Category: politics

08:16 – The G20 conference ended in failure as far as the EU was concerned, with the other nations telling the EU that they wished them well but they were going to have to come up with the money themselves to bail out the euro. The problem with that is that the EU simply doesn’t have the $3 trillion to $5 trillion it needs, just for a start, to bail out Italy, Spain, and France, not to mention the other smaller nations that are under threat. Meanwhile, while the G20 was sitting around the table discussing what emergency measures to take to save Italy from collapse, Berlusconi fell asleep. Twice.

The other G20 nations pushed for the European Central Bank to address the crisis by monetizing the debt by printing euros. Lots of euros. Euros by the ton, literally. At this point, the only solution, bad as it is, that anyone can see is for the ECB to inflate the euro dramatically. But the ECB is having none of it. And they’re right, if not in the short term, certainly in the medium- and long term. At this point, the eurozone is going to take a huge economic hit no matter what happens, as will, to a lesser extent, non-eurozone EU countries, and, to a lesser extent still, the rest of the world. Right now, all the arguing is about who is going to take how much of that hit, and how.

The takeaway lesson from all of this is that government and the economy is too important to be left to the politicians, nearly all of whom are, at best, mediocrities. That’s why we need strong Constitutional protections that will handcuff the politicians, limiting the damage they can do. A rigid balanced-budget amendment that makes no provision for exceptions, including in time of war, would be a good start.

08:58 – Greek Prime Minister George Papandreou is being universally reviled for doing the right thing: calling for a referendum to allow the Greek people to decide their future. Merkozy are spitting nails right now, because Papandreou has just thrown a gigantic monkey wrench into the save-the-euro plan they came up with at their failed summit last week.

The real problem, of course, is that the EU wrote off Greece long ago as unsalvageable. Their plan has nothing whatsoever to do with helping Greece; it’s all about helping Greece’s creditors, many of whom are German and French banks. Whether or not the plan goes forward, Greece is toast. In either case, Greece faces literally decades of economic disaster and human suffering.

Calling for a referendum really is a stroke of genius. At this point, Papandreou has basically called the EU’s bluff and, at the same time, shifted responsibility for the decision from his own government to the Greek people. It almost doesn’t matter if the referendum is actually held or, if it is, what the outcome is. It is, if not win-win for Papandreou, at least a less-lose either way. The ideal outcome from Papandreou’s point of view would be for the EU to write off Greece’s debts without requiring the austerity measures that they have so far demanded. I have no doubt that that’s one of the options that Merkozy will be discussing during their emergency phone conference today. Alas for Greece, I don’t think that’s what’s going to happen.

I think what’s more likely to happen is Merkozy deciding to drop Greece like a hot potato, even if that does make a chaotic Greek default almost certain. Make no mistake. Right now, Angie and Nick are seriously pissed. From their point of view, they held out an olive branch to Papandreou and he just shit on them. There are so many players involved, not least the IMF, that it’s difficult to predict short-term outcomes, but I think it’s even possible that the EU/IMF/ECB will decide to withdraw the sixth aid tranche that was to be paid to Greece in the next couple weeks.

That would, of course, immediately topple Greece into chaotic default, but ultimately it won’t matter. Merkozy certainly understand by now that that outcome is inevitable, so from their point of view the only real question is whether it’s worth buying a few more weeks before they have to deal with the fallout. Ultimately, the aid payments are just paper shuffling anyway. Each of the bailout payments is simply an accounting transfer from the bailout fund to Greek creditors. Why not take Greece out of the loop entirely and simply make those transfers directly to the creditors? Or, more specifically, why not simply have the German government make bailout payments to the German banks who have Greek payments due, the French government make payments to French banks, and so on? The EU governments, the IMF, and the ECB also hold Greek debt, but you can be sure they’re first in line to be paid, and Greece cannot afford to default on those debts if it ever wants to be able to borrow again before the 22nd century. Of course, that leaves non-EU creditors without anyone to pay them. Too bad. So sad.

09:43 – Rule, Britannia! Believe it or not, the Home Fleet is now down to zero vessels. The once-proud Royal Navy, which within living memory deployed huge battleships, battle cruisers, and aircraft carriers by the dozen, is unable to come up with even a tiny destroyer or frigate to protect home waters.

08:49 – Well, as expected, the crisis summit today has turned into a complete fustercluck. Not only is there zero chance of comprehensive actions to address the euro crisis, the participants can’t even agree about what to argue about. And, oh by the way, the Italian government is teetering on the brink of collapse, mainly because of German demands that Italy increase retirement age to 67, as Germany has done. Collapse of Italy’s fragile coalition was narrowly averted yesterday, but it looks like Berlusconi is on his way out, and sooner rather than later. If that happens, it could be months before Italy again has a functioning government.

The collapse of Italy’s government would eliminate even the slightest mathematical chance of saving the euro and the EU. Even with the ECB buying Italian bonds, yields on those bonds are now above 6%, the catastrophic level that convinced the ECB to intervene in the first place. And Italy has to rollover €250 billion worth of bonds over the coming year, just to stay even. Even with a functioning government, it’s extremely unlikely that Italy could sell €250 billion of bonds over the next year no matter how high the yields. If the government collapses, there’s no question that Italian bond sales will also collapse, leaving Italy with no way to pay off maturing bonds. In other words, Italy will default, joining Greece, Ireland, and Portugal. The EFSF bailout fund is insufficient even to cover expected losses on Greece, let alone Ireland and Portugal. If Italy joins the group of bankrupt nations, there is zero hope that it can be bailed out. And it’s looking likely that Italy will join that group in the next few months, if not the next few weeks.

12:31 – Barbara sent me a link to this forensics blog, which looks very interesting. The author, Tom Adair, is a retired forensics guy with 15 years of experience. Unlike most of the forensics sites I follow, which are intended for forensic scientists and technicians, this blog is targeted at fiction authors and readers. I’ve only looked at half a dozen random articles, but it appears that this guy knows what he’s talking about. If you have any interest at all in real crime-scene investigation and criminal forensics, check out this blog.