Thursday, 27 October 2011

By on October 27th, 2011 in government, personal, politics

08:45 – How could I have been so wrong? The EU authorities announced this morning that they’d hammered out a comprehensive plan overnight to address the euro crisis. And they’re right. They pretended to deal with every issue facing them (except the important ones), and so far the markets are pretending to believe them. I predict that’ll last 24 to 48 hours before reality sets in.

Private lenders agreed to accept a “voluntary” 50% writedown on Greek bonds. In reality, they accepted an 85% writedown, because what they ended up with was 15% in cash and the rest in 30-year Greek paper, which the market will quickly value at zero, or close to it. And I have my doubts about that 15% cash ever actually being paid. But at least Greek debt has gone from unsustainable to, well, unsustainable.

They’ve also announced that they’re pretending to increase the bailout fund to €1 trillion, although they’re not actually going to commit any more of their own money to it. They plan to use a combination of leveraging (AKA smoke-and-mirrors) and hoping that non-EU countries will be foolish enough to put in pots of money to back worthless EU sovereign bonds. Meanwhile, they’ve papered over the ECB issue simply by not mentioning the ECB at all.

So, the net result of this pathetic effort is that they’ve bought themselves a bit more time. I’d guess they’re hoping for weeks, but I think they’ll be lucky if it’s more than a few days. Keep a close eye on Italian bond yields over the coming few weeks for the real story.

Regular readers probably won’t believe me, but last night I was pumping iron–lifting free weights. Barbara called Mary Chervenak yesterday to ask if she could borrow some weights for a week or two, until she could start going to the gym again. Mary stopped over after dinner and dropped off a pair of 15-pound (6.8 kilo) weights. I actually picked one of them up and carried it into the house. Dense little sucker. Barbara carried the other one.

25 Comments and discussion on "Thursday, 27 October 2011"

  1. brad says:

    Our host will appreciate this article (German). The title says it all: “At least they talked about the right topics”. The author goes through the whole publicized solution and points out that it is too little, too late. But, hey, at least the chapter headings are correct…

    He also says that the markets will do as they always do in these situations. React positively for the first day or two, then drop as they realize that nothing has actually changed.

    I think I like this author: down to earth and realistic. Probably means he won’t be around long…

  2. brad says:

    Duh…sorry, it’s not so much the author, as who he is interviewing: Tobias Straumann.

    Though the author deserved credit for reporting it straight…

  3. Robert Bruce Thompson says:

    He at least points out one issue that the other articles I’ve seen this morning fail to address: that leveraging the EFSF is extraordinarily risky. If Italian bond yields continue to rise–and remember that the ECB says it plans to stop propping up Italian and Spanish bonds–the whole EFSF collapses and along with it the whole house of cards.

  4. SteveF says:

    Why didn’t you rig up a wagon or sledge and have the hound drag the weight in? Make him earn his keep!

  5. Robert Bruce Thompson says:

    A sledge? You must be kidding. Colin could probably carry a 15-pound barbell in his mouth. One of his favorite “sticks” was a part of a branch about four feet long and 3″ in diameter. He’d trot down the street on a walk with it in his mouth. He literally stopped traffic more than once, with people stopping their cars to watch him tossing it in the air and pouncing on it. I eventually threw it away while he wasn’t looking.

  6. Chuck Waggoner says:

    You would think the media would eventually realize that only they are focused on solutions to the Euro crisis. The politicians sure aren’t.

  7. Robert Bruce Thompson says:

    Well, politicians have their priorities, and getting re-elected tops that list. In fact, it’s the only thing on that list. Next to that, minor issues like preventing the collapse of the euro, the breakup of the EU, widespread human suffering, and a world-wide depression have to take a backseat.

  8. brad says:

    Oops!! Y’all have probably seen this: Obama accidentally told the plain, simple truth: President Obama warned his recession-battered supporters that if he loses the 2012 election it could herald a new, painful era of self-reliance in America.

    Hey, at least it makes the priorities clear!

  9. Chuck Waggoner says:

    I have long wanted the option to have no President. My favorite Presidents have spent their time on the golf course–where they can do little harm. Calvin Coolidge and Ike Eisenhower come to mind. Ever since Clinton, every President has had the single purpose of getting himself into the news every single day of the year. I want Presidents who do nothing and never make the news.

    Gerry Ford was not bad. Most of the time, when he made the news, it was because he tripped or banged his head, or something.

  10. ech says:

    My favorite Presidents have spent their time on the golf course

    Well, Obama plays a lot of golf, so you must love him!

    As an aside, I saw set of great #Occupy satires:
    #OccupyJupiter, because 12.5% of the planets shouldn’t have 71% of the mass.
    #OccupyMordor, because One Ring shouldn’t rule them all.
    #OccupyVulcan, because the needs of the many outweigh the needs of the few, or the 1%

  11. Chuck Waggoner says:

    I love Obama every minute he is on the golf course. I would love him even more if he stayed out there all day, like Ike. No cell phones allowed, either. You aren’t taking the game seriously if you carry a cell phone.

  12. Chuck Waggoner says:

    Just ordered something from Amazon. I have heard that Bezos — like Jobs did — takes personal charge of too many things at Amazon — such as the website.

    Geez, could anything be more convoluted and complex than their increasingly bewildering website these days? All I wanted to do was order a cutting device with some replacement blades. With the suggested this and that cluttering up everything, that proved almost impossible. It took me a good 20 minutes to do what should have taken about 20 seconds. I had to order the replacement blades from a separate source, but between 1) determining that I had no other choice than to do that, and 2) finding out how to do it, I was delayed nearly interminably. Then, when I hit ‘checkout’, I had to wade through a couple of pages of special offers that really had nothing to do with my order, then page after page of confirming everything from delivery address to shipping method (why isn’t “cheapest” a choice?–instead, I have to figure out for myself what ‘standard’, ‘economy’ and ‘express’, mean, and which is actually cheapest — with even more mouse clicks to actually choose it, write it down, then go back and do the same with another choice to compare). With all the information they collect about us, why can’t they just say, ‘last time you did things this way’ then describe it all on one page, and ask if that is how I want it this time, too?

    This was an office supply purchase. The very first Staples store was opened in Natick, Mass. on Rt. 9, just down the street and around the corner from where we lived (OFD might remember that store, close to his next-town-over Framingham childhood), and it was a marvel place where I could spend hours just perusing. Meanwhile, that chain has since degenerated into a complete rip-off, with small store spaces, lower quality goods, and out-of-sight high prices. I went in to get some paperclips yesterday while I was in Indy, and my only option for the plastic-coated ones cost $8. I sped over to Office Max and got them for half that price.

    I really like shopping for some things in stores. As I grew up, office supply stores replaced dime store comic book stands as my favorites, but the breadth of inventory is a small fraction of what it used to be, and the prices are no different than rip-off convenience stores. Whatever happened to the ‘warehouse-pricing’ concept that Staples was supposed to be all about?

    In Boston, we had a huge Hallmark store in the Prudential building. The teeny little Hallmark store in Tiny Town, did not have what I was looking for, so I thought I would check a bigger store while I was in Indy yesterday. Whoops! The Hallmark store in the biggest Indy mall was a hole-in-the-wall that was actually a smaller space than in Tiny Town! What is happening?

    I may have to get used to giving Bezos more mouse clicks and just give up on real stores altogether.

  13. OFD says:

    OFD certainly does remember that Golden Mile in Framingham-Natick, about a fifteen-minute walk from our little ranch house, itself a fifteen-minute walk from my high school and lovely Saxonville. The Staples wasn’t there then, of course; instead we had Lafayette Radio, a great old chain store that I used to dreamily invade, eyeballing all the radio kits and gadgets. Next door, the Loew’s Cinema, one of my first jobs as an usher, followed by one at the General Cinemas at Shopper’s World, one of the country’s first two or three malls, if memory serves. All just under twenty miles from Boston, and on the hill where a couple of my siblings went to elementary school one could, on a clear day, see the Prudential Tower.

    Ironically, decades later, I found myself working a temp contractor (Cisco network analyst) job at the Staples HQ, which is in Framingham just off Route 9, a.k.a. the old Boston-Worcester Turnpike, and long before that, a trail for the local Algonquin Nations tribes to hike back and forth from Boston Harbor to the lakes and streams of central and western Maffachufetts.

    I have had several good experiences at our Staples store here in northern Vermont and zero complaints, and ditto for my many experiences over the years with Amazon. YMMV, of course.

  14. Miles_Teg says:

    Chuck wrote:

    “Gerry Ford was not bad. Most of the time, when he made the news, it was because he tripped or banged his head, or something.”

    Oh come on!

    You mean Gerry “there is no Soviet domination of Eastern Europe and there never will be under a Ford administration” Ford? Is there another Gerry Ford who’s escaped my notice?

    Ford and his accomplice Henry Kissinger presided over the US withdrawal from South Vietnam, which turned into a complete fiasco. They left a king’s ransom of South Vietnamese gold, military equipment, sensitive files, and South Vietnamese who’d worked for and trusted the US to the tender mercies of the commies.

    I think Ford is right up there with Buchanan, Pierce and Andrew Johnson as one of the worst presidents in US history.

  15. Chuck Waggoner says:

    My experience may indeed have been the store. The people working there seem particularly uninterested in my needs. It is in a mall that decayed to the point it is no longer a mall, but just a separate bunch of individual stores. I should try a store in a more affluent neighborhood. The prices will probably be cheaper.

    Although my kids lived a number of years in Natick, neither of them remembers that there was a huge Hostess bakery (factory would be a better word), just east of the Natick Mall. It was referenced in an episode of Family Guy, and they thought it was fiction. There was an old railroad siding that you could see from our house, bringing tank car after tank car of chemicals to that plant.

    Great commentary on Randy Newman — although I like him more than most people, apparently.

  16. Chuck Waggoner says:

    Chuck wrote:

    “Gerry Ford was not bad. Most of the time, when he made the news, it was because he tripped or banged his head, or something.”

    Miles wrote:

    Oh come on!

    You mean Gerry “there is no Soviet domination of Eastern Europe and there never will be under a Ford administration” Ford? Is there another Gerry Ford who’s escaped my notice?

    I fear you missed my drift entirely. But his problem was likely not enough golf. No President can ever spend too much time on the golf course.

  17. Miles_Teg says:

    We need more Abe Lincolns and Harry Trumans as president… 🙂

  18. Alan says:

    …then page after page of confirming everything from delivery address to shipping method (why isn’t “cheapest” a choice?–instead, I have to figure out for myself what ‘standard’, ‘economy’ and ‘express’, mean, and which is actually cheapest — with even more mouse clicks to actually choose it, write it down, then go back and do the same with another choice to compare).

    If you order enough from Amazon, try Amazon Prime (free 2nd day delivery on most items they stock or do fulfillment for), and if you don’t but do a decent amount of mail-order from other sources you might be surprised at what you can get from Amazon these days. I easily save more than the yearly fee – plus you get access to their streaming video library.

  19. OFD says:

    Chuck, the bakery that was there when I was a kid was a Wonder Bread factory/bakery. You could smell it for miles around, and nearby was the Carling Black Label brewery, on the shores of lovely Lake Cochitutate, lakeside home of WBZ weatherman, Bruce Schweglor (sp?), who had wild parties there when he wasn’t on the air in Boston with Chet and Nat.

  20. Anonymous says:

    Who can forget Whip Inflation Now! 😀

    I follow markets and I wrote to a friend earlier today, “In other news, it looks like USA QE3 is factored into the markets; how else to explain the market’s reaction to “good news” on a Euro resolution (Ha!) alongside an instantaneous rise on POG? Slide in dollar was to be expected — can you think of a “Euro” deflationary force more powerful than having Greece write of 50% of their indebtedness?”

    I look at the market’s forcasting ability, and I’m afraid we’re in for another cocaine (debt) binge to stave off the current hangover. Which means that much capital will flow via currencies and equity markets. Unlike many, I consider the POG is more correlated with currency uncertainty than “inflation”, as his been shown throughout history via clan and group behavior.

    If Keynesian idiocy is reigning on Wall Street, USA who am I to argue? Equity markets will climb for the next 6-9-12 months, alongside POG. Once the proportions of the worldwide sovereign debt crisis hits home, then it’s time to worry about the cab home. Until then, have a drink on Ben.

    (Note to Chuck: sovereign debts crises are a result of human nature and clan behavior. They’ve both been with us for a very, very long time. I suggest you study economic and geographic history a bit more carefully.)

    I am very worried about another FDR seizure of gold, though. That crippled little shyster had IRS agents overseeing the opening of safe-deposit boxes when he fixed the price of gold back in 1933, virtually outlawing the world market price.

    If currency wars (and wars in general) are to be the outcome — as history as shown, I wouldn’t care to hold physical gold in the US unless you’d care to trade it on the black market at a discount.

  21. Chuck Waggoner says:

    If you reveal who you are, I might have something to say.

  22. Chuck Waggoner says:

    Wonder Bread was bought out by Hostess. Later, after more acquisitions, corporate began calling itself Interstate Brands and quit changing the names of the companies it acquired. Wonder may still exist, but not anyplace I have lived in the last couple decades. Nissen Bakeries in Maine had a lock on New England when I was there — but it, too, was bought out by Interstate — which quickly cheapened all the high-quality stuff Nissen made. That is when I started making my own bread.

    Yeah, wrong channel for Bruce Schwoegler. He was over with Jack Williams and Liz Walker on the notoriously cheap Westinghouse’s WBZ. It was Dick Alpert who was teamed with Chet and Nat at WHDH, which ultimately lost its license to WCVB. Geez I’m glad I don’t work in that business anymore. It is hard enough just being a sometimes volunteer in a non-profit radio operation.

  23. Robert Bruce Thompson says:

    Well, I know who he/she/it is, based on the email address that’s visible to me in the screen where I have to approve all comments from anyone who hasn’t already had a comment approved. I’m assuming that I just approved “Anonymous” only when posting with that particular email address. I’d hate to think that I just told WP to allow any anonymous commenter.

    Speaking of which, someone attempted to post anonymously the other day using a fake address from this domain. I didn’t appreciate that, so I trashed the comment. I’ll accept anonymous comments from an email address that I recognize or if the comment looks valid, but an obviously fake email address is a quick way to get deleted.

  24. Don Armstrong says:

    Well, that was interesting. Bob, I hope you don’t have any expectation of security on this blog, because you ain’t got it. I clicked on the link to get here, to see all the posts for today, and instead got to

    Now, as it happens, he’s someone you’ve got linked over on your right-hand side., but I didn’t go near that – I know what I clicked, and I didn’t get there/here the first time. This is just one of those oddities you have to file for future reference, in case you see more things going wrong. You can’t really act on what happened to me right now – just be ready to throw it in the balance pan some time in the future.

  25. Robert Bruce Thompson says:

    Thanks. As I’ve said, I don’t have high expectations from WordPress, but unfortunately the old method just wasn’t sustainable once my tech support department, Greg and Brian, were no longer running my server.

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