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Category: politics

Friday, 9 December 2011

07:52 – The EU summit has already ended in disaster, with the main Friday meeting having just gotten underway. Late last night, it was announced that UK PM David Cameron had, unexpectedly, proven that he possesses a backbone. Cameron vetoed Merkozy’s plan to federalize the EU and thereby eliminate the sovereignty of member nations.

Merkozy are trying to make the best of this fundamental split, claiming that because the 17 euro nations and some of the non-euro EU members agreed to form a “super eurozone”, they have achieved their goal. They’re wrong, of course, because their plans depend upon this clique having its decisions enforced by institutions that belong to the entire EU, including the UK. And the UK maintains a veto over such actions.

This summit is just like all the others have been, with grand plans being announced for the future, but without any details about how they’re to be approved by national legislatures, implemented, and, more importantly, paid for. More of the same, in other words. And more of the same just isn’t going to cut it. I expect the markets to be delighted, as usual, for a few days, after which reality will set in and the downward spiral will continue. Of course, this time S&P has already announced that if the summit doesn’t take concrete and effective steps to resolve the crisis, S&P may carry out its threatened downgrades of ratings on the sovereign debt of the entire EU, possibly as early as tomorrow. And nothing coming out of this summit is likely to satisfy S&P, or indeed anyone with a realistic view of the matter. We’ll see what happens.

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Tuesday, 6 December 2011

08:17 – I see that S&P has belatedly noticed that all 15 eurozone countries that don’t already have junk ratings should be downgraded, including Germany. The problem is, S&P is under immense political pressure, and so will probably downgrade these countries by only one or two notches. The reality, of course, is that there’s not a country in the eurozone that should have a rating in the investment-grade range. Back on 25 November, I posted my suggestions for accurate ratings for the eurozone countries. We’ll see how close S&P comes to reality when they finally get around to cutting these ratings.

We have all the subassemblies ready to make up a new batch of chemistry kits, so it’s just a matter of getting them boxed up and ready to ship. I have a bunch of backorders to fill, and intend to ship all of those Friday.

Work on the biology book continues. Right now, I’m working on a lab session about the root, stem, and leaf structures of seed plants, with another session about reproductive structures in the on-deck circle.

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Sunday, 4 December 2011

09:55 – We’re back in stock on the chemistry kits, or at least we will be after Barbara finishes building the final subassembly this afternoon. We’ll start shipping backorders this week.

I finished up the lab session on mosses and ferns yesterday except for a few end-of-session questions, which I’ll do today. Then I’ll get started with a lab session or two on seed plants, probably leading off with gymnosperms and then segueing into angiosperms and monocot versus dicot structures. I hope to finish up plants this week or early next, and then move along to invertebrates (which is where I was thinking about dissecting a politician). By around the 26th I should be getting started on chordates.

And I see that there’s another failed EU summit scheduled for later this week. As usual, Merkozy are talking past each other. Sarkozy honestly believes that Merkel is going to open the German coffers and accept Eurobonds and an interventionist ECB, which she isn’t going to do. Merkel honestly believes that Sarkozy is going to yield French sovereignty over taxing and spending to German control, which he isn’t going to do. So the outcome is predictable. They’ll meet, argue, make zero significant progress, and then announce that they’ve agreed a comprehensive solution, when in fact they’ve agreed on nothing that matters. The markets will rejoice for a few days, believing that a real solution has been reached, until they realize that it’s the same-old-same-old. Eventually, Germany will probably announce that it intends to invade France, and France will surrender. Same-old-same-old.

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Wednesday, 30 November 2011

09:37 – It’s the last day of the month, and I’d scheduled the Fungi chapter to be complete today. I don’t think I’m going to make it, but I may come close.

13:24 – Good grief. The Fed, the Bank of England, and most of the world’s other major central banks are going to bailout the eurozone, with (of course) the US bearing a disproportionate share of the costs. Not that it will ultimately make any difference. The euro has a fatal design flaw, so all this latest initiative will do is kick the can down the road a bit farther. And, like all the other half-measures taken so far, the actual long-term benefit will be zero while the costs will be extraordinarily high. You can’t fix a rotten, collapsing old shack by slapping a fresh coat of paint on it, and euro makes that rotten old shack look like a concrete blockhouse.

In case it’s not obvious to everyone, this initiative has nothing to do with saving the euro, which is not savable. The only purpose is to kick the can down the road far enough to stave off the collapse until after the 2012 election. Obama is as cynical as they come. He’s obviously weighed the political cost to himself and the Democrats of committing hundreds of billions of dollars to an ultimately futile bailout of Europe and Europe’s banks against the political fallout if the EU collapses before the 2012 election and concluded that screwing US taxpayers is his best option. No surprise, I guess. That’s what he’s been doing since he was elected.

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Friday, 25 November 2011

09:44 – I got 28 sets of the hazardous chemical subassemblies made up yesterday, with about 90 minutes’ work. It was a nice break from writing. Barbara won’t be home until Sunday afternoon, so the remaining work involved in building those 28 kits will have to wait for the following weekend, but we will be ready to start shipping chemistry kits again the week of 4 December.

On the heels of Germany’s disastrous bond auction Wednesday, Italy held an even more disastrous bond auction yesterday, with yields averaging more than 7.2%. It’s now obvious even to the biggest euro proponents that investors–individuals, banks, and foreign governments–are no longer willing to risk their money in euro-denominated instruments. Death of a currency as eurogeddon approaches. If you have any assets in euro-denominated instruments or funds, get out now, today, while you still can. The collapse, when it comes, won’t be gradual. And it will come, sooner rather than later.

13:38 – It really is time for any sane person to get as far away from the euro as possible as quickly as possible. At this point, we’re talking about the euro becoming a smoking pile of rubble within weeks, if not sooner. Don’t be lulled by the idea that Germany might save the euro. In the first place, it won’t because it’s not willing to take on responsibility for the debts of the other eurozone countries. In the second place, even if it were willing to do so, it can’t. Even if Germany were willing to beggar itself to save the euro, it doesn’t have sufficient assets to do so. Nor will Germany form a currency union with Finland, Austria, and the Netherlands. Germany will ultimately have no choice but to revert to the D-mark. All of them, including Merkel, know this, and you can bet that Germany has been frantically printing new D-marks in huge quantities for the last several weeks, if not months.

Euro armageddon: David Cameron fills the sandbags.


15:03 – And I see that S&P just downgraded Belgium from AA+ to AA, which is preposterous. Not that S&P cut Belgium’s rating, but that it left it ridiculously high. The ratings agencies obviously didn’t learn their lesson after the Lehman crisis, during which they were still rating junk derivatives AAA literally days before they crashed. The same is true now for sovereign credit ratings. A credit rating is supposed to reflect the likelihood of a country defaulting on at least some of its debts. On that basis, only the US really deserves the top credit rating, because it will never default. It may inflate the hell out of the dollar, which amounts to the same thing, but it will pay off its debts in dollars, regardless of what those dollars are then actually worth. So, if you assume that the US deserves the highest credit rating among all the world’s countries, although that rating is in fact crap, where should the major EU countries be rated? Well, let me fix that for them, using the descriptions from Wikipedia:

UK: BBB (An obligor has ADEQUATE capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.)

Germany, Finland, the Netherlands: BB (An obligor is LESS VULNERABLE in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitments.)

France, Belgium, Austria: B (An obligor is MORE VULNERABLE than the obligors rated ‘BB’, but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments.)

Italy, Spain: CC (An obligor is CURRENTLY HIGHLY-VULNERABLE.)

I’m not sure why the three major agencies haven’t assigned these ratings to these countries, because that would reflect reality. It may be that the agencies, as usual, are behind the curve, or it may be that they are coming under immense pressure from the countries in question. Well, there’s no doubt they’re under intense pressure from the EU governments and the EU itself, but I’m not sure that fully explains their failure to assign accurate ratings. Note that, of this group, only the UK with its BBB rating can still be considered “investment grade”, and it’s teetering on the edge. Germany and all of the other nations rated BB or lower are actually “junk grade”. And, as we all know, changing a bond’s rating to junk causes all sorts of unpleasant things to happen, not least of which are mass sell-offs by banks and investment companies that are not allowed to carry junk bonds on their books.

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Wednesday, 23 November 2011

10:10 – Barbara took off this morning on a trip to Pigeon Forge, Tennessee with her parents, sister, and sister’s husband. They plan to spend several days going to shows and shopping at the outlet malls. They rented a Toyota handicapped-accessible van to make it easier to handle Barbara’s dad’s wheelchair. They’ll be back Sunday. I told Barbara I’d watch 20 or 30 episodes of Despicable Housewives while she’s gone and then tell her what happened when she gets back. The truth is, I probably won’t turn on the TV while she’s gone. I’ll work during the days and read during the evenings. Well, read and throw the ball for Colin. Over and over and over.

I’m still working heads-down on the biology book. I sent the protists chapter to my editor this morning, and am currently working on a chapter about fungi and lichens.

Meanwhile, during the last couple of weeks, the euro crisis has gone from desperate to catastrophic. Italy and now Spain are on the verge of needing bailouts to avoid defaults, and there’s no money there to bail them out. Belgium isn’t far behind, and France maintains its AAA rating in name only. The FANG nations are now the G nation, with Finland, Austria, and the Netherlands coming under the gun. The ECB has reached and passed its limit in terms of its willingness to buy Italian and Spanish bonds, and without that subsidy Italian and Spanish bond yields will skyrocket from their already-catastrophic 7% levels. Private investors are no longer willing to risk their money in sovereign bonds or private bonds from any EU country other than Germany, and they’ve begun to be leery even of German bunds. The IMF and the BRIC nations have basically told the EU that it’s on its own and it can’t expect any IMF/BRIC bailouts. The US has tossed diplomacy aside, told the EU not to expect any financial support from the US, and is now ordering the EU in no uncertain terms to DO SOMETHING. The trouble is, there’s really nothing to be done, and even if there were, Germany is not willing to pay for it. We’re watching the collapse of the eurozone and the EU itself, and the timeframe is now weeks rather than months. This is not going to be pretty.

13:42 – Oh, my. Forget what I just said about Germany being the last FANG nation left standing. Germany–Germany!–just suffered a failed bond auction. Germany offered €6 billion worth of bonds, but private investors were willing to buy only about 60% of them, leaving the central bank having to buy the rest. Granted, the interest rates were low, at about 2%, but even so. This was the worst auction of German bonds in the euro era. At this point, it’s clear that investors don’t want even German bunds, perceiving (correctly) that Germany is in deep, deep trouble.

14:38 – Actually, I think I will watch something while Barbara is away. We started watching the BBC series, Survivors, on Netflix streaming a couple of months ago, but we watched only the first episode. Barbara found it grim and depressing, and I could tell she really didn’t want to watch any more of it. But it’s still in our queue, and I should be able to get through the remaining 11 50-minute episodes while she’s away.

15:46 – Ah, I wondered how long it would be before this shoe dropped. After watching the concessions given to Greece, it was only a question of time before other bailed out nations demanded that kind of favorable treatment retroactively. The only thing I wasn’t sure of was whether it’d be Portugal or Ireland first. Well, it turns out to be Ireland. Can Portugal be far behind?

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Friday, 11 November 2011

09:01 – Even the scummiest of politicians will sometimes tell the truth when it suits his own agendum. So, it was with no surprise that I read Eurozone collapse ‘will send continent into depression’

According to no less than Jose Manuel Barroso, the president of the European Commission, a collapse of the eurozone would instantly wipe out half the value of the eurozone’s economy, plunging Europe into a deep depression, the likes of which haven’t been seen since the 1930’s and reducing living standards to Latin American levels. Barroso has his own agendum, of course, which, as always, is “More Europe”. As with all statists, his motto is Never Waste a Good Crisis. And, in fact, he exaggerates. Living standards in the southern tier, including his own country, may in fact fall by 50% or more, but the effects on the FANG nations will be considerably less severe.

Someone asked me the other day why I am more optimistic about the future of the US, UK, Canada, Australia, and New Zealand than I am about the rest of the world, including other first-world countries that use other languages. Two reasons: first, and the importance of this should not be underestimated, we speak English, which is demonstrably superior to all other languages. As a rough guide to relative usefulness, I suggest cubing the ratio of the number of words in the English vocabulary to that of the comparison language. Second, and even more important, our women have equal rights and responsibilities. We don’t waste half our population. Of course, that’s also true of Europe, particularly northwestern Europe, but they have saddled themselves with inferior languages, which limits their competitiveness.

Still, Europe is in wonderful shape compared to most of the rest of the world, where women are treated at best as less-than-a-man and more commonly pretty much like livestock, if that well. (A woman, of course, is often cheaper than a cow, and easier to replace.) This situation applies throughout the entire islamic world, India, nearly all of Africa, and much of Asia, Central America, and South America. It’s no wonder that these are all third-world countries, and doomed to remain so.

And yet, people are often surprised to learn that I consider myself a feminist. In truth, I’m an elitist. I value hard-working competent people above others. I have no use for people who are lazy or incompetent, or both. If people are hard-working and competent, I don’t care what color their skin is or whether they pee sitting down or standing up. And I think that attitude is common in the first world and rare otherwise.

Work on the biology book continues. I’ve finished three microcosm lab sessions, leaving only one on observing Winogradsky columns in the to-do pile. Today, I’ll jump to a different topic altogether, although I’m not sure which one.

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Thursday, 10 November 2011

09:02 – I’m so busy and the euro situation is so hopeless that I’m not going to bother to write about it any more. Merkozy are now talking openly about the breakup of the euro and the EU itself, and they’re talking about it as though it’s likely to occur sooner rather than later. Italian bond yields spiked to 8.1% yesterday, which is far past the point of no return. The 7% threshold is very real psychologically for the markets; once yields reach 7%, investors write off the issuer as so likely to default that it’s simply too risky to invest. That in turn causes bond yields to increase further in a vicious circle. So, Italy is gone, which means Spain and then France won’t be far behind. There’s nothing that can be done to stop the collapse–short of the ECB turning on the printing presses, which they’re not going to do–so it’s pointless to continue discussing it. The patient is brain-dead.

Work continues on the biology book. I’m doing a lab session right now on the effects of pollution on succession in microcosms. What fun. Build a tiny little world and then poison it. Forced selection and survival of the fittest.

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Wednesday, 9 November 2011

07:18 – So, how do I know when I’ve been writing too long? Here’s an example. By late afternoon yesterday, I was getting pretty tired, after more than eight hours of heads-down writing with only a few short breaks to walk Colin. I was writing a lab session about succession in pond-water microcosms, giving a detailed procedure for observing and documenting the microorganisms present in various parts of the microcosms. I mentioned adding a drop of methylcellulose, which is added to water to reduce the motility of some organisms. I actually found myself writing this sentence: “Some of these little fuckers are FAST.” (I actually intended to write “suckers” but I apparently experienced a Freudian slap.)

Now, it’s true that we’re often complimented on our informal writing style, but I thought that was a bit too informal even for us. After thinking about it, I left the sentence as is for then and decided to knock off for the day. I’ll fix it this morning.

08:34 – Ruh-roh. When I checked Italian bond yields this morning, I found they’d already touched 7.4% and seem likely to continue climbing. That’s very, very bad for a country that has about $3 trillion in outstanding sovereign debt, with about a sixth of that coming due in the next twelve months. About the only good thing that can be said is that, at six or seven years, Italy’s average maturity is longer than average for the eurozone. Still, there’s no way it’s sustainable to have to finance half a trillion dollars a year at the current rates Italy has to pay.

The fear all along, of course, has been that Italy is “too big to bail” and that fear is about to come home to roost. The ECB is legally prohibited from helping. In fact, their purchases of Italian and Spanish bonds are illegal, and the ECB is getting very nervous about that. Nor can the EFSF “bailout fund” help. Although it’s usually reported as having a €440 billion war chest, the fact is that it doesn’t really have any money to speak of. In terms of actual cash in the bank, it might have €4 billion. The remainder is in the form of promises from EU governments to commit funds to the EFSF. And one of the major guarantors of the EFSF is–you guessed it–Italy. Other EFSF guarantors include such already-bankrupt nations as Spain, Portugal, Ireland, and … Greece. The only currently-solvent nations backing the EFSF to any significant extent are France–which itself is likely to a bailout candidate–and Germany. In effect, the EU nations are cosigning loans to themselves.

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Monday, 7 November 2011

08:03 – The Netflix Fairy, AKA our friends Mary and Paul, showed up this morning and left Sons of Anarchy S3D4 at our door.

For the last three months, the ECB has been buying worthless eurozone sovereign bonds, nearly all Italian but some Spanish, at a rate of $40 billion to $50 billion a month. Despite that, bond yields have continued to climb. This morning, Italian bond yields touched 6.7%, just short of the 7% level that toppled Greece, Ireland, and Portugal into receivership. On the current trajectory, Italian bond yields should pass 7% in the next week or two.

There’s nothing magical about that 7% number other than its effect on market sentiment. If history is any guide, once Italian yields hit 7% we’ll enter a vicious circle, with higher yields causing panic and panic causing still higher yields. If (when) Italian yields hit 7%, don’t be surprised if they rapidly begin skyrocketing into the 10% and even 15% range. At that point, Italy quickly loses all access to the markets, because no one considers yields in that range to be sustainable. And the ECB is dropping loud hints that its patience is about exhausted and it will soon stop buying Italian bonds. Without that prop, yields will skyrocket even faster. Once it becomes obvious that Italy cannot survive without being bailed out, it really is game over for the euro.

09:56 – I’m investing in tinned food, a shotgun and a farmhouse on a remote Scottish island. We’re all doomed. This guy may be exaggerating, but not by much.

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