous support given to the terrorist-supporting Palestinian government on the West Bank and the terrorist group Hamas in Gaza.
• The retreats from still-unstable Afghanistan, pulling 23,000 troops out of the country even as its political situation deteriorates and despite saying in 2008 that Afghanistan “has to be … the central front on our battle against terrorism.”
• The open hostility of former ally Pakistan, where we can’t even get a supposedly “friendly” regime to release the doctor who helped us locate and take out Osama bin Laden.
• The sudden abandonment of Iraq, after all we’ve done there to stabilize it, leaving that country to the tender mercies of its menacing neighbor, Iran. But the list doesn’t stop with U.S. failure in the Mideast. Americans can’t be blamed for also wondering why the president has:
• Pledged to “reset” relations with Russia, enabling Vladimir Putin to turn into a tyrant, jail his political foes, bully neighboring countries, aid Iran in getting a nuclear weapon, and provide support to Syrian bad guy Bashar Assad — at our expense.
• Stiffed both the Poles and the Czechs by backing out of a planned regional missile-defense system, putting these staunch allies once again at the mercy of a predatory Russia. This was done, supposedly, to enlist Russia’s help with Iran — help that never came.
• Assured Russian Prime Minister Dmitry Medvedev that he’ll have more “flexibility” in foreign affairs once the November election is out of the way.
• Proposed an 80% cut in nuclear weapons that would leave the U.S. vulnerable to less-scrupulous superpowers such as Russia and China while encouraging rogue nations like Iran and North Korea to go nuclear.
• Used across-the-board budget cuts to hollow out the military, diminishing our naval presence to levels not seen since the end of World War I.
• Stood by as China expands its military at double-digit rates, builds a blue-water navy and turns the Eastern Pacific into its own little lake.
• Started treating old friends such as Britain, Canada and Japan as unwanted in-laws and old adversaries such as Russia and China as friends.
• Allowed American guns to flow to cartels in Mexico without Mexico’s knowledge, at a high cost of human life.
It’s really hard to believe that it’s gotten this bad in just four years. Where’s the free press? Oh yeah: “Elderly Soviet propagandists must be wondering why they wasted their time jamming radio transmitters and smashing printing presses when they could just have sent everyone to Columbia Journalism School.”
The troika — the European Union, the International Monetary Fund and the European Central Bank — will complete its review of Greece by mid-September. A decision on whether Greece will receive the next bailout tranche (worth roughly 30 billion euros) can be expected for early October. Stratfor expects Greece to receive this tranche after its parliament passes further austerity measures worth 11.5 billion euros in late September. This will buy Greece some time and temporarily ease rumors of its withdrawal from the European Union.
Portugal will likely receive more time to reduce its budget deficit since it has become clear that its economic downturn is stronger than expected. However, Portuguese unions will hold demonstrations across the country against spending cuts and rising unemployment. The main protests are expected for Oct. 13 in Lisbon. Later that month, the government will present the 2013 budget to the Portuguese Parliament, which is likely to generate an uptick in political tensions with the opposition and the unions.
The negotiations between Portugal and the troika will be noted by Ireland, which will be under review by its lenders in October. Ireland will continue to negotiate better bailout terms. If Lisbon is granted softer deficit targets, Dublin is also likely to request — and be granted — special treatment.
Maybe Margaret Thatcher was wrong. Maybe you don’t have to run out of other people’s money if you can just print it or use the power of the central bank to buy unlimited quantities of sovereign debt.
Speaking in Frankfurt on Thursday, the E.C.B’s president, Mario Draghi, outlined a new program to lower borrowing costs of countries like Spain and Italy that have been forced to pay rates which most analysts believe would be sustainable in the medium term.
Called Outright Monetary Transactions, the program will focus on purchasing government bonds with maturities from one to three years. The E.C.B. will not set a limit on how much it buys and will not insist on senior creditor status, which means being paid ahead of others in the event of a restructuring. Such status worries other investors who fear they would face disproportionate losses.
But countries wanting help will have to ask for it and will then need to meet strict conditions. That presents a crucial problem for Spain, which is at the heart of the crisis and whose government worries that such a formal request would constitute a political humiliation.
And difficult discussions lie ahead about Greece’s bailout, with international lenders due to arrive in Athens this weekend. The government there is asking for more time to hit its targets, but euro zone nations are reluctant to fill yet another gaping hole in Greek financial plans. A failure of those talks could still lead to a Greek exit from the single currency, with huge consequences for the rest of the euro zone.
While the E.C.B.’s announcement has undoubtedly bought time for the single currency area, analysts said it needed to use that time to build more credible structures in order to restore market confidence, including ambitious plans to construct a banking union.
The experience of the euro zone crisis so far is that, whenever pressure from the financial markets is reduced, politicians postpone difficult decisions. Paradoxically, that could mean that the E.C.B.’s intervention will make agreement on crucial changes seem less urgent.
Meanwhile: In Germany, there are already fears that the Bundesbank has suffered a mortal defeat in failing to persuade others that the bond-buying programme is “tantamount to financing governments by printing banknotes” (as the bank itself said in a rare public reaction to the ECB’s decision). The website of the respected daily newspaper Die Welt headlined its main story: “Financial markets cheer the death of the Bundesbank“.
It’s been well over two years now since the crisis started, and they’re still kicking the can down the road. The only good news, such as it is, is that there’s not much else to do after making a decision to monetize most of Europe’s sovereign debt.
Matt Lewis has five policy problems of the Clinton and Bush eras that incrementally created the crisis of the last decade. Fannie Mae, the repeal of Glass-Steagall, artifically low interest rates and all the rest culminated in a near-perfect storm. Real problems that caused a crisis — but did they cause the panic?
No. The panic was caused by the decision by Paulson, Geithner, Bernanke and the Bush administration to let Lehman Brothers fail in September 2008. Christine Lagarde, the French finance minister, understood how calamitous that was. It was a particularly appalling moment for Ben Bernanke, since he is a student of the Great Depression, and letting Lehman go was roughly the equivalent of the NY Fed’s 1930 catastrophic decision to let the Bank of the US fail — a decision that went a long way towards turning the recession of 1929 into the Great Depression.
Final point: Almost nowhere discussed is the large cultural shift that occurred with the creation of securitization. We suppose that securitization lowered borrowing and transactions costs and made markets more efficient. But securitization did one colossally horrible thing. When applied to bank loans, securitization distorted a critical element of banking. The essence of banking is that the banker is a lender, not a salesman. Traditionally, there is an ongoing and important relationship between borrower and lender, because times and circumstances change, and nothing necessarily goes as planned in a long-term loan. Securitization with government guarantees and the like destroy this. Loans traditionally were based on creditworthiness, of course, but also on the “three C’s” (Character). “If a man comes in on a Friday afternoon for a loan, the answer is no,” and so forth. Old chestnuts of course, but banking is an old business. Making bankers salesmen packaging stuff for computer-generated portfolios is an invitation to disaster — so guess what: disaster! (This is not to say that you can’t have terrible results in direct borrower-lender loans; corrupt China stands for that proposition — see the $1.7 trillion boondoggle or Lioaning province for example.) Moral of the securitization story: “new wisdom” may be new, but almost always it is not wisdom.
China’s sales to European Union countries fell 16.2 percent last month and growth in U.S. exports slowed to 0.6 percent from 10.6 percent in June, customs data showed.
