In The Heart

I was reading the reviews of Spengler's new book How Civilizations Die: (And Why Islam Is Dying Too) and came across this interesting bit:

David Goldman's book is hard to summarize, perhaps because it is so thought-provoking. It is also full of data which you have probably never seen before.

The most startling data describe what might be the impending collapse of the Iranian theocracy. It has been a complete failure in every direction, and even the mad, evil Ahmadinejad can see the handwriting on the wall. After thirty years of religious tyranny, it turns out that a mere two percent of Iranians attend mosque on Fridays. The birthrate has plummeted --- the steepest drop in fertility known to recorded history. Prostitution is pandemic, with a huge number of prostitutes being women who passed the university entrance exam, or who are actually studying at the university. They sell themselves not out of desperation but out of greed. Drug addiction now has hit 5 million men, among the work-force which is 35 million strong. Rumor has it that the Big Turbans on top of this seething volcano are now grabbing everything they can before their number is up, with billions of dollars disappearing from Iranian banks.

Gee, maybe Grandpa was right: "Religion is in the heart. It cannot be forced upon the people. You find the love within God, and with that love, you cherish life."

What is even more startling is that this is only the worst case in the Muslim world --- all of the oil-importing Muslim countries are facing disaster, with Egypt as a prime example: 80 million very backward people who need to buy half their bread from abroad. Well, tourism in Egypt is dead, for some STRANGE reason, and that foreign exchange has disappeared, and the price of wheat is going up up up as the Chinese, Koreans and Japanese buy more and more. We may well be looking at a desperate famine situation within twelve months.

I think that is exactly right. People have to find their faith. It can't be forced on them.

I didn't find my faith until I was in my late 20s. A big part of the reason is that I had a very difficult childhood due to the alcoholism of my father. But it was quite understandable in retrospect. His mother beat him. Badly. He often recounted an incident where she threw a meat axe at him. Very lucky for me - he ducked.

I'm not much of a believer in religion (in case you hadn't noticed). I think its effects are generally pernicious because religion is about power and power structures. Besides, I don't need faith. Why should I? I have experience. The Maker talks to me. And what has he been telling me?

He told me to start having children (I was 38 at the time and my mate was 34) not quite in Abraham/Sarah territory but still. We have 4 children.

1. An artist
2. UChicago graduate (with honors) in the Russian language
3. An Electrical Engineer
4. A Chemical Engineer

Not a lot of children to be sure. But way more than the average high tech geek. I couldn’t be happier about the advice. Especially since I was sure at age 30 that I would never have a family.

Every man (and woman) has to find his own way. It would be more than helpful in that respect if government would get out of the way. We will never have a moral nation with government forcing morality down people's throats. The example of Iran is very instructive in that regard. Forcing is counter to the best of the Judeo-Christian tradition. It must come from the heart. And heart is something government is not well known for. I'd like to see more Christian compassion and a lot less (Pharisee like) "the law is the law." Maybe for murder and theft. But extending that to what people eat, drink, and smoke - very unwise.

Cross Posted at Classical Values

To Tell The Truth

Them crazies at Zero Hedge are at it again. The head of UniCredit global securities Attila Szalay-Berzeviczy had this to say:

"the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.”

The Zero Hedge guys have it pegged: Welcome to the Apocalypse...

The Zero guys have more at the link. Batten the hatches boys because we are in for a hell of a storm.

Cross Posted at Classical Values

Taking Out Insurance

Lloyd's of London is pulling cash from European banks.

First it was US money markets; then it was various European industrial concerns (which somehow double down as banks); then it was China; now the bank runs shift to insurance institutions when, as Bloomberg reports, Lloyd's of London has decided to pull peripheral Euro bank deposits. What next: complete collapse of European interbank market as bank runs become a daily thing at both the retail and institutional level? Well, we already anticipated that. But it is something totally different to see it happen in practice.

From Bloomberg: "Lloyd’s of London, concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution. "“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.” Lloyd’s, which holds about a third of its 2.5 billion pounds ($3.9 billion) of central assets in cash, has stopped depositing money with some banks in Europe’s peripheral economies, Savage said, declining to name the countries or institutions. “We have a very conservatively positioned balance sheet,” Savage said. Lloyd’s also holds about a third of its assets in mainly U.S. and U.K. government bonds and a third in corporate bonds, he said." As usual, the biggest threat for European banks are not short sellers, not even naked CDS traders: it is precisely this - a deposit run, which saps the liquidity lifeblood out of any bank, hence making its collapse a matter of time.

"Europe" is coming apart at the seams.

Cross Posted at Classical Values

Pounding The Pound

Reader Chuck left a link at my post Reality Check to Zero Hedge that is rather interesting.

As we pointed out last week, nobody cares about either Greece or the PIIGs any more. The focus among the smartest money out there, in the face of CDS traders, for the third week running, is on the core of Europe, and specifically on the UK. Last week the net notional derisking in UK was a massive $1,063 million in 280 traded contracts, which according to our files is the single biggest one week derisking amount on record. all the Greek "speculators" are now focusing their attention squarely on the UK... and France, which came in second with $384 million in derisking. Incidentally, these two represented the greatest amount of of derisking in all top 1000 CDS reference names (third altogether was not surprisingly Goldman Sachs with $256 million). The bet is now squarely on that the PIIGS contagion will move to the UK, and that France will also not be spared.

Despite what you hear about the economy of the US improving it is my opinion that we are not out of the woods yet. Not by a long shot.

If one studies the history of the Great Depression one finds that there were a number of false dawns. The #1 rule of the universe is that if something is unsustainable it will not be sustained.

BTW the comment section at the very first link above is most interesting and amusing. I had more than a few LOLs reading it.

Running Out Of People

Are we actually running out of people? No. What we are running out of is a certain kind of people. Mark Steyn in a column from this past February explains. He puts it in terms of the Greek crisis.

What's happening in the developed world today isn't so very hard to understand: The 20th century Bismarckian welfare state has run out of people to stick it to. In America, the feckless insatiable boobs in Washington, Sacramento, Albany and elsewhere are screwing over our kids and grandkids. In Europe, they've reached the next stage in social democratic evolution: There are no kids or grandkids to screw over. The United States has a fertility rate of around 2.1 – or just over two kids per couple. Greece has a fertility rate of about 1.3: 10 grandparents have six kids have four grandkids – i.e., the family tree is upside down. Demographers call 1.3 "lowest-low" fertility – the point from which no society has ever recovered. And, compared with Spain and Italy, Greece has the least-worst fertility rate in Mediterranean Europe.

So you can't borrow against the future because, in the most basic sense, you don't have one. Greeks in the public sector retire at 58, which sounds great. But, when 10 grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?

By the way, you don't have to go to Greece to experience Greek-style retirement: The Athenian "public service" of California has been metaphorically face down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book "America Alone," I put the Social Security debate at that time in a bit of perspective: On 2005 figures, projected public pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent: in other words, head for the hills, Armageddon outta here, The End.

Well you should go and read the whole thing. Mark has a way with words.

Unions Declare War On GM

In an effort to keep their jobs some unions in Europe have declared war on General Motors. They claim that GM declared war on them first.

BERLIN (AP) -- Employee representatives at General Motors Co.'s Opel unit on Friday slammed the automaker's announcement it would cut 8,300 jobs and close its plant in Belgium as a "declaration of war" on European workers.

Armin Schild, head of the IG Metall union in Frankfurt and a member of Opel's board, criticized GM for lacking a clear and thoroughly financed restructuring concept, the DAPD news agency reported.

"Now, GM is apparently off on the next horror trip," Schild said.

He criticized GM for mismanaging the company for 15 years and called the planned closure of the site in Antwerp, Belgium, "a declaration of war against all European Opel employees."

Opel CEO Nick Reilly announced on Thursday that the company will cut 8,300 jobs across Europe, including 4,000 in Germany, and close the plant in Antwerp -- casualties of the "tough reality" of a shrinking European auto market.

Of course. Declaring war on your employer is always a smart move. A smarter move would have been to ask Obama to bail them out. After all he is very popular in Europe.

Old History

Not really old history just forgotten according to history Professor David Kaiser.

How did he get people on his side? He did it by promising jobs to the jobless, money to the money-less, and rewards for the military-industrial complex. He did it by indoctrinating the children, advocating gun control, health care for all, better wages, better jobs, and promising to re-instill pride once again in the country, across Europe , and across the world. He did it with a compliant media – did you know that? And he did this all in the name of justice and change. And the people surely got what they voted for.

You know who he is talking about. And if you don't read the essay.

It is obvious we are far down the road when Congress Critters vote in favor of a bill they are not allowed to read.

You may find Professor Kaiser's book, The Road to Dallas: The Assassination of John F. Kennedy of interest.

Cross Posted at Classical Values

Euros Balk On Climate Agreement

The Euros are balking when it comes to paying to prevent climate change. As if restricting the output of plant food could actually accomplish that goal.

Environmental campaigners slammed Europe’s governments tonight after latest talks to settle funding levels for climate change broke down without agreement.

The European Commission has put a price of up to £14 billion a year on the EU’s contribution towards the cost poor countries will face meet a global climate change deal.

But talks between EU finance ministers failed to agree figures today.

Swedish finance minister Anders Borg, chairing the talks, said afterwards: “There was a disappointing failure to reach agreement on climate financing today. The lack of conclusion was disappointing - but it doesn’t mean we won’t find a solution.”

EU environment ministers will try next — but all eyes are on an EU leaders’ summit in Brussels at the end of the month to deliver an accord on funding with little over a month before the EU goes to Copenhagen hoping to present a united environmental front to the rest of the world..

Greenpeace EU climate policy director Joris den Blanken said: “Today’s EU fiasco has made the chance of failure in Copenhagen very real.

Good news for the people who would actually have to pay for this stuff. You know the former darlings of the socialists. The Workers. Who seem to have become a liability.

Evidently the workers are putting up a fight.

Nine of Europe's poorer countries, led by Poland, demanded their own economic circumstances be taken into account before the EU agrees up to 15 billion euros ($22.5 billion) in financial aid for developing nations.

Developing countries say they cannot cut emissions and adapt to changing temperatures without help from industrialized nations, which grew rich by powering their industries with hydrocarbons and polluting the atmosphere.

Earlier, India's Environment Minister Jairam Ramesh rejected an Indian newspaper report that he was willing to drop a long-standing demand for foreign aid and technology as the price for accepting international curbs on India's rising emissions.

Dropping such a link would have been a big concession for the December 7-18 U.N. climate conference in Copenhagen. India is the fourth biggest emitter behind China, the United States and Russia.

Ramesh said in a statement India would agree to international monitoring of emissions "only when such actions are enabled and supported by international finance and technology."

The 190-nation U.N. talks are bogged down over how to share out greenhouse gas curbs between rich and poor nations as part of an assault meant to avert ever more heat waves, rising sea levels, floods and more powerful storms.

Ah yes. Well things are looking bad indeed. Except for one small point. Temperatures are not rising. They are falling.

Global satellite data is analyzed for temperature trends for the period January 1979 through June 2009. Beginning and ending segments show a cooling trend, while the middle segment evinces a warming trend. The past 12 to 13 years show cooling using both satellite data sets, with lower confidence limits that do not exclude a negative trend until 16 to 22 years. It is shown that several published studies have predicted cooling in this time frame. One of these models is extrapolated from its 2000 calibration end date and shows a good match to the satellite data, with a projection of continued cooling for several more decades.

Evidently there is no rush to curb emissions of plant food. We have time to study the matter further and come up with economical fixes if a fix is even needed.

Cross Posted at Classical Values

The Right Says No To Bailouts

Yep. The right is up in arms about the cost of bailouts. In Europe.

BRUSSELS – Conservatives raced toward victory in some of Europe's largest economies Sunday as initial results and exit polls showed voters punishing left-leaning parties in European parliament elections in France, Germany and elsewhere.

Some right-leaning parties said the results vindicated their reluctance to spend more on company bailouts and fiscal stimulus amid the global economic crisis.

First projections by the European Union showed center-right parties would have the most seats — between 263 and 273 — in the 736-member parliament. Center-left parties were expected to get between 155 to 165 seats.

Right-leaning governments were ahead of the opposition in Germany, France, Italy and Belgium, while conservative opposition parties were leading in Britain and Spain.

Mr. Obama might want to keep that in mind. If people don't see results commensurate with expenditures his party will be in trouble. No matter how much patronage Obama has bought at Government Motors.

Cross Posted at Classical Values

I'm Here To Spread Panic

And why not? Europe is headed for the rocks. And it appears that there is nothing that can save it. The rocks are Eastern European debt.

If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.

Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.

"A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.

The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East.

So let me see are the banks the Russians or the Germans? Would it make a difference?

Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.

Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble.

"This is the largest run on a currency in history," said Mr Jen.

In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.

And just a while ago the Russians were doing so well. They were making money faster than their elite could steal it. But all the oil producers are in the same fix. Not enough buyers in the market. Too many sellers.

And Europe on the hook for American and Eastern European debt? Priceless.

The real question though is this: why didn't any of the oil producing countries see a threat to their economies when oil went from $100 a bbl to $150 a bbl? And another question. Why is the US Congress restricting drilling in the US which would help stabilize oil markets?

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.

They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).

Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.

Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.

The Europeans have an excellent system for maintaining the value of their currency. They contract their money supply when their economies turn south (well at least some of them do that). However, that makes them vulnerable to countries that are inflating their money supply (the USA) because they then lose production to the lower cost suppliers. Further weakening their economies.

"There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU."

It all comes down to this: civilization runs on energy. The higher the cost of energy the less the civilization. So I'm hoping America will do something serious on the energy front. Drill for oil, build more nukes, add more refineries, build a HV DC backbone across the US for electricity, get serious about fusion research. Something.

Because - until we lower the cost of energy we are (at least for a while) going to have to do less with more. Never a cheery prospect.

Why hasn't Polywell Fusion been funded by the Obama administration?
Bussard's IEC Fusion Technology (Polywell Fusion) Explained

H/T Instapundit

Cross Posted at Classical Values

Israel Gets A New Government

According to the Jerusalem Post the new Prime Minister will be Binyamin Netanyahu.

A day after Kadima leader Tzipi Livni and Netanyahu each declared victory in Tuesday's election, they both began a race against time to form a coalition on paper before President Shimon Peres started the process of appointing one of them to build a government next week.

Netanyahu and Livni both met with the leader of what has become the third largest party, Israel Beiteinu's Avigdor Lieberman, in an attempt to woo him. But Lieberman raised several demands that either prime ministerial candidate would have a hard time accepting.

Livni appointed a coalition negotiating team of five top Kadima ministers and MKs and the party will continue with its political horse-trading in an effort to persuade Peres to let Livni form a government.

But privately, senior Kadima officials said they were well aware that Peres would ask Netanyahu to form a government because of the Right bloc's 65-55 advantage over the Left, and that if Likud offered Kadima a sweet deal, they should take it.

In parliamentary politics coalitions are made after elections. In American politics coalitions are made before the elections. I like our system better. It may just be because it is what I know.

What are the geopolitical implications? Europe and Israel have moved to the Right, America to the left. In other words the frictions in international politics will continue.

Europe Takes A Dump

The EU Referendum has the details in a piece called Oh Shit.

"We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars."

This is Ambrose Evans-Pritchard giving his take on the fast unravelling crisis in Germany. Mind you, The Times is not much more encouraging and Euronews is citing an IMF spokesman saying that the Eurozone is facing its first "trial by ordeal".

Clearly, the "colleagues" see the danger. The Independent is reporting: "EU leaders tear up rules of eurozone". The headline is misleading as it seems to apply to the whole of the EU. The story tells us that: "Public spending curbs and rules against state subsidies will be thrown – temporarily – out of the window to rescue European banks from the abyss of the global financial crisis."

The EU guys have more with links. Give them a visit.

Bloomberg says the dollar is doing good against the Euro.

Oct. 6 (Bloomberg) -- Treasuries rose for a fourth day, sending two-year notes to their longest winning streak in six weeks, as stocks fell and European bank rescues added to evidence a global credit crunch is deepening.

Investors sought the safest assets as European governments rushed to shore up their faltering financial systems, pushing yields to a two-week low. Germany's government and financial institutions agreed a 50 billion euro ($68 billion) rescue package for Hypo Real Estate Holding AG and BNP Paribas SA joined a state-backed bailout of Fortis, Belgium's largest financial services company.

``The flight to quality into Treasuries is still king as we now see the financial crisis hit Europe at full scale,'' said David Schnautz, a fixed-income strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``Treasuries are the overall safe haven.''

Big surprise there considering the state of the U.S. economy. I guess our consolation prize is that Europe is in much worse shape. It is a case of our central bankers being morons and theirs being idiots.

Nationalizing Banks

In Europe. And you thought we had it bad in America.

The Dutch-Belgian bank Fortis, Britain's Bradford and Bingley, and Iceland's Glitnir, were all partially or fully nationalized after failing to roll-over debts in the short-term money markets, while the French state pledged support for the Franco-Belgian lender Dexia after the share price collapsed on reports of a capital shortage.

"The European financial sector is on trial: we have to support our banks." said French President Nicolas Sarkozy. He has reportedly ordered the state investment arm Caisse Des Depots to shore up Dexia, even though the bank is based in Belgium.

Germany's Hypo Real Estate, a commercial property lender, was rescued with a €35bn lifeline from a consortium of local banks. The lender has $560bn in liabilities, almost as much as Lehman Brothers.

Not only that money from Europe is rolling into America. Why? Look at some of the other problems in Britain alone.

Mortgage lenders were warned by the City watchdog on Tuesday to batten down the hatches and brace for “very difficult” market conditions next year as at least 1.4m homeowners face a sharp jump in loan repayments.

The Financial Services Authority said that there was “a very real prospect that conditions will worsen further into next year, in terms of both liquidity and credit risks”.

The bleak warning from the FSA comes as pressure builds on the Bank of England to cut interest rates as it prepares to meets for its monthly meeting.

Fresh evidence from Halifax, the country’s biggest mortgage lender, showed that the rate of the slowdown in the housing market is quickening. Last month prices fell by 1.1 per cent twice the rate of the previous month. The annual rate of growth fell to 6.3 per cent.

Halifax said the drop was the biggest monthly fall since last December and the first time it had recorded three months of consecutive falls since 1995.

So lets have a look at the Dollar vs the Euro.

The dollar mounted an explosive rally in the third quarter, persuading some investors that its long decline had finally touched bottom.

By late September, however, as markets grappled with the immensity of the U.S. financial crisis, the buck was back under pressure. It managed to finish the quarter on a high note, surging 2.6% against the euro Tuesday from a day earlier amid signs of turmoil in European banks.

Over the course of the quarter, the dollar strengthened 11.8% versus the euro, rallied 12% against the British pound and was little changed versus the Japanese yen. It was the dollar's best quarter against the euro since the European currency's inception in 1999 and the best against the pound in at least a decade.

Measured against a broad range of currencies in a Federal Reserve index, the dollar gained about 5% from the end of June through Monday, putting it back at levels that prevailed a year ago.

Still, problems may lie ahead. The size of the U.S. government's proposed bailout package and the numerous interventions by the U.S. Federal Reserve could hurt the dollar in the months and years to come.

A 2.6% rise in one day is pretty spectacular and indicates just how bad Europe's problems are.

So how bad is the mortgage crisis in Europe? Pretty bad.

The weekend’s events have highlighted European fragility in the financial crisis, note Citigroup analysts. In the UK, the eighth biggest mortgage lender (in terms of mortgage lending in 2007) has been nationalised. In all, four of the top 10 mortgage lenders have now been nationalised or required an emergency rescue since mid-07.
A major Benelux bank has required a public sector bailout, with the governments of Belgium, the Netherlands and Luxembourg jointly taking a 49% stake.
In Germany, the German government and a consortium of banks provided EUR35 bln to a large German Bank that is specialized on real estate and government funding.
In Denmark, trading in the shares of a small bank was stopped on Friday after the failure of one of the bank’s large customers, a property speculator, and the bank was sold over the weekend. In total, six minor Danish banks have now been sold/merged or bailed out by the state so far in recent months.

European house value erosion
Although each of these cases has particular features, they are not isolated events. Rather, they are symptoms of Europe’s major vulnerabilities to the credit crunch, note Citigroup analysts. These vulnerabilities stem from the large rise in corporate and household debt in recent years, international linkages, and the banking sector’s relatively low overall cushion of capital and underlying profitability.

Although the overall European housing boom has been smaller than that in the US, the surges in house prices in some countries – notably the UK, Spain, Ireland and France – have all exceeded the US so far this decade. In turn, house prices are now flat or falling across most European countries, with adverse economic and financial effects. The drop in house prices is causing weakness in housebuilding (especially in Ireland, France and Spain), adverse wealth effects on consumers (especially in the UK, Spain and Ireland) and widespread erosion of the value of mortgage collateral on lenders’ balance sheets. But, whereas the US housing adjustment has been underway for over two years, the European housing adjustment has only started last year. Most of the decline in European house prices probably still lies ahead.

Uh oh. What does that mean? While the US is coming out of the problem Europe is still in the middle.

So where am I on this? I have instructed my Congressman, Don Manzullo, to vote no on the bail out unless the Community Reinvestment Act which is at the core of the American mess gets fixed.

Cross Posted at Classical Values

War Between Germany And Poland

Is it 1939 all over again? No. Far from it. What we have is a much milder variety. What we have is a nudist war.

On the one side white bottoms burn in the sun. On the other side conservative swimming trunk-wearers turn up their noses at the naked beachgoers.

Now a heated argument has broken out between the exhibitionist Germans and the prudish Poles.

For the last fifty years sun-loving Germans have been preserving their naturist traditions from Ahlbeck (Mecklenburg-Vorpommern) to Swinemünde.

But following the Schengen agreement in December 2007 the fence separating the German and Polish parts of the beach was removed.

Now German nudists are battling the Poles for their freedom to prance around naked in the sun.

"It's ridiculous" said Swinemündes minister Edward Zajac. And Anja (28) from Poland, who clearly think the German nudists are real swines, said: "It's horrible. We would never bathe naked - we are Catholic."

Evidently the integration of Europe is not going quite as swimmingly as is generally portrayed in the news.

According to the story some Poles are offended and some just want to watch. Let us hope the Poles and Germans can come together and put an end to this friction.

Cross Posted at Classical Values

Ask The French For Help

Nick has left an interesting comment on my error in the post Blazing Economies.

Seems to me the difference won't matter once the winter comes and the Russians shut the lights off on Germany.

I seem to recall that Secretary of State Rice warned the Europeans about getting too deeply dependent on Russian Energy supplies. Well what do you know? I recalled correctly.

ANKARA, Turkey, April 25 [2006 ed.] -- Secretary of State Condoleezza Rice on Tuesday warned Greece and Turkey against allowing Russia to obtain a monopoly over Europe's supply of natural gas, implicitly bolstering a planned pipeline from Azerbaijian that would weaken Russia's tight grip on European energy supply.

"It's quite clear that one of the concerns is that there could be a monopoly of supply from one source only, from Russia," Rice told reporters in Athens after meeting with Greek Foreign Minister Dora Bakoyannis.

Rice waded into the battle over the increasing dominance of Russia's state-owned energy giant Gazprom -- which recently sought a stake in a Greek-Turkish pipeline -- even as she sought to build support in Greece and Turkey for sanctions against Iran concerning its nuclear program.

Her trip to Athens was the first independent visit to Greece by a secretary of state in two decades. As she met with Bakoyannis, about 3,000 protesters marched with signs calling Rice a war criminal and urging her to "go home," and some youths clashed with riot police.

And who do they expect to defend them if the Russian Bear comes calling? I guess they couldn't see that far ahead. Fortunately, America has an administration with a little foresight.

What do you want to bet that the Euros ask for another American division to protect their sorry asses? I suppose we could just tell them we are busy. Ask the French for help.

Cross Posted at Classical Values

Blazing Economies

It is interesting how the US news media describes the German economy of the last year.

The Italian economy, chronically stagnant over the last decade, shrank in the second quarter by 0.3 percent, according to the government data.

Another quarter of decline would mark the country’s fourth recession — defined as two consecutive quarters of negative growth — in a decade.

More bad news appears increasingly likely this coming week in the form of data on growth in Germany and the 15-nation euro area.

Many economists believe the German economy, the engine of the region, may have contracted in the second quarter after blazing ahead by 1.5 percent in the first three months of the year. Much of that growth reflected technical factors like construction projects that will not be repeated. But the European Central Bank said Thursday that the fall-off in growth also stemmed from higher energy prices and cooling demand for German exports worldwide.

Got that a 1.5% growth rate in Germany is described as blazing.

And how has the growth rate the US been described lately?

'The fact that there was technical growth in GDP in no way alters our view that the economy has fallen into recession,' Bear Stearns (nyse: BSC - news - people ) economist John Ryding said in a research note.

'Indeed, the popular definition that a recession is two or more consecutive quarters of negative GDP growth is not used by the National Bureau of Economic Research (NBER) in dating recessions,' he pointed out.

The NBER is considered the official arbiter of recessions and defines the R-word this way: 'A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.'

In a 2001 paper, the NBER said it 'gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions'. In fact, NBER considers job and income growth more important than GDP.

Although there were two quarters of negative growth in 2001, those quarters were not consecutive. The NBER still named that period of downturn a recession.

While Rupkey said the U.S. should see at least one quarter of negative growth before naming a recession, others say meager growth will suffice for such a call.

'For the U.S. economy, which can potentially grow at about 2.75 pct, consistent growth below 1.0 pct should be considered recessionary,' said Aneta Markowska of Societe General.

'There's nothing magical about staying above zero,' said L. Josh Bivens of the Economic Policy Institute, a liberal think-tank in Washington.

'Despite the barely-positive growth, we are almost certainly in a recession,' he said.

Got that? German growth at a 1.5% annual rate is considered blazing. Any American rate below 2.75% is sluggish. Any rate below 1% is a recession.

I'm glad to know the new definitions. I wonder what the financial arbiters will be calling the Italian contraction? I think the term most common will be "minor correction". Why? Because Europe is creamy goodness and America is evil incarnate where the moguls of finance are bleeding the poor for their own personal gain where as the Europeans have just made a few minor mistakes.

Cross Posted at Classical Values

Update: 10 August 008 0751z

vantastic5 in the comments advises me that the German economy really did grow a blazing 1.5% in the first quarter. What happened? They got a years worth of growth (for Germany) in the first quarter. After that the economy was and will be essentially flat. The Financial Times reports:

Germany’s economy has performed robustly compared with other industrialised countries, with 2.5 per cent growth last year and 1.5 per cent quarter-on-quarter growth in the first three months of 2008.

However, second-quarter growth is expected to be significantly lower, the German finance ministry conceded this week, owing to high energy prices and inflation, the strong euro and the weak international economy.

Industrial production fell in May by 2.4 per cent – its largest monthly drop in a decade – and a second-quarter contraction in gross domestic product of 0.4 per cent was likely, according to an economists’ poll published on Wednesday by Reuters.

The German government has forecast that growth will fall to 1.7 per cent this year and 1.2 per cent in 2009.

Cross Posted at Classical Values

Market Break

The Financial Times of London has the story:

US stocks soared on Friday as the dollar saw its biggest one-day jump against the euro in eight years and oil prices plunged.

The moves marked a key reversal of a trend that many investors had followed profitably for months – betting that high commodity prices would keep the dollar weak.

The dollar reached its highest in five months against a trade-weighted basket of currencies, while oil fell more than $5 to $114.87, 22 per cent below its record high of $147.27 last month. The S&P 500 closed 2.4 per cent higher in New York.

The shift in sentiment was triggered by Jean-Claude Trichet, president of the European Central Bank, who warned on Thursday that third-quarter eurozone growth would be “particularly weak”. This sparked talk that the ECB would be forced to abandon its hawkish policy stance and start cutting interest rates, thereby weakening the euro.

“This is the watershed week for the US dollar,” said Marc Chandler, currency strategist at Brown Brothers Harriman. “The magnitude of the dollar’s moves and the breaking of key technical levels suggest that a major shift in the outlook towards the dollar is occurring as massive positions are adjusted.” Other analysts described the widespread buying of dollars as “capitulation”.

Wasn't Obama calling for a strengthening of the dollar the other day? I think he got his wish. Before the government could do anything.

It also looks like the US economy is holding its own.

WASHINGTON (Reuters) - U.S. business productivity rose solidly in the second quarter as companies cut jobs to cope with rising costs, helping curb inflation pressures while also keeping a tight grip on stocks of unsold goods.

A Labor Department report on Friday showed worker efficiency, or output per employee, gained at a 2.2 percent annual rate in the second quarter.

While slower than the first quarter's 2.6 percent gain, analysts said it was strong enough that Federal Reserve policy-makers may be able to keep interest rates low into 2009 to bolster growth.

The Fed said on Tuesday that it considered inflation risks "of significant concern" but held its benchmark federal funds rate at 2 percent. Labor costs rose at only half the rate in the second quarter as in the first quarter.

It is hard to say what this will mean. Lower oil prices? Probably. Higher trade deficit? Yep. American consumers with more buying power? Yep. Lower inflation? Likely. Recession? Not likely. Economic slow down in China? Possible.

Now add in one other factor that makes Europe shaky. The war between Russia and Georgia.

MOSCOW -- Russia and Georgia, once united under a single Soviet banner but now sworn enemies, were on the brink of all-out war as Russian troops and tanks surrounded the capital city of the Georgian breakaway republic of South Ossetia after a day and night of bloody clashes.

Russia ordered its troops into the rebel southern republic a day after Georgian forces were sent in to seize the region, which declared independence after a 1992 civil war.

Fighting reportedly raged into the night with Georgia's Interior Ministry saying early today that warplanes attacked three Georgian military bases and key facilities for shipping oil to the West.

After more than a day of violence, Russian news media reported overnight shelling of the regional capital, Tskhinvali. They said Georgian forces were responsible.

So besides the economic fundamentals you have what is known as the flight to safety. "Pack your ermines" time as William Burroughs would say.

In addition there is the mortgage melt down going on in Europe. Let us start with the British version.

Britons have come to an uncomfortable realization in the last few weeks: after 17 years of uninterrupted growth, the British economy is moving closer to recession, and may already be in one.

Figures released on Thursday by HBOS, Britain’s largest mortgage lender, showed the housing market slump, which has been dragging down consumer confidence, is gathering pace. The average price of a property fell 8.8 percent in the 12 months ended July 31, the biggest drop since the company started tracking prices in 1983. Repossessions, bankruptcies and unemployment, though at relative lows, have started to creep up in the last three months.

The Bank of England, the nation’ s central bank, is unable to lower interest rates to keep the economy growing because inflation looms. It left lending rates unchanged at its meeting on Thursday.

Now many economists are predicting the situation will drastically deteriorate over the next six months, leaving Britain to face a longer, more painful downturn than the United States.

And just months ago they were laughing at us for our stupidity. Heh.

How about the Spanish property market? Here is a report from the end of March this year.

Spain's once-booming property market is in freefall, official statistics have revealed for the first time.

The announcement that house sales had plunged has dashed government hopes for a "soft landing" in the sector that has driven the Spanish economy for more than a decade.

The buying and selling of homes fell by 27 per cent in January compared with the same period last year, Spain's National Statistical Institute (INE) announced yesterday. The collapse coincided with a 25 per cent fall in the granting of mortgages, the biggest drop since 2004. The size of individual mortgages has also fallen, by nearly 4 per cent, as providers fear for the security of their loans.

There are also problems in Ireland and a number of other European housing markets. So while the US is slowly coming out of its slump Europe is going into one.

Where will all this end? Probably with the US stronger than ever. Especially with a lot of very interesting new technology coming out of US Labs in a month. For instance there will be a final report in the next few months giving the results of fusion experiments now going on in New Mexico. If the results are positive expect a further boost to the US economy because it could mean practical fusion power in as little as five years. It would also mean a decline in the long term prospects for oil. Cheap electrical power or even cheap steam could provide a very big boost to oil shale and tar sand extraction and conversion. It would also make ethanol cheaper by reducing the cost of distillation.

The future is so bright I gotta wear shades.

Cross Posted at Classical Values

Joke Of The Day 16 May 008

From Manufacturing Business Technology.

Successive EU enlargements, the Union's growing reputation as a global defence and security actor, and its continued strong economic performance have also become key reasons for India's increased interest in Europe.

Let me see. They couldn't handle the Yugoslavia problem in their own back yard. They depend on USA logistics to maintain troops in Iraq and Afghanistan. And unemployment in France and Germany has been in the 10% range for many years. Other than the value of the Euro what have they got?

Kiss The Ground

AVI was commenting on my I Won't Vote For McCain piece and came up with this gem which I think bears repeating.

It occurred to me over the weekend what people in other countries - even freeish, democratic countries in Europe - have for candidates to vote for. If free-marketers in Europe applied the same principle that the anti McCain purists are advocating this election, they would never have anyone worth voting for in their entire adult lives.

I've complained about socialist lites as well, but really, I should know better. Look at the parties of Europe and kiss the ground we walk on here.

Cross Posted at Classical Values

The Euros Are Getting Organized

The Europeans have some of the highest gasoline taxes in the developed world. Certainly higher than in America. And yet....

In common with the rest of the world, Europe is now having to face up to the fact that a cheap and plentiful supply of oil and other fossil fuels has led to a long term under investment in energy technologies. Public funding for energy R&D in the EU member states declined between 1991 and 2005 in real terms, when it stood at around €2.2 billion a year. Of this, almost three-quarters is concentrated in only three countries. Private sector investment in energy R&D shows a similar pattern.

We don't seem to have those kinds of problems in the USA. I wonder why?

As a result the process of energy technology innovation is riddled with structural weaknesses, such as long lead times to market, incompatible infrastructures and limited market incentives. In the era of cheap oil, the take up of new energy technologies was hampered because they were inevitably more expensive.

Now, as oil nudges $100 per barrel and the IPCC’s warnings on global warming become yet more dire, the European Commission wants to accelerate low carbon energy development and deployment. The strategy highlights 14 technologies it plans to promote, ranging from wind and solar power, to decarbonised fossil fuel and nuclear fission and fusion.

Dire warnings and $100 a bbl oil and the Euros can't find opportunities? Something must be strangling their economies. What could it be?

The problem is how to jump start energy research from its current low base. Although member states share some priorities, pan European cooperation is low, and until now there has been no setting of priorities at a European level. Yet the capital intensive nature of energy technologies – witness the ITER nuclear fusion project – makes it essential to find synergies and build economies of scale.

Oh yeah. ITER. The great Euro fusion boondoggle that will get us the practical knowledge to build a working fusion power plant in no less than 30 years.

America is a little different. We have lots of fusion projects going on and we are a member of the ITER club too. Let us start with a venture capital start up Tri Alpha Energy.

That is not all, we have Robert Bussard's Easy Low Cost No Radiation Fusion which is currently being funded by the US Navy.

The above reactor can burn Deuterium which is very abundant and produces lots of neutrons or it can burn a mixture of Hydrogen and abundant Boron 11 which does not.

The implication of it is that we will know in 6 to 9 months if the small reactors of that design are feasible.

If they are we could have fusion plants generating electricity in 10 years or less depending on how much we want to spend to compress the time frame (my best guess is that a crash program could build an operating power plant in 3 to 5 years - if the experiments now underway green light that course of action). A much better investment than the CO2 sequestration non-sense promoted by the EU.

BTW Bussard is not the only thing going on in IEC. There are a few government programs at Los Alamos National Laboratory, MIT, the University of Wisconsin and at the University of Illinois at Champaign-Urbana among others.

The Japanese and Australians also have programs.

So let me ask. How is it the Australians can afford a program which may produce actual energy soon or at the very least is going to produce some knowledge on the cheap and yet the Euros can't afford it? It is a wonderment. It is kind of like they have killed off or driven out a major portion of their risk takers.

Welcome to America. Where all kinds of ideas get tried. Even long shots. Like ITER.