While the US was focused on the health care drama over the weekend, over across the pond events are rapidly deteriorating in euro land. For this week’s Outside the Box I offer two columns, one from the Financial Times and another from the London Telegraph. Both describe the problems that the eurozone faces. It is not pretty.
I was sent this note from a Steve Stough who translated this from a German TV news show’ It is a nice set-up for the two short columns.
I was reading an interview with Germany’s most-quoted economist and then, all of a sudden, his face pops up on a TV show (a panel discussion on Germany’s version of Fox Business News) at the same time, so I paid close attention. Hans-Werner Sinn’s remarks are apparently listened to as closely as are the Federal Reserve Chairman’s remarks in the US. He said:
The Greek drama will have a ‘frightful’ (‘schreklich’) ending no matter which course of action is taken. The objective is to avoid having a Greek default trigger another banking crisis across the EU.
The EU member states are too financially fragile to take on any flaky Greek debt. The actual Greek deficit is running at 16% of GDP, not 12% as previously reported. Greece is in a deepening retraction, not a recovery, as previously claimed. [Germany's social security, welfare, unemployment, and health care entitlement programs are all running cash-negative or soon will be, but that is another subject entirely. Angela Merkel has a committee established to work on tax reform, meaning tax rate reductions - Steve].
There are three bad alternatives. He recommends #3 (effectively, default):
A Franco-German bailout. Dr. Sinn believes this is impractical and the worst of the three alternatives because the amounts required for an effective bailout are so large that it would trigger a jump in yields on French and German sovereign debt which would result in a Euro-wide financial crisis. In addition, Angela Merkel said ‘no,’ and so did Guido Westerwelle (her coalition partner and foreign minister).
IMF loans. Dr. Sinn believes that this would accelerate the Greek economic contraction with a dramatic deflation of wages and prices, which could lead to civil war, revolution and a political destabilization of the area.
Exit the Euro zone, revive the Drachma, re-denominate the sovereign bonds in Drachma, let the Drachma collapse, and rebuild after the collapse, largely on tourist remittances Assuming a small amount of domestic (internal) default, this would be the least-painful to the Greek populace, but German banks and investors would lose approximately $38 Bn in bond investments +/- what can be recovered after the Greek economy recovers. Eventually, Greece would be allowed to re-join the EU.
Formation of an EU monetary fund is out of the question, he believes, because it requires treaty modifications that might take many years to pass.
As an aside, he said that if German tax rates are not lowered, that Germany will slide back into recession.
Steve Stough
As a quick aside, I know I said two weeks ago that I would do an assessment of the affect of taxes on the US economy. I decided to hold off until we can see what the health care taxes rally look like, rather than guessing. I will get to it, as I am quite curious as to the total level of the tax increases.
Some interesting reading material for your Monday afternoon pleasure:
• New York Fed Warehousing Junk Loans On Its Books: Examiner’s Report (Huff Po)
• Sentiment’s dark cloud (Marketwatch)
• Buh-Bye: Finra shuts down GunnAllen (Investment News)
• Where Does U.S. Foreign Aid Go? (Economix)
• High-End Repo Men (WSJ) We’ve discussed this topic before
• Panasonic 3-D TVs Sell Out as ‘Avatar’ Technology Reaches Homes (Bloomberg)
• Google tries a route around Chinese Web censorship (Salon)
• Snopes: The Mom-And-Pop Site Busts The Web’s Biggest Mythbusters (NPR)
• Natural Disaster and Extreme Weather Information Center (ebrary)
• YouTube’s Chief Counsel calls out Viacom for being lying weasels (YouTube official blog)
Last week, I noted the mass of trackback spam. The cause seems to be an auto generated “Related Content from the Web” add on that seems to be popular with the splogs.
Someone asked me how big a spam spike I was looking at that I was writing — here’s the visual depiction:
Peter Boockvar dug up these fascinating charts from this CBO report from 2002.
What really surprised me is how consistent the US economy has been for most the latter half of the 20th century: About 20% of GDP. It starts about 19%, peaks at about 23% then falls back to about 18 and a half%.
Note that this data is before the Bush’s Prescription Drug Act or Obama’s Health Care bill.
Collaborize from http://democrasoft.com/ will let you organize conversations, capture ideas, get feedback from your coworkers, friends, or audience. I speak with CEO, Richard Lang, and learn more about this new service that launches tomorrow at the DEMO conference.
Several emailers have asked me about what was the latest information with Burst.com. (“Hey, how about some non-public inside information to trade off of?”) I have been unable to discuss as I am a Board member, being one of those odd ducks who prefer not to go to jail.
Since its now official, I can point those who are interested to the following.
Burst.com (BRST) today announced its long-awaited new direction with the launch of Collaborize, its new easy-to-start, easy-to-use communications and decision tool for groups of all sizes. Collaborize is an online service designed to help both external audiences and internal teams of nonprofits and for-profit organizations address issues both large and small and drive toward actual implementation of collective solutions. The public announcement of Collaborize(TM) was made at the Spring DEMO Conference.
Burst.com is in the process of changing its name to Democrasoft(TM) to underline its new strategic direction. Collaborize is the first in an anticipated series of Democrasoft products built upon a common platform.
Collaborize arrives on the scene backed by the company’s 20 years of technology expertise and beta partners that include Medtronic, Robert Cringely, TechSoup Global, Monitor Group, Maverick Media, Wine Industry Network and others
Because of the flexibility and scalability built into its “cloud computed” technology, Collaborize can cost-effectively empower groups and organizations of all sizes: businesses, non-profits, governments and their citizens. It taps into the “Wisdom of We”(TM) to turn a group, organization or social network into a functioning community that can organize conversations, capture great ideas, collect votes and streamline group decision-making, all online and in real time.
Burst is presenting at Demo.com today; that presentation will be posted eventually.
Scobelizer did an interview with the CEO Richard Lang about Collaborize — the video is here . . .
"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -Thomas Jefferson (letter to John Taylor in 1816)
After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national...
entitlement programs are all running cash-negative or soon will be, but that is another subject entirely. Angela Merkel has a committee established to work on tax reform, meaning tax rate reductions - Steve].
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