Tuesday, January 10, 2012

My predictions for 2012 . . . an open thread

Why doesn't some one else go first . . . ?

It would be nice to hear from all the barkeeps and regulars, as well as any guest wishing to comment . . .

I'll chime in at an appropriate time. I'm cautiously optimistic for the longer run, fear the immediate could turn somehow possibly desperate. Difficult to say where the fear comes from.

Difficult to say how the locals would react.

How far does theory actually lag behind praxis . . . ? I'd hope for a quiet year, a time of mending, but I somehow don't think it's going to work out that way.


  1. I'm going to go radical and predict:

    -Arab Winter continues
    -EU doesn't get their act together
    -US economy sucks slightly less, unemployment stays below 9% barely
    -OWS marginalized until summer, ups protests, no unified political movement formed or catered to by ruling parties
    -Biden replaced as VP
    -Warren wins MA
    -Romney inspires no one, losses, but Congress/Senate remain intractable

  2. Oh well, I've been wrong before, so for 2012:

    1] Pats win the Superbowl in a blowout

    2] The Arab Spring fizzles in Syria as the Assad regime stays in power (no oil to interest Western intervention plus he will probably get $ and armaments from friends in Iran)

    3] Gas goes back over $4/gallon and climbs to $4.50 in some blue state markets

    4] Unemployment drops - but quarter million new jobs are all in retail

    5] Obama just barely wins the general election with only 49.xx% of the popular vote & retains the presidency due to the Republicans eating their own in the primary

    6] Dems do NOT get a super majority in the Senate and a majority in the House (See #s 3 and 4 above)

    7] A Chinese company buys majority shares in ??Merck?? or maybe ??Pfizer?? or some other major pharma giant

  3. I'll throw in, no guarantees on accuracy.

    1) The EU recession proves to be much worse than currently expected. This plus bad policy decisions drives the US economy into a light recession for at least the first half of the year. The US stock market drops 15% in the first half of the year and the US government makes more bad policy decisions. The EU crisis stays unresolved and countries may finally fall out of the EU as the crisis gets worse.

    2) China does various things to lower the value of their currency and reduce imports. This promotes verbal attacks from the West and shakes world confidence in the short-term economy.

    3) Official unemployment will go up a little bit but the workforce will officially continue to shrink, keeping the unemployment rate below 9%. Retail sales and other indicators will stay even or only fall a little bit as the rich buy more stuff. Obama and Romney will publicly debate why the average voter is so concerned and unhappy and neither will get it right, further demoralizing the public.

    4) Gas prices will hit $4 per gallon but only temporarily. Food prices will not increase by a lot unless there is a major drought somewhere.

    5) The Republicans win the White House, the Senate (but not 60 votes), and slightly expand their lead in the House. Tea Party candidates will do well on the grounds that Washington ignored them.

    6) The West will not attack Iran this year, Syria is less certain. Allies of the old regimes will either control or strangle the new governments in Libya and Egypt.

    7) OWS restarts their protests in the late spring. What follows depends too much on what they do to be predictable.

    8) Green Bay wins a squeaker over the Pats.

    1. ref #5

      It's certainly Obama's to win or lose, but I'm certain he'll be back in the WH next a year from now.
      The only things I see that can give him trouble would be the economic/jobs situation or starting up a war, or even just bombing, in Iran.
      Not that we're not doing that now. Glenn Greenwald


      and Juan Cole


      have written on this story, also seen in the Guardian.

      Otherwise, I see Obama winning by 5 to 10% of the popular vote.

      By all rights, it shouldn't be that close.


    2. BTW, cool new look! When did we get this look?


  4. I hope SRV is wrong about Biden being replaced as the VP. I NEVER thought I'd say it, but Biden has been the sole predictable voice of reason in this administration.

    Of course, if I'm right, it won't matter whether Biden is kept on or not.

    I should add to my predictions that a record amount of money will spent on the election. And the Republican win in the White House will probably fall short of 50% due to the popularity of 3rd party candidates, maybe including Ron Paul.

  5. Thanks srv and mike.

    Here's my first prediction . . .

    China will not be seen as the economic juggernaut they are perceived as today, but as having significant problems. As the Chinese economy slows, social problems will increase. It will also become apparent that Chinese banks have made numerous investments which will be seen to have been very dodgy.

  6. I expect to see more "pain" in the EU, but ultimately a climb out of the morass.

    I haven't a clue about the US. I honestly think the dysfunction needs to precipitate drastically serious problems before the electorate wises up. Are there enough sane heads willing and able to run for office to create a Congress and Executive that can lead the government in a sound direction? Anti establishment sentiment alone won't solve the problems we face. Dismantling the federal government isn't the answer. Making it functional enough to provide for the common good is what's needed. But the common good isn't bankrolling the politicians. As has been so often stated here, government isn't the problem. Bad governance is. And, we seem to want to institutionalize bad governance.

    I agree that China is going to start to feel the weight of the economic problems elsewhere in the world. They have built an economy on the insatiable desires of the world. Desires that cannot be filled for the long term without more debt. Their customer base is hurting.

    The above I cannot influense, but, amongst other things, I do see a fun filled holiday with my Vespa riding friends from the US, UK, Australia and Greece in Tuscany next September. That I can influence.

    1. This comment has been removed by the author.

    2. I honestly think the dysfunction needs to precipitate drastically serious problems before the electorate wises up.

      Followed by massive public demonstrations, as in millions or at least 100s of thousands of people in the streets across the country. I look at what the people in Wisconsin and now Indiana ( where I believe an important sporting event will be held with Union members participating ) have done. Ohio too.

      Until that happens, the country will limp along as usual with "bad governance" as you say.

      I don't have a clue yet as to what to tell the people in my precinct WRT voting. I can't advise Obama.

      Not that he even has a chance here anyway.

      PS a pity we still can't edit.


  7. I have to agree with Al in regards to the EU. A lot of the anti-EU blather is simply that. Europe only looks weak in terms of the old paradigm which is collapsing as we speak.

    We find ourselves in the middle of a transition, which explains the confusion. Where we are now it is almost impossible to see where the future leads, whereas at the same time the past looks somehow unable to connect with the future. Clausewitz experienced this as well, as did Machiavelli . . .

    My second prediction . . . we will be at war with Iran . . .

  8. Seydlitz - On your second prediction: I would hope that we will see through the Israeli attempt to get us in a war with Iran. They are the Brits of the 21st Century, getting others to fight their wars for them. But then if Pluto is correct in his prediction #5 then your #2 is probably correct also.

    Al - Tuscany is definitely the right place for a Vespa rally. Are you visiting the plant in Pontedera(sp?)?

  9. Either India or China will have a problem with their grain harvest in 2012. Their need to import will cause a spike in the price of cereals and destabilize countries who are net importers of food.

  10. Mike- We start in Pontedera, and will visit the Museo Piaggio. "Plant tours" are unheard of, even for an international bunch of rabid Vepsa owners. While the bulk of us will be riding rental Vespas, one couple is riding in from London and back.

    seydlitz is on the target. The EU countries are finally faced with the notion that the EU means we are "all in this together", not just a set up where each member state belongs for purely nation gain. Difficult way to find out, however. Much of the trials and tribulations have arisen from the delays arising as unrealistic national (and partisan political party) interests were pandered to, especially by Ms Merkel. As my neighbor said, "If all of Europe wanted to to be German, we would have never welcomed you Yanks here in the 40's."

  11. My predictions for 2012.

    1. We'll still be here, us and milpub, Deo Volente of course, a year from now.

    2. The Saints will go marching in and come out with another SB Trophy. Their defense won't need to come off the bench to play. Not a baseball ( used to be ) nor a basketball fan.

    3. OWS will be at both political party's national convention and I hope both will be non-violent. There will continue to be significant OWS activity all through this year.

    4. The economy will bump up and fall down, but will remain flat with unemployment stuck near or around around 9% throughout the year. The Republicans and Obama will not change their habits.

    5. Stephen Colbert will announce for president and get at least 15% in the So. Carolina primary. :)
    And will be crowned Emperor of the United States by Thanksgiving. 8-b

    6. Obama will still be prez and the Democrats will have the House and Senate again, not that that will do us any good. I'm weak on the Senate prediction, but Elizabeth Warren will get Teddy's Senate seat back from the usurper.

    7. Jackson's Hobbit movie will be a big hit.

    Do we get prizes, seydlitz? :)


  12. Hey all,

    Still getting settled in my new digs, but I'll throw a couple of quick things out there:

    1. Now that I'm in Florida the lull in hurricanes will end (when we were last here we got hit with 3 in the 2004 season and evacuated twice).

    2. As much as it pains me, my Denver Broncos, after providing one of the most exciting seasons in memory, will not make it to the Super Bowl. Watch out next year though.

    3. The US and/or Israel will not attack Iran. It's likely, though, that the increasing pressure and sanctions on Iran will prompt them to do something stupid and give the US an excuse to retaliate. Once sanctions really start hitting the economy hard, that will weaken the Iranian government internally and they will act either to prevent that.

    4. The unemployment rate will stay above 8%. I give myself a bit of wiggle-room on this because of the way BLS calculates it. Other metrics, like the labor force participation rate, will stay down.

    5. The economy will continue to see slower growth - 2% or less. If something bad happens to the EU, we will get another recession.

    6. Because of #4 & 5, I predict Romney will win the Presidency.

    7. We will still have at least 75,000 US troops in Afghanistan at the end of the year.

    1. Nice to see we agree on so much, Andy. :) Do you think Tebow is the QB the Ponies can win with?

      WRT your 6, Romney won't win because he's not a good campaigner and the Ds have a lot on him to work with. O will win, but not by much.


    2. I just found this.

      We shouldn't need to be reminded of the viciousness of attack ads in S Carolina, nor be surprised to what depths Republican activists can reach to.



    3. BB,

      I think Tebow could be a great quarterback. He's got the leadership skills, he seems to have the intangibles, and his teammates love him - he just needs more work on his passing game. It's frankly amazing what he's done so far. Regardless, he's great to watch!

  13. Aviator,
    Ah, the Vespa. One of the handful of constructs that by some mysterious mix of utility, originality and verve have the right to be called classics. One might include the Piper Cub, the Opinel folding knife, early Leica 35-mm cameras, and, of course, the VW Beatle in that group.

    1. Not so sure about the Opinel, but would include a 16 oz Estwing hammer to the list . . .

  14. Thanks for the predictions gentlemen. I would note that Andy's and my predictions in regards to Iran are not necessarily incompatible.

    My third prediction - the Democrats will get trashed in November, that is we will have a GOP President in December.

    As to prizes? What better than the simple knowledge that you called the tealeaves right in January? Of course we could do a follow up in a year and declare a winner, awarding the title, "MilPub Nostradamus of 2012" . . . with an invitation to Portugal to come and collect your partyfass of German beer (I'll even help you drink it) . . . what would you expect from a pub anyway?

  15. Herr Seydlitz:

    Sixteen ounce Estwing???? What do you use that for, putting together cribs? Assembling assorted Bagatelle from Ikea?

    You need you a 28 oz. Estwing with a meat tenderizer tip. Had one since the early Seventies..good as gold,,..Can't tenderize meat no more, nor leave your signature on cornice work neither. Nope, that Hammer Heahyudd is plumb smooth as a baby's ass. After one framing job, my parner an' I teamed up with this redneck fella, Bert Cahoe. He come up to me yellin' and cussin' and such.."Goddammit you fucker, what have you done with my soffit?" He had me plumb dead to rights, I had left an imprimatur on his work. It woulda been discovered by them punch-out inspectors, no doubt; though I did admire the Escher like quality of my imprints. Well doncha' know, I had to go out and get one of them little hammers (or "Lillehammer" which is what them boys across the Oppland county line up in Norway calls em'..and that's a no shitter there good buddy.

    Well after that unpleasant experience, we went back to framing. Back in the old days, when white boys (plenty of them Longhairs, mind you) were buildin' homes, you needed a Papa Estwing if'n you only had two nail guns per crew. Just one tap to guide the right azymuth.. Whack, Whack. it's in there. Be sure to run the nail through your hair, when you have a chance.

    1. So much for my piddly 16-ounce, wooden handled, Stanley from the 1960s. Call me lillehammer if you want. But It still has the original wooden handle, reseated once or twice with a wedge. But then I haven't done any serious nail pounding with it since the 80s.

    2. You found me out! My original job in carpentry (Summer jobs while in College) was as a framer, but without any tools. I spent most of my time with a shovel in my hand digging pier holes, but occasionally got to grab a hammer out of the contractor's tool bag and do some real work. Those were Stanley's like Mike's. Building a house from the ground up is a great experience, but unfortunately didn't last in my case. The guy we were building the house for hoped to save money and took over what I was doing, after the roof was on. So I was able to step up to cabinet making (through a friend). Bought the tool belt and all and so didn't need more than a 16 oz . . . did that all through the rest of college. We were the dudes . . . and I was the only short hair in the crowd (USMCR at the time) . . . those were great experiences . . .

  16. My fourth prediction . . . the world will not end on 21 December of this year . . .

  17. Don't see anything here I would consider a hill to die on, other than the GOP seems determined to find a way to lose the WH in November despite holding all the cards. Romney just has a gift for sounding like an entitled a-hole at a time when being an entitled a-hole isn't all that popular. Add to that the fact that their actual platform doesn't really offer anything except more goodies for the folks with the goodies, and the rubes may be rubes but they're not all THAT rube-y...

    And the other thing that I still don't see is Germany being willing to accept that to drag the southern tier nations up - meaning letting wealth flow into them - means that some of the northern tier EU nations (i.e. Germany) have to let wealth flow OUT, and that's been troublesome. Germany beat it's economic slowdown by boosting it's external trade (among other things) and seems unwilling to consider that helping Italy, Spain, and Greece means BUYING stuff from them...

    So I'm not saying the Euro collapses...but I think the EU depression will be longer and more difficult than it could or should be.

    1. Nice snapshot of part of the German problem.

      The mess is also fueled by those who say the "Argentina Card" is the answer. Of course, Argentina was not a possible "Domino", and trying to un-entwine one or more Euro countries from the Euro is a bit more difficult that what Argentina went through. No other nations were economically connected, other than holding debt that became worthless, which is a one time event, not a long term or chain reaction one.

      For any of the EuroZone nations to withdraw from the Euro, they would have to make a 100% default on their sovereign debt. Otherwise, their debt would have to be paid off in increasingly devalued national currency, which, of course would result in default anyway. Further, other non-monetary aspects of EU membership would become impossible to deliver, such as mutual healthcare compacts, etc.

      In short, whether or not it was prudent to accept certain countries into the EuroZone is no longer relevant. It exists, and dismantling any part of it through forced defaults is not a healthy option. For Europe nor the rest of the world's economies.

      More critical, and what Germany et al need to keep in mind, is that hedge funds would love to force any and all defaults possible, as they have CDS backup that actually makes their investments worth more in default than they originally paid for them. It will not take too many of these hedge funds refusing to take a "voluntary haircut" to push the EuroZone, and then the rest of the world, over the brink, and the more insured defaults they can enjoy, the merrier. This problem is just beginning to pop up on the radar screens as hedge funds seek bonds at 40 cents on the Euro to insure at face value to their selfish advantage.

  18. Re: war with Iran...

    I think that the Iran situation ties into the "Arab Winter". If we should have learned anything from fighting wars in Iraq and A-stan it's that the bottom line with impoverished, resource/population-rich, industry/education/infrastructure/good government-poor Islamic nations is that "more rubble = MORE trouble". So you overthrow your local "dictator" and what you get is often worse and at least no better than what you had.

    Short of a decades-long occupation (and you can imagine how well that'd work) simply busting up these "nations" is cracking the dragon's eggshell. There's no telling what sort of dragon is gonna emerge but there's a better than even chance that the Western nations aren't going to like the dragon.

    You'd think that any D.C. politician with a functioning hindbrain would have learned that.

    But IF a Republican wins the WH in November I'd still wager that some sort of military operation or strike is about a 50-50 chance. The GOP shows absolutely NO evidence that they have learned from the Bush Debacle; they're like Bourbons on steroids - not only do they forget nothing and learn nothing they seem to think about nothing - their intellectual think-hole is chock full of some sort of "New American Century" nonsense equally composed of neoimperial cake batter and Islamophobic packing peanuts.

    And the Dems seem to have given up pretending to have any sort of coherent geopolitical ideas other than "Don't do anything that could let Rush Limbaugh call you a hippy peace-freak". So while I'd suspect that a second Obama term is a trifle less-likely to pretend that dropping bombs on Qom will produce anything positive, it's say that there's STILL a chance that his people could convince him to take a slap at the Iranians just so's he won't "be seen as weak".

    The sad reality is that the bulk of the governing class inside the Beltway appears to see foreign policy as some sort of outgrowth of DOMESTIC policy; I can't see any sort of genuine attempt to figure out what U.S. interests are almost anywhere in the world. It's all about what will play in New Hampshire.

    Sad, but when you live in a late-post-pseudo-imperial power you take what you get. And that's what we appear to have. I see no reason to assume that 2012 - or 2013 or '14 - will be any different.

    1. Chief-

      Fifty/fifty is sitting on the fence. Predicting is jumping off on one side or the other . . . when are you going to get down and do some actual predicting . . . ?

  19. I don't think that sitting on the fence at this point in time, at this particular period of our nation's history, is a good idea. For that reason I attempt to initiate dialogue. Either here or in the classroom . . . it all comes down to "chances" . . . within a certain complexus of interests . . . domination as in politics - the state - as a concept - essentially an apparatus/form of coercion. Minus all the window dressing . . .

    Funny that.

    Fifth prediction: "Europe" is going to look a lot better off five years from now than our own good ole US of A, that is if we still exist as a (somewhat) coherent political community . . . that is minus all the paper money/military power that clouds our thought at this point. Five years down the line . . . this current paradigm will be gone, and replaced with what exactly?

    Could be seen as the "beauty" of the whole dilemma/catastrophe . . . Where to next with the context of humanity as a tragic reality, our options basically "bad" or "not as/so bad" . . . which defines our modern age. The US was simply "leading" the way.

    "Europeans" of spirit, unite!

  20. Well, seydlitz, my problem with predicting U.S. foreign policy is that - as I mentioned in my comment above - the U.S. now seems to do foreign policy AS domestic policy, and our domestic politics (and, hence, domestic policy) are a tale told by an idiot. So in a sense you're asking me to predict the actions of a schizophrenic moron. Not a good way to parse that fucker.

    But, here goes; I'll guess that Obama holds onto the WH. I don't think he'll be strong, but unless the GOP can come up with something better than the weak sauce they're showing at the moment I can't see the U.S. public being THAT stupid. Mind you, it's not that strong a prediction. A serious drop back into recession this summer - not impossible, as you know - could be enough, a rockin' Republican convention could be enough, some truly ingenuous attack ads could be enough. Either way, the current trend towards worse and worse governance will continue. But the actual CONTENT of the government is difficult to predict; the electorate simply no longer responds in any sort of sanely predictable way. I think you're correct in that the U.S. is headed for a bad time over the next decade.

    One thing I think that you're not hitting hard enough is the paradox of the U.S. middle class. The "Grand Bargain" is completely broken - the working class has been handed its ass, and the lower ranks of the white-collar professions are following rapidly. The jobs are going, or gone; it seems unlikely that any serious number of Americans are going to be able to make a "middle-class" living out of manufacturing or middle-management again. Mind you, there could be a black swan out there that will save these people. But if there is by its inherent nature we can't see it. I think we're going to see a serious return of debt-peonage and the widening of the underclass over the next decade, with all the political turmoil that will follow.

    So I'm going to guess that there will be nothing more than an air raid or two on Tehran, and even that seems unlikely. The downsides are just too big, and the gains too small, for anyone but a true Islamophobic nut.

    Romney wins this year, though? My bets are off. There's no just telling what the GOP whackjobs will do.

    I think that over the next decade the "domination" you're talking about may actually become less a matter of government than one of corporations. The interests with the current preponderance of wealth and enough sass to use it are almost all on the private side. The Dems haven't the balls to fight back and the GOP is a wholly-owned subsidiary of the crony-capitalists. I think we'll see the U.S. become more openly like the present Russian Federation, where the President, his Congressional pals, the national security siloviki, and the heads of the big corporations (Texaco and WalMart as GAZPROM and Sibneft?) all work together to ensure that the power and the wealth stay "where it belongs".

    OTOH I think you're being overoptimistic on the EU. Germany shows no signs of being willing to take a HEAT round to help the southern tier, and all the Euroskeptics predictions about what is bad about a unified currency in a polity without unified labor and commerce markets seem to be coming true. The commercial banks are willing to see Italy and Spain take a haircut because they will make money from the CDS...I think it has the potential to be really, REALLY ugly unless the ECB and the big Two (France and Germany) are willing to lose some of their wealth, and I don't see that.

  21. Chief-

    Minor correction. A voluntary haircut will not trigger CDS protection. The commercial banks have much more at stake than the risky sovereign debt, and have been forced into looking at the "long term". It's the hedge fund people, who live from score to score that want to push a default. The banks know that a voluntary haircut is in their long term best interests.

    Germany is not looking at a "solution" as much as imposing "disciplinary action" on the errant countries. More and more sane minds are pointing out how this is the equivalent of "debtor's prison" for someone in arrears of child support. The kid is guaranteed to starve and become a burden on the welfare system. If your kids in college runs up max debt on their credit card, do you pay it off, rein him in and allow him to finish college or make him drop out with the resulting loss in lifetime earnings potential? Germany's "austerity" demands are not a solution, but more of a punishment for those who failed to live up to Germany's cultural standards.

    So, the "Big Two" have a vested interest in a viable long term solution, and default is not part of that. Sarkosy knows this and is willing to take the heat. Merkel knows this, but temporizes to hold onto power.

  22. "Germany's "austerity" demands are not a solution, but more of a punishment for those who failed to live up to Germany's cultural standards."

    Also, for those unable to *export* enough. And (just guessing), I'd bet a lot that Germany had tight restrictions on what banks were allowed to do within Germany.

  23. I thought this was a pretty good explanation of the core problem with the Euro:

    In normal international trade Greeks buy German goods with deutschmarks and Germans buy Greek goods with drachmas. Germany may produce everything more efficiently than Greece but doesn’t produce everything with equally greater efficiency. Consequently it continues to make sense for the two countries to trade with one another. Check the details of how that works under “comparative advantage”.

    Greeks want German products. That raises the demand for deutschmarks and the cost of deutschmarks, measured in drachmas, rises. Germans aren’t so interested in Greek products. That pushes the price of drachmas measured in deutschmarks down. The relative values of the two currencies limits the volume of German products that Greeks buy.

    Greece and Germany being on the same currency, the euro, effectively means that the German currency is substantially under-valued and the Greek currency substantially over-valued. That puts more wind in the sales of German products. The governor for Greeks buying German products is removed.

    California and Mississippi use the same currency, have for the last 150 years, Mississippians generally buy more California products than vice versa but we’re not vexed about the trade deficit between the two states. Why? Because California, effectively, subsidizes Mississippi. That’s what I mean by “shipping a portion of GDP”.

    One or some combination of several things needs to happen between Germany and Greece. Germans need to buy more Greek goods and/or Greeks need to buy fewer German goods. That’s contrary to the present German operating philosophy. Or the Greeks could continue borrowing and the Germans could subsidize their debt. That, too, is against the present German operating philosophy. That’s the impasse.

    The key point to remember is that there is no level of Greek austerity that will correct the trade imbalance and the trade imbalance is at the heart of the problem.

    So, I'm not sure how the Euro can be saved - the solutions don't appear to be politically viable.

  24. Andy: Pretty much what Krugman and the other Keynesians have been saying, and their conclusions are the same as yours - that with the present mania for "austerity" to "punish" the southern tier nations the EU group is behaving like the characters in the old story about the turtle and the scorpion.

    I don't see how it ends well, either. I was a euroskeptic back in the day because I didn't see how could match the fluidity of labor and the business hardscape to the fluidity of the currency. Turns out that when you combine that with some fairly skeevy banking procedures you can get a real mess...I'm shocked, shocked! Wait, are these my winnings?

  25. I think what has been non-productive are the analyses looking for reasons why the EuroZone was wrong to begin with, as they add nothing to solving the problem. Further, they tend to be one or two dimensional, such as the blog on currencies and exchange rates that Andy offers.

    The issue here in Greece is debt. If that sovereign debt had been denominated in Drachmas, Yen, Euros or Monopoly Money, Greece would still be teetering on default. It was not an international commerce issue, but was simply a government that spent money as if it grows on trees, yet allowed tax avoidance and evasion like it was the national sport. Had we remained on the Drachma, we would still be in this position, just like Argentina and Iceland were. Except in the case of Argentina and Iceland, they weren't in an economic co-operation zone with a vested interest in righting the ship.

    My point is, you can go on and on with theories of why the EuroZone shouldn't have come into being. However, the reality is that it did, and is currently under great stress. Not because of the pros and cons of international trade under a common currency, but pure and simple sovereign debt due to irresponsible governments. Since the current reality is what has to be addressed, the EuroZone partners need to address it in terms of that reality. The problem is the context of the EuroZone, and needs to be addressed in that context, not some hypothetical model of another system. That is the dysfunction that German nationalists have been bringing to the table in expecting an integrated international system to mirror their domestic system. Hell, why isn't anyone suggesting that the US let Calif default and create their own currency?

    Joe Blow has been run over by a car. What does the person on the scene do as the first priority? Give immediate aid to Joe or chase after the car so the driver can be punished?

    1. Al,

      I don't necessarily disagree. But the problem is that the Euro takes away the obvious course for a country like Greece to get out from the burden of it's debt - devaluing the currency. Since Greece can't do that, what options are left? On one hand you have austerity which isn't working and is politically unpopular in Greece. On the other hand are bailouts by the rich Euro countries which will only temporarily stem the tide. The only other option that I'm aware of is a fiscal union under which the rich nations would inevitably subsidize the poor nations. Is that in the cards? From this side of the pond it doesn't appear to be political support for that either. So what's the solution?

      You're right the problem is debt, and a fiscal union would be the permanent fix to that problem. Without it, Europe is going to see debt crises come up again and again.

  26. Andy-

    Sadly, this was a scenario that the "wealthier" nations failed to consider. They were more interested in the trade advantages offered and oblivious to any EuroZone wide responsibilities they may have to bear.

    Had the EuroZone not existed, then the "Southern Tier" would just have easily defaulted on their debt, still extracting a huge toll on their creditor neighbors. If anything, should we get it worked out, the EuroZone should end up providing "soft landings" for all involved. That is if all member nations look at the general well being. A "haircut" on holdings by French and German banks is a hell of a lot disastrous than a full default. Still ain't painless, but a hell of a lot less lethal.

    Germany and others willingly looked the other way for several years, as it was convenient. Now their indifference is costing them

  27. Al,

    How does one bring about a "soft landing?" Last time I checked, Greece was still running a primary deficit so even if the banks got a buzz cut and Greece's debt was zeroed out, they'd still be running deficits. That's just one country.

  28. By "soft landing", the objective is to bring down annual deficits over a period of years, while getting the existing debt away from "crash landing" - a full default. No one expects Greece or the other weak sisters to turn around on a dime.

  29. Gentlemen-

    As to the "financial sphere" or "financial level of operations" I would only point out that financial institutions up to this point have not been able to directly use coercion, that is the threat of organized violence sanctioned by the state. France and Germany can wield such an instrument, Goldman can not. And is it all not much more complicated than that? Who wishes to think about it really? Which means do "they" and "we" have at our disposal? So many questions, but one basic assumption . . .

    You can't trust the numbers. Wall Street, London City, and the rest are pretty much making it up as they go along. The history of bad investment, waste and corruption is long in Europe, as one would expect, but enough to cause this? Maybe on planet Zog, but here on earth?

    The latest reporting on the financial sector, especially the firestorm unleashed by those two Economist pieces . . . what are my conclusions at this point?

    The sleaziest casino, the worst rattrap you'd care to visit. The history of what is going on now may be seen quite differently in five years time. Which is in fact my last prediction.

    We can't really see much of what is going on around us. We can't tell if we are dealing with real threats or simply illusions/delusions, projections on the back of the cave. We're in the transition from one world to the next, imo. Enjoy the ride. It could end rather suddenly.

    Our bunch as been through this once before, back in 1989-92. Very different context of course, but recognizable. At this point the sensors are full out listening, but probably not saying so much . . . We were lost, without any identifiable target, let alone strategy. And in my case, this was operational, you were able to commit resources for strategic intelligence collection. But collect what?

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