Your Euro Debt Pr0n Post of the Day

Bloomberg.

Nov. 30 (Bloomberg) -- Spain’s banks may struggle to refinance about 85 billion euros ($111 billion) in debt next year as costs surge on concern continental Europe’s fourth- biggest economy may need an Irish-style bailout.

“There’s a universal dumping of Spain going on,” said Andrea Williams, who helps manage about 623 million pounds ($968 million), including shares in Banco Santander SA, at Royal London Asset Management. “The fear is that Portugal, Spain and Italy are now in line after what happened in Ireland.”

Freight train.

A Tiny Take On Wikileaks

Wikileaks is like a high school girl's very personal diary falling out of her backpack at school. In no time at all, everyone is pouring through it to see what she wrote about them. Every tiny criticism is blown out of proportion and the girl has to go into full-time damage control mode.

Elsewhere, Dean isn't impressed by the whole thing while Secular Apostate is less sanguine.

Cheezburger of the Day

see more Lolcats and funny pictures

Link of the Day

The Wall Street Journal has created a fantastic multimedia explanation of the European Debt Crisis' results. Check it out.

Keep in Mind, This Is Just the Beginning

Ireland is saved!* Now on to Portugal and Spain!

Nov. 29 (Bloomberg) -- The cost of insuring against default on Portuguese and Spanish government debt soared to record high levels as an aid package for Ireland failed to reassure investors the region’s debt crisis will be contained.

Credit-default swaps on Portugal jumped 36.5 basis points to 538.5, and contracts on Spain climbed 24.25 to 347, according to CMA...

“The market seems to think it’s inevitable Portugal requests assistance next -- perhaps in January? -- and then after that Spain will be scrutinized with a fine tooth comb over the coming months,” said Jim Reid, head of fundamental strategy at Deutsche Bank AG in London.

Just like the mammoth marital fight that occurs when you and your spouse come to the realization that having 5-digit balances on 6 different credit cards plus a mortgage plus two auto loans means that you're practically bankrupt, this is the part with all the yelling and jumping up and down. Once the screaming has stopped, the bills have to be paid. The real change will occur once priorities are reassessed and you have to live within your means while struggling to pay down those monstrous debts.

* - Well, at least until they realize they can't pay back a $113B loan.

Iceland Teaches, the World Ignores

Lost amidst the sturm und drang of the European debt crisis is the story of tiny Iceland.

Nov. 26 (Bloomberg) -- Iceland’s President Olafur R. Grimsson said his country is better off than Ireland thanks to the government’s decision to allow the banks to fail two years ago and because the krona could be devalued.

“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

This is the story of plenty of financial and fiscal crises before now and only Iceland seems to have it figured out. Lost amidst the wailing and grinding of teeth that this is the worst economy in (insert random number of decades here) is that human societies imploding from time to time is a natural consequence of the imperfections of humanity. In the past, the fastest recoveries have been the ones where the government didn't engage in massive interventions, FDR's endless, large-scale experimentation in the Great Depression included. This isn't just noise, the Iceland recovery is really happening. Unemployment in Iceland is less than 7% and their economy is starting to grow.


Michael Derks points out another unspoken truth in all of these bailouts - the debt problems are too big to rescue through nationalization.

“The taxpayer has no realistic prospect of being able to save their banks, such is the magnitude of their bad loans and their extraordinary dependence on central bank support,” wrote Michael Derks, chief strategist in London at foreign-exchange firm FXPro. “Both junior and senior bondholders in these insolvent banks need to suffer huge haircuts,” he said.

Meanwhile, closer to home, we nationalized GM, Chrysler, the entire home mortgage industry in the form of Fannie Mae and Freddie Mac ...

Bloomberg has disabled embedding, but here is a great interview with Olafur Grimsson. It's worth watching a national leader who gets it. Compare this to the serial statist spasms you see everywhere else.

Don't Panic About California Defaulting

... because it doesn't seem likely, given the state's constitution, writes Jamers Altucher in a column earlier this year.

The California constitution mandates that education costs be paid first out of any revenue coming in. California has about $90 billion in revenue. About 40% of that goes to education. After that, as per the California constitution, all debt payments have to be made. After that, California can spend on whatever it wants: police, landscaping, random buildings, etc. Debt service payments come to about $5.5 billion per year. In other words, each year California makes its debt payments, with an extra $50 billion to spare. This is why it has no problems refinancing and why municipal bond yields are at record lows. Most states have similar clauses in their state constitutions: that debt service payments come before anything else.

I know I'm a broken record on this, but it reinforces what I've been saying since the elections - Jerry Brown's victory was the high water mark for progressives. When California can't pay its bills, it doesn't default on its bonds, it whacks its services and employees. And who has the largest chunk of the slashable budget?

And the big winner is ... Health and Human Services! Let's hear a big round of applause for the unsustainable social programs!
In the comments of that article is this contrarian view:

As a investor, I have one simple question to ask - where is the money? Lets check - States like California are not independent countries like Greece - they are part of the US - so factor in Federal debt to the equation. State + Federal + muni debt. So where is the money to pay for all this debt? I expect a default. You can not tax people who do not have the money.

I don't see how this disproves the author's point. The bond servicing payments don't seem so large that the objection, "Where is the money" will ever come into play. With businesses leaving the state, there's no question that raising more taxes will prove to be fruitless, but that still doesn't lead to insolvency in terms of debt servicing. Insolvency will lead to an employee and benefits crisis instead, which is what we've been seeing with furloughs, mandatory days off without pay and the state issuing IOUs in lieu of benefits checks.

Tromboncino Squash

... from my mother's garden, arrangement by my wife.


More info on Tromboncino squashes here.

Celebrating Caturday

I shot this one yesterday. I love the way the background is overexposed and blurred. It really sets off our Maximum Leader's regal face. The exposure on her fur was just right and you can see individual hairs if you click and look at the larger version. She's a bit dirty and rumpled as moments before she had been happily rolling around on the ground.

Surf Movie Saturday

We're going to see this one today. Can't wait.

And in Other News, You Can't Stop a Freight Train Quickly

From Bloomberg, with emphasis added by me.

Nov. 26 (Bloomberg) -- Borrowing costs for Europe’s most indebted nations are at record highs as Ireland’s capitulation in accepting a bailout of its banking industry stokes concern that other countries also will have to seek aid.

The average yield investors for 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.57 percent today, a euro-era record. The average premium investors demand to hold those securities instead of German bunds widened to as much as 492 basis points, the highest level of 2010. The average cost of insuring against default by the five nations using credit- default swaps reached a record 517 basis points on Nov. 23.

It's time for a Marc Faber encore.

You can't have the kind of debts (Greece, Portugal, Spain, Italy) has with (olive oil, sardine, tourism, lousy Italian cars) income. This is like a runaway freight train and the bondholders and European Central Bankers keep getting surprised every time the thing smashes through another flimsy barricade.

Jerry Brown's election as governor of California was the high water mark of the progressives across the Western world. This freight train of debt was started when we began making social spending promises we knew to be unsustainable and it picked up speed every time we launched another doomed-to-fail War on Poverty program.

It won't stop until many of those social spending programs have been dismantled, either deliberately through austerity measures, or involuntarily through the inflation that comes with printing money to pay for them.

Happy Thanksgiving!

Thanksgiving as a holiday was begun by Abraham Lincoln with a proclamation that contained this passage:

No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.

It has seemed to me fit and proper that they should be solemnly, reverently, and gratefully acknowledged, as with one heart and one voice, by the whole American people. I do therefore invite my fellow-citizens in every part of the United States, and also those who are in foreign lands, to set apart and observe the last Thursday of November next as a day of thanksgiving and praise to our beneficent Father who dwelleth in the heavens.

In the spirit of Honest Abe*, I'd like to say that I am deeply thankful that God has given me innumerable chances to recover and learn from mistakes and friends (which includes all y'all) and family who have shown me supportive kindness and understanding forgiveness throughout my life. God bless all of you.

* - Sometimes you can be a little too honest. :-)

Cheezburger of the Day

In for a Dime, in for a Trillion

A thought occurred to me as I was reading a couple of articles about the European debt crisis yesterday. Right now, the European Central Bank (ECB) is printing money and loaning it to Greece and Ireland (soon to include Portugal and Spain) because these countries can't pay their bills without access to more loans. The ECB is holding interest rates low to make it easier on these borrowers, but the money is still borrowed and that debt still has to be serviced. What happens when (not if) they discover that, say, Portugal is insolvent?

Once you've printed the money and loaned it out, it's too late to get it back. Unlike loans from German and French banks, no one is going to immediately go under if the loans are simply forgiven and the money is effectively gifted to Portugal. If you aren't going to draw the line now and force bankruptcies and liquidations, what would make you do it a year from now when you've got so much more invested? Once you start down the road of printing money to cover government debts, where do you stop, particularly if the government you're lending to has no hope of ever paying it back?

This is the point Marc Faber has been making for quite some time - these nations are insolvent and will never be able to pay back these loans. The money quote starts at 0:30.

So once the ECB has bought up the debt and the commercial banks in Germany have quietly sold theirs off to the ECB, the only one taking the hit when you finally forgive the debts of Portugal or Greece will be people holding Euros and that will happen through inflation. Inflation is relatively indirect and politicians can point fingers at each other about it while the banks and investors get out from under the loans they made to insolvent countries.

This is a long way of asking, "What's the real problem here?" Is there a real debt contagion risk? Does anyone think that the ECB or Fed, once having printed tons of money to loan to governments is ever going to grow a backbone and demand a liquidation once it becomes obvious the debts will never be repaid? Or will they instead, just forgive the debts and wash away the problem in a cataract of printed Euros and Dollars?

Amateur Video from North Korean Artillery Attack

Dig this.

I'll Bet Black Widow Spiders Are Drunk Half The Time

Here's a photo of one that lives right outside of our office at work.


I've read that they're indifferent web builders. This one looks like something a petulant 3rd grader would do on a homework assignment she hated. It's just a random spray of silk spattered across one corner of our window. After all, what's the point of doing a good job? All the web has to do is slow the prey down so the spider can run over and bite once. The spider is saying, "Whatever. I don't have time for this web stuff, man, I'm busy. Grab me another beer, OK?"

I Don't Know Why I Love This, But I Do

I Think Every Grilling Attempt by Young Men Involves Food on Fire and Beer

... and, oh yes, some young ladies wondering aloud if the grill is supposed to be a mass of flames. Like this.

Man, does that look familiar.

Hedgehogs Are Full of teh Awesome!

No, really.

Losers Don't Dictate Terms

... that's the only thing I can think of every time I read these kind of sentiments coming from the White House.

Nov. 20 (Bloomberg) -- President Barack Obama said countries running trade surpluses should boost domestic demand and allow their currencies to strengthen, repeating criticism he made of China a week ago at a meeting of global leaders.

“Countries with big surpluses have to figure out how they can expand demand,” Obama said today at briefing after a North Atlantic Treaty Organization summit in Lisbon. “Countries with significant deficits, we have to save more and focus not only on consumption, but also on production and exports.”

We've worshipped consumption and demonized production and now we're prostrate before our creditors, forced to print paper money to cover our debt payments. Obama and his buddies' sound like Wesley Mouch from Atlas Shrugged issuing Directive 10-289.

"In the name of the general welfare," read Wesley Mouch, "to protect the people's security, to achieve full equality and total stability, it is decreed for the duration of the national emergency..."

Everyone around the world should stop trying to make money by producing valuable things at good prices because, well, we're losing. Oh yeah, that's going to work out well. It's like the academics think that everyone else is out for "fairness" just like they are. They don't like the idea of competition and winners and losers, so they want to ban it. Instead, the Chinese and Germans are happily kicking our butts and will continue to do so.

The Obama Admnistration might be surprised to discover that the rest of the world isn't banning "touching" in their schools.