Flashman Letters

Grantham comes face-to-face with a paradigm shift - Click to link for whole thing

I believe that we are in the midst of one of the giant infl ection points in economic history. This is likely the beginning of the end for the heroic growth spurt in population and wealth caused by what I think of as the Hydrocarbon Revolution rather than the Industrial Revolution. The unprecedented broad price rise would seem to confi rm this. Three years ago I warned of “chain-linked” crises in commodities, which have come to pass, and all without a fullyfl edged oil crisis. Yet there is so little panicking, so little analysis even. I think this paradox exists because of some unusual human traits

via ftalphaville.ft.com

Some Politics of U.S. "Hooliganism" - Rebutting the whining of currency manipulators

Some Politics of U.S. "Hooliganism"

via ipeatunc.blogspot.com

A Tale of Two Trilemmas - click to link - thanks ipad

By: Kevin O’Rourke

via www.eurointelligence.com

Hats off to Berlusconi. It takes a lot of energy to misbehave so thoroughly

I don’t know how Silvio Berlusconi finds the time. Me, I’m ragged. Get up, write a bit, wash, eat, feed the child, stagger to nursery, stumble to work, stay there, go home, eat again, fall asleep on sofa watching The Killing; that’s pretty much my lot.

via www.spectator.co.uk

Click to link-our dumb republic: Gov. Perry Issues Proclamation for Days of Prayer for Rain in Texas

Thursday, April 21, 2011  •  Austin, Texas  •  Proclamation

via governor.state.tx.us

Predicting the improbable: Evidence from playing the lottery | vox - Research-based policy analysis and commentary from leading economists

Important events are hard to predict – a fact that is particularly hard-felt when it comes to low probability events with dramatic consequences. Nuclear catastrophe, financial crisis and the like are things that even experts struggle to predict. The difficulty stems from a lack of understanding of the underlying factors and complex interactions among causes (probabilities are not independent but conditional on other events).

via www.voxeu.org

Skeptic Pitied | The Onion -

"I honestly feel sorry for the guy," said neighbor Michael Eddy, 54, a born-again Christian. "To live in this world not believing in a higher power, doubting that Christ died for our sins—that's such a sad, cynical way to live. I don't know how he gets through his day."
Coworker Donald Cobb, who spends roughly 20 percent of his annual income on telephone psychics and tarot-card readings, similarly extended his compassion for Schaffner.

"Craig is a really great guy," Cobb said. "It's just too bad he's chosen to cut himself off from the world of the paranormal, restricting himself to the limited universe of what can be seen and heard and verified through empirical evidence."

via www.theonion.com

The European Union in deep trouble | Gideon Rachman

What do the following stories have in common?

1. France has started to block trains from Italy to intercept illegal migrants from North Africa.

2. A Eurosceptic party has made big gains in the Finnish general election.

3. Political squabbling in Portugal is raising doubt about the country’s ability to negotiate a bail-out.

4. There are growing demands in Greece for the country to default on its debts.

Answer: These are all symptoms of the same problem. The political understandings that underpin the EU are beginning to unravel.

via blogs.ft.com

An Unclear Path, RealClearWorld - A review of Obama, Sarko, and Cameron's Op - Ed

...so long as Qaddafi is in power, NATO must maintain its operations so that civilians remain protected and the pressure on the regime builds. Then a genuine transition from dictatorship to an inclusive constitutional process can really begin, led by a new generation of leaders. In order for that transition to succeed, Qaddafi must go and go for good. At that point, the United Nations and its members should help the Libyan people as they rebuild where Qaddafi has destroyed — to repair homes and hospitals, to restore basic utilities, and to assist Libyans as they develop the institutions to underpin a prosperous and open society.

Nowhere in the article, however, do they explain how they intend to bring about his downfall. The leaders state that unseating Gaddafi was not the point of the mission, but then declare that the NATO mission will not end unless and until Gaddafi steps aside. So it's only natural for people to point out that there is a rather glaring mismatch between means and ends here. Why harp on the fact that the goal is Gaddafi's departure if you're not going to take the necessary steps to hasten him to the door?

via www.realclearworld.com

Yanis Varoufakis, "It's the (German) Banks, Stupid!"

So, the only thing stopping Germany from announcing here and now a wholesale debt restructure is the banks.  Thus my term the Great Banking Conundrum.  The reason why banks are such a large problem is that they have their tentacles everywhere.  Their profit is theirs to enjoy but their bankruptcy is everyone's loss.  Unable to cash in their "assets" at a time of crisis, i.e. to retrieve their loans from their debtors (homeowners, businesses, governments), if they are forced to come clean regarding the true value of these assets, bank insolvency looms.  So, Europe is not forcing serious stress tests upon them.

In other words, the reason the German government remains undecided on the Greek debt is that it is still struggling to compute the losses to German banks from a restructure of Greek, Irish, and Portuguese sovereign debt.  There are two issues here: First, it is simply impossible to calculate the knock-on effects.  For instance, while we know almost to the last euro the exposure of European banks to peripheral debt (here is a great interactive guide), it is impossible to predict precisely how, say, a 50% haircut of that debt will reverberate throughout a financial system whose opacity and inter-connectivity is notorious.  A recent figure that was given to me confidentially, by a well-known German banker, is that a 50% haircut on EU peripheral debt would translate into an extra €850 billion of fresh capital that would need to be put into French and German banks alone to compensate them for the losses they will end up incurring.

Secondly, there is an international dimension that an export-oriented country like Germany cannot afford to ignore.  For example, many of these bonds are owned by non-European banks.  If they lose a lot of money, these losses can trigger another round of government infusions (in places like Japan, China, Korea, etc.), which may affect local investment in projects that would otherwise require German capital goods.  What is the likely magnitude of this problem?  The Bank for International Settlements tells us that the total exposure of non-EU banks to Greek, Irish, and Portuguese debt is a mere $363 billion.  This is peanuts, by the standards of the 2008-11 crisis.  But then again it does not take into consideration (a) the amounts owed to UK banks and (b) the more-than-likely Spanish sovereign troubles.

In view of the serious problems that a horizontal debt restructure would cause to Germany' banks and to its external trade relations, the German Ministry of Finance is therefore reluctant to come out, once and for all, in favor of a debt restructure.  On the one hand, they have concluded that it is inevitable.  On the other, they know it will bring huge costs to bear upon primarily Germany's own banks but also, and this is equally daunting, its export sector.  The result is a new round of . . . dithering.

via mrzine.monthlyreview.org