Time for 15 euro nations to throw in their cards

The cost of saving Europe is getting too high, and considering the direction the Eurocrats’ philosophy is taking, it’s better just to walk away.

One warning sign was the vehement opposition to the proles ever having a say in how their country or their continent is run.   Never mind that the Greek right wing had half the debt hidden with accounting trickery and derivatives so the public never had a say or notice that the debt was being run up that high.   They should just be stuck with the debt because the elites that want to enslave them say so.  That is the right wing thinking.

Personally, I emphatically agree with the “doctorine of odious debt” and strongly believe that it should be international law.   If somebody like a dictator runs up a huge tab without a mandate, I don’t accept that that there is any moral or ethical basis why the public should be bound by that evil collusion.

It needs to be held to situations where it is appropriate, and the banks colluding with a prior Greek government to run up a tab with no mandate, off the books, is well across the line.

Now another angle is that S & P is being condemned for threatening to downgrade even Germany and France.

S & P, Moody’s and Fitch should be condemned for not having already downgraded Germany and France.

These ratings agencies need to decide if they are in the public relations business or the ratings business.   If they are supposed to be publicists generating good buzz for everybody they should go work for Kim Kardashian and leave serious work to somebody else.

The traditional ineptitude of ratings agencies among other things makes market crashes worse as occurred in 2008.

In 2008 some seriously defective instruments that were given AAA ratings suffered serious losses.    Some of these packages of instruments were intentionally designed to fail and the banks selling them were shorting them at the same time.

Ratings should not be a rubber stamp.

But getting back to the recent story, the real news is not the threatened downgrades, but that the politicians and bureaucrats think that ratings agencies shouldn’t tell the truth because it might affect the markets.

God forbid a ray of truth might get through.

At the same time, half the financial press are writing on the impending market disaster while the other half write glowing nonsense about how the markets are certain to rise and we face eternal prosperity.  The direction that the politicians, bureaucrats and media are taking is Orwellian and I don’t like it.   Europe is regressing 80 years and the US is turning into the Republic of Americastan.

I take it the French have thrown veracity on the rubbish heap along with liberty, fraternity and equality.  The Germans have never espoused those values so I can’t accuse them of abandoning anything.

So there you have it.  If you are in favor of truth, justice and democracy you are an enemy of the Reich…er..European Union.   Framed that way, I know which side I’m on.

Footnote suggestion: start turning ratings hard instead of issuing them in inscrutable ways that look more like religion or astrology.

The European Union’s magic numbers were debt no more than 60% of GDP and deficit no more than 3%.   But that level will already cause significant debt stress.

The GDP is not the best figure to use.  As shown in the US, governments face significant resistance to raising taxes.  They also face significant resistance to reducing programs, any programs.  The result is often inertia.  That means that comparing the debt to the government budget is a more appropriate ratio.  The GDP is irrelevant unless the government can access more of it.  And which sounds more ominous, that the debt is 60% of GDP or that it is 240% of the annual budget?

But using GDP comparisons for a moment, as that is all that has been publicly developed, the idea that the 60%/3% should reflect a AAA rating is ridiculous.

The idea that a government is inherently a more reliable debtor is a dangerous misconception.   A government controls its’ own process in a way that no other debtor can.   A government can immunize itself from execution against assets and unceremoniously give you the heave ho.

Giving a government that is badly in debt a AAA rating because it is a government is incorrect.

If I were making the credit ratings I wouldn’t give a government with the 60%/3% debt ratios better than a BBB.

The US present debt and deficit? A BBB-…maybe. For any other country I’d put that in single or double B.

Have hard lines that result in automatic downgrades without debate, analysis or equivocating and it will help straighten things out.   There’s no need for a field that is mostly numbers to be all soft analysis.

Euro chicanery as ominous as any other sign

I’m sure everybody has noticed by now certain patterns that European politicians have used to disguise the lack of progress on their issues.

The mainstay approach of having a meeting, resolving nothing, then departing and declaring victory is getting really thin.

The announcement is followed with no specifics and further meetings are announced to work out the details of the non-deal when in fact the extent of the agreement is “we have agreed to solve the problem” but without any mechanics.

The second line of attack is, we’ve had a meeting, and we’ve decided that somebody else will solve our problem.  China will solve our problem.  Private investors will solve our problem.

That is not a plan, it is a hope for “deus ex machina”.

This form of salvation reminds me a lot of the old Aesop fable about mice who are being terrorized by a local cat.  So the mice have a meeting and they decide that the solution to the problem is that they will put a bell on the cat.   The reaction to this is quite favorable, until an old and wise mouse speaks up and says, the plan is fine, but who is to bell the cat?

In other words, a plan that can’t be implemented due to an insurmountable hurdle is as good as no plan at all.

China is predictably not interested and there is little incentive for them to get involved.  The lack of any attempt by Europe to take a serious run at its’ problems on its own makes it foolhardy to fund them.  They’ll just go through any money contributed and then when it is about to run out, start having meetings again to figure out what to do.  Giving money to Europe right now is about as constructive as putting your money in a pile and setting it on fire.

As for the private investors solution, that fizzled for predictable reasons.  There is little interest in European bonds now as it is.  The leverage plan is rather silly, because it insures only 20-30% of the value of bonds.  The statement that makes is in some ways worse than no insurance.  Invest in Europe and we guarantee you will get one fifth of your money back ! Woo hoo, sign me up.

The whole issue is that private investors are losing faith in government debt.  The theory that you will fix the problem by attracting back private investors is strained at best.

Trying to force banks to take on more government debt by increasing tier 1 capital requirements is dirty pool and there is a bit of a conflict of interest in the decision.  The irony is that the whole thrust of the problem is that tier 1 capital is arbitrarily defined and attributes a reliability to government debt that is without foundation.

Other dubious plans have come up.   An utterly bizarre plan from Germany involves putting together currency reserves to increase investor confidence.

So Germany alone would need to save 500 billion Euros under that proposal.

If there isn’t actual currency set aside, it’s just an accounting gimmick.

If currency is raised to set aside with bonds, then you increase the debt.

If you do set physical currency aside as a guarantee, you will decrease the liquidity in the system unless you print more Euros.   That will tend to cause deflation and stagnate markets.  Deflation will increase the value of existing debts.

If the idea is to print money to set aside as a guarantee, so that there isn’t a liquidity crisis, why not just simply print money without turning this into a dog and pony show.

So I am divided as to whether this latest from Germany is supposed to make no sense or whether it is supposed to be counterproductive.

The latest from Europe generally is, the ECB lends money to the IMF and then the IMF lends it out to Italy or Spain as the case may be.

Is John Cleese making European policy?

If Europe and the ECB can’t bail out Italy and Spain now, how does it assist to loan money through the IMF?  If they are providing the funds, how does adding a step with the IMF in the middle change anything?

If the idea is that the IMF is a better credit risk, then you have the ultimate issue that, if the debtor country stiffs the IMF, will it be Europe or the IMF that gets stuck with the tab?

That really is the issue.  If the IMF doesn’t have the money to loan, and the ECB doesn’t have the money to loan, how does this work? If the IMF and the ECB could fix the problem with their resources together, why not have the ECB put in some money and the IMF put in some money separately rather than taking weird roundabout steps?

If the money isn’t there for a bailout, it isn’t there.

There is an old expression about pulling oneself up by one’s bootstraps which would be appropriate, but it is a bit dated.

Here’s a more contemporary allegory: bees lifting a laptop:

http://www.youtube.com/watch?v=3AxIOtSjXyA

Mythbusters proves that bees can’t lift a laptop using basic principles of physics.

The basic myth of bees lifting a laptop has the same structure as supply-side and other right wing economics however.   It is possible with some sleight of hand to create the appearance that it can work but that isn’t enough to deliver.

It’s hard not to wince hearing some of the plans being floated in Europe these days.   When a “plan” is obvious balderdash, it has a prejudicial effect worse than having no plan.  A bunch of confusing bafflegab may reassure slow people but to those of us with IQs over 100 it looks incredibly desperate, like not only is there no plan but you’ve given up and are prepared to say things that are incoherent rather than say nothing at all if you need to stall for time.

Merkel and Sarkozy are the pioneers of the planless plan, where the real plan is to game the media to keep up market and consumer confidence without doing anything.   It’s too bad that Merkel is taking the lead in this, because she leads Germany and Germany has money to spare.   Sarkozy is at least ten times as smart as Merkel and far better at public relations.

Merkel and her bank friends are so awful that they make me feel sorry for Berlusconi.  Italy was in good shape and then there was a massive misleading press blitz about Italy’s finances and then ECB halved it’s support for Italy’s bonds in order to push Berlusconi out of power so that he could be replaced by an ECB/ Goldman Sachs puppet.

It is a supreme irony that with all of Berlusconi’s unethical connections and activities and more legitimate reasons to remove him than you can count on your fingers, that when he was finally removed from office, he was removed by foreign powers and bankers because he was a patriot who refused to sell out his country.

The tactics used against Italy suggest to me that those who would consolidate Europe now do not have the appropriate motives and it must not happen.

Europe has had years to work on the debt problem and they haven’t come up with a single good idea.  Germany vetos any suggestion that would solve the problems (e.g. print money).

The plan for Greece is doomed to failure for a variety of reasons, not least of which is that the yields on Greece’s bonds are over 30%.

If Greece’s full debt was unsustainable at 7% yields, can half of Greece’s debt be sustainable at 30% yields?  Do the math.  No way.  Greece is going to burn out and soon.

Greece should be allowed to default…because they are going to default.  Anything that anybody has to say on the subject is moot.

What needs to be the focus is, when is Greece going to default.

The unpopular answer for the politicians should be, as soon as possible and it should be carefully planned so the logistics can be worked out.

If more bailout funds are given to Greece, they will be spent.

Greece should be allowed to default, but the flip side of that is that the bailout funds would need to be given to Greece’s creditors to keep them afloat.

Wait, and the bailout funds will have been spent and we will be in the same mess but with fewer resources to address it.  Unfortunately politicians are averse to taking any immediate action that is unpopular, even if it is necessary and the cost/benefit is there.

 

 

Donald Trump as spoiler?

Donald Trump running for president might be indirectly useful after all.   He apparently is drawing support away from Sarah Palin.

He’s also appealing to the loon crowd in a way that isn’t likely to help him get elected.

Maybe someone is recruiting him specifically as spoiler.   Palin is turning into a universal hazard.  If her views are as represented she’d be a disaster as president, and more likely a disaster as the Republican candidate.

Obama has settled into being a sequel to George Bush, accomplishing some Democrat things like the health bill but perpetuating fundamental errors of the Bush administration.  He is also way to cosy with firms like Goldman Sachs that created the economic crisis and hasn’t done enough to reign them in.   The architects of the financial crisis have been saved and are making as much money as ever while everybody else suffers the consequences.

If Obama feels worried about 2012 he’s more likely to step up.

I’d really like to see Ron Paul as half the Republican ticket for that purpose, although I think I’d like to see him split off with the more common sense Republicans and make a new party that is neither crooked nor loony.

Of course Trump would be a disaster as president too, but if all he does is cancel out a run by Palin that might be a good thing.

 

We need the right kind of nuclear debate.

Over 20 years ago there was a conflict when some atomic energy guy in the US warned that Mark 1 reactors had a 90% chance of breach in the event of certain problems such as what happened in Japan.  That was all white-washed and nothing came of it.   The official line was that the chance of breach was less than 10%.

Well that is looking like more than 10% now.

The Mark 1 reactor represents skimping on reactor complexes to save money.  It is really short term thinking.  It turns nuclear power into a reverse lottery where most of us get cheap and relatively environmentally safe power in return for a few places will get randomly hit with a crisis where wide areas become uninhabitable for a couple of generations.

The alternative to nuclear power is for the most part burning more coal.   Other clean energy is very capital intensive and will take a while to have much of a dent in the energy market.

Realistically we don’t have much of a choice.

But that doesn’t mean that we should gloss over nuclear risks and have critical decisions made on the basis of ad hoc numbers that people come up with to defend the industry or that there should be propaganda like that plutonium is less dangerous than caffeine.   Among other things such an official line makes it difficult to allocate the resources to address what is theoretically not a problem.   It also becomes permission to build unsafe reactors.

It is a case where binary thinking of nuclear power as just a yes or no issue has really not assisted us.

We need to have that debate in part so that real safety issues are dealt with.  There may be some great solutions out there that we can’t find while the emphasis is glossing over the problem.

Bradley Manning is no Daniel Ellsberg

For inexplicable reasons, Daniel Ellsberg is defending Bradley Manning: http://www.cnn.com/2011/US/03/19/wikileaks.ellsberg.manning/index.html?hpt=T2.    But Manning is no Ellsberg.  Ellsberg is a national hero.   Manning is a vandal and a parasite.

Ellsberg outed that the government was committing acts of pure evil and suppressing the information for release.   Manning outed everything that he could get his hands on and precious little of what has been released by Wikileaks has any public interest component.

Putting confidential information that destroys your own government’s bargaining positions, compromises intelligence gathering and generally sets back diplomacy ten years everywhere in the world is an act of pure evil and sabotage.    Outing confidential information doesn’t automatically make you a hero except to anarchists.

I’m generally against capital punishment, but especially in a military context and a deliberate attempt by a soldier to sabotage American interests you have to really think about it.

Getting close to time to draw lots or seek volunteers at plutonium reactor

We might wind up with a hollywood style finish to the reactor business in Japan.

One of the reactors that is in distress has plutonium.   In popular discourse plutonium and uranium are treated almost the same but they are much different.

Uranium is in small amounts everywhere, and we’ll each have a little of it in us.  Uranium is a native element.  It is not a product of science, although we engineer it to purify the 235 variety that is used for most nuclear purposes.

Plutonium is one of the most deadly poisons known to man and will kill in small quantities.  There are both toxicity issues and radiation issues.  It has a biological halflife of 200 years and will continue radiating from within the body.   A few micrograms per kilogram of body weight is deemed to be a “lethal” dose, by which I take it is meant death due to acute toxicity alone.

The Chernobyl reactor was of a type designed to be able to use unseparated Uranium, rather than just 235.   Presumably little if any plutonium was released into the environment and the Uranium mixture would not have been as nasty as if it were pure U235.

They need more than categories 1-7 for nuclear accidents.  If 7 is Chernobyl, a plutonium based reactor spewing plutonium dust into the atmosphere is more like a 9 or a 10.

If large amounts of plutonium dust get into the atmosphere everyone and everything downwind for some ways is dead.

From the perspective of wildlife, Chernobyl wasn’t that bad.  With the absence of humans in the area it is fairly vibrant now even with the remaining radioactivity.

Don’t expect that with plutonium exposure.

If there is even a 1% possibility of that, they have to do whatever it takes.   Hit the plant with everything they have to cool it down enough for some volunteers to get inside and do whatever it takes to make the plutonium safe.

I can appreciate the need to keep people calm but if you wait until the plutonium is in the air to do evacuations, getting 35 million people out of greater Tokyo at the drop of a hat is not logistically possible, even with a massive Dunkirk style effort where everybody including private citizens does whatever it takes to minimize losses.

Seriously, has anybody posed the question of what they are going to do if large amounts of plutonium get put in the air by an explosion?

Mark 1 reactors are bad enough with uranium, but if that plutonium reactor is also a Mark 1 reactor…words like negligence and recklessness just don’t begin to describe it.

One major problem with plutonium: getting objective information about it.

Some claim that plutonium is no more toxic than caffeine.

Well, we have caffinated beverages, when are the plutonium ones coming out for when you need that extra jump?  I express skepticism.

Others who are vested in the opposite direction claim that plutonium is extremely deadly.

The sample sizes are mostly animal studies and there are those issues of whether these are wholly objective.

I think that the panic about the reactor shows that the powers that be are in fact concerned about more than the population being exposed to an energy drink.

There seems to be at least some concensus that plutonium is far more dangerous inhaled than ingested.   Face masks may help a great deal.

There seems to be little easily available information about degrees of exposure between that which will be almost immediately lethal and minor exposure.

The amount of plutonium exposure that is considered “safe” is the lowest of any of the radioactive substances.

Defining terms such as “lethal” is important in this kind of context.  What time frame does it have to kill you within to be considered lethal?   If you had a life expectancy of a decade or more and that reduced to a couple of years an ordinary person would probably consider that pretty lethal, although I suspect that it wouldn’t fall within the definition used in studies.

Loss of power threat to power plants?

Check this out: http://www.cnn.com/2011/US/03/15/nuclear.plants/

That is pretty much my analysis.

And again the paradox of shutting down a plant actually increasing the risk.

It would make more sense to have at least minimal internal energy creation rather than a full shut down, including after a quake, so that the plant can power itself enough to prevent catastrophy.

Is the irony of a plant blowing up for lack of power lost on everybody but me?

The irony of a plant, in fact several of them, blowing up because procedures were followed exactly and the automated shut down was successful and everything went as it was supposed to, is I think now widely appreciated.