Monday, November 28, 2011

This would be relevent...

...if the same warnings were given two years ago. Like the sirens in action films being audible *just* in time for the final credits to start rolling.

While Moody’s central scenario remains that the euro area will be
preserved without further widespread defaults, even this ‘positive’
scenario carries very negative rating implications in the interim period.
The rating agency notes that the political impetus to implement an
effective resolution plan may only emerge after a series of shocks, which
may lead to more countries losing access to market funding for a
sustained period and requiring a support programme. This would very
likely cause those countries’ ratings to be moved into speculative grade
in view of the solvency tests that would likely be required and the
burden-sharing that might be imposed if (as is likely) support were to be
needed for a sustained period.

However, over the past few weeks, the likelihood of even more negative
scenarios has risen. This reflects, among other factors, the political
uncertainties in Greece and Italy, uncertainty around the final haircut
imposed on holders of Greek debt, the emphasis in the recent Euro Summit
statement on the conditional nature of the existing support programmes
and the further worsening of the economic outlook across the euro area.
Alternative outcomes fall into two broad categories: those involving one
or more defaults by euro area countries (in addition to Greece’s PSI
programme); and those additionally involving exits from the euro area.

Saturday, November 26, 2011

Tensions increase

The inexperience is telling. Much, much more of this to come.

The company involved, New Forests Company, grows forests in African countries with the purpose of selling credits from the carbon-dioxide its trees soak up to polluters abroad. Its investors include the World Bank, through its private investment arm, and the Hongkong and Shanghai Banking Corporation, HSBC.

In 2005, the Ugandan government granted New Forests a 50-year license to grow pine and eucalyptus forests in three districts, and the company has applied to the United Nations to trade under the mechanism. The company expects that it could earn up to $1.8 million a year.

But there was just one problem: people were living on the land where the company wanted to plant trees. Indeed, they had been there a while.

Sunday, November 20, 2011

Carrier Group Locations

Foreign policy being inextricably tied to economic interests, it is instructive to note where U.S. Carrier groups are located. The Recapitulator notes multiple carrier groups in and around the persian gulf.

(Link can be found on this blog titled "Carrier Group Locations" in the "Useful Links" section to the right)

Redenomination risk.

An issue as old as finance (the risk that the currency you possess from another country or culture is not what is currently used in said country) makes a comeback with respect to the Euro area.

full article here:

Investors should consider three main parameters when evaluating redenomination

1) legal jurisdiction under which a given obligation belongs; 2) whether a break-up can happen in a multilaterally agreed fashion; and 3) the type of Eurozone break-up which is being considered, including whether the Euro would cease to exist.

In a scenario of a limited Eurozone break-up, where the Euro remains in existence for core Eurozone countries, the risk of redenomination is likely to be substantially higher for local law obligations in peripheral countries than for foreign law obligations. From this perspective, local law obligations should trade at a discount to similar foreign law obligations.

In a scenario of a full-blown Eurozone break-up, evaluating the redenomination risk is more complex, as even foreign law obligations would have to be redenominated in some form. In this case, redenomination could happen either into new national currencies (in accordance with the so-called Lex Monetae principle), or into a new European Currency Unit (ECU-2). This additional complexity in the full-blown break-up scenario leaves it harder to judge the appropriate relative risk premia on
local versus foreign law instruments.

The distinction between local and foreign law jurisdiction also becomes less important in situations involving insolvency. In those instances, the lower redenomination risk associated with foreign law obligations may be negated by higher haircuts. Hence, the legal jurisdiction therefore seems most relevant from a trading perspective in connection with high quality corporate credits which are
highly resilient to insolvency.

Read more:

Thursday, November 17, 2011


...a continuing series...this is shaping up to be another containment strategy. Something we have a great deal of experience with.

When President Obama met with Australian Prime Minister Julia Gillard on Wednesday, they announced plans for the first sustained American military presence in Australia.

By the end of 2012, 250 Marines will begin six month rotations, and in the years ahead, that force will build out to 2,500. They'll train alongside Australian troops and live on Australian bases. In addition, the U.S. Air Force will have additional access to Australian airfields.

At the news conference with the Prime Minister, President Obama said:

The United States of America has no stronger ally than Australia. We are bound by common values, the rights and the freedoms that we cherish. And for nearly a century, we’ve stood together in defense of these freedoms. And I'm very happy to be here as we celebrate the 60th anniversary of our alliance, and as we work together to strengthen it for the future.

Problems and flash points

While "indexes" are fraught with computational and aggregation error, this failed state index is interesting. Nothing that we have not contemplated before, but the granularity of the data gathered is as good as can be at the moment.

Monday, November 14, 2011


...Once again, the illusion of control is laid bare by the Euroskeptic.

Chancellor Angela Merkel tells us that peace in Europe can no longer be taken for granted, and she is right. Her own Gothic actions and her inflexible imposition of 1930s Gold Standard contraction and debt-deflation on Southern Europe is itself preparing the ground for Europe’s civil war (hopefully pacific), a rebellion by the South against the North.
Italy’s youth are turning. Watch the footage of students chanting "democracy" and brandishing their "95 Theses" of Wittenberg revolt as poet Van Rompuy tried to speak in Fiesole.
"No to Austerity," starts the Luther List: "Troika out of Greece", "IMF and ECB out of Italy, Ireland, and Portugal", it goes on.
"The EU has become ever less accountable to the people of Europe. The undemocratic structures have infiltrated the very structures of the Union," they said.

Friday, November 11, 2011

The intrinsic...

...and pathological need for order in humans takes various (but universal in frequency and intensity) manifestations.

One of these is the requirement that market changes have a "cause". Any cause will do. So last weeks volatility was immediately ascribed to problems in Europe. But, as we know the discounting nature of the markets, there is likely something else causing trepidation in U.S. stocks.

So the following article is a more likely "cause".

Call it Wall Street's other geopolitical driver, one played out not in Athens or Rome, but close to home in Washington.

WSJ's Janet Hook reports on yet another week ending without a deal from the congressional deficit supercommittee. Plus, what is likelihood that the deficit negotiations will come down to the 11th hour?

As stock-market investors fret over sovereign-debt contagion in Europe, a Nov. 23 deadline for the U.S. Congress's so-called budget supercommittee is fast approaching. The committee is assigned to devise at least $1.2 trillion in deficit-reduction measures over 10 years, or else automatic cuts ordained by Washington's summer debt-ceiling agreement are triggered.

Friday's market action gave little hint that investors remain perturbed over Europe's debt situation, much less any happenings in Washington, as the Dow Jones Industrial Average surged by triple digits. But the gains came on the kind of light volume that usually suggests a lack of participation.

Wednesday, November 09, 2011


...what? Interesting diplomacy.

WASHINGTON, Nov. 8, 2011 /PRNewswire via COMTEX/ -- In the run-up to the international climate negotiations in Durban later this month, China has responded to efforts to ban the trading of widely discredited HFC-23 offsets by threatening to release huge amounts of the potent industrial chemical into the atmosphere unless other nations pay what amounts to a climate ransom.

China's threat comes after the European Union and other nations moved to ban HFC-23 credits from internal carbon markets in recognition of the perverse incentives created by these credits under the UN Clean Development Mechanism (CDM). The vast amounts paid for HFC-23 offsets have led factories in China and elsewhere to manufacture far more HCFC-22 and its HFC-23 by-product than necessary, just to maximize the amounts paid to destroy HFC-23 through the UN-backed carbon trading scheme.

Tuesday, November 08, 2011

Modest improvement... does appear the trajectory is not full-on descent into chaos, as the EOTers have constantly proclaimed...


In September, the hires rate was little changed at 3.2 percent for
total nonfarm. The hires rate increased in construction and
professional and business services as well as in 3 out of 4 regions.
(See table 2.) The number of hires in September was 4.2 million, up
from 3.6 million in October 2009 (the most recent trough) but below
the 5.0 million hires recorded when the recession began in December
2007. The number of hires has increased 17 percent since the end of
the recession in June 2009.

Over the past 12 months, the hires rate (not seasonally adjusted) was
little changed for total nonfarm, total private, and government. The
hires rate increased for construction and professional and business
services. The hires rate increased in the Midwest and decreased in the

Excellent example...

...of a Sovereign's ability to change self-imposed rules in the name of economic growth, mirroed by the ability of industry to apply pressure for the same reasons. Note also the insular nature of the process.

That German exports have remained strong despite the brewing crisis in Europe is hardly a secret. Indeed, a new report emerged on Tuesday indicating that exports actually climbed in October by 0.9 percent relative to September. In comparison to September 2010, exports even skyrocketed by a hefty 10.5 percent.
Chancellor Angela Merkel, it would seem, is anxious to do her best to ensure that the trend continues. And according to information obtained by SPIEGEL, arms exports have become one of her administration's focuses.
In a position paper delivered to the European Commission on Oct. 27, which SPIEGEL has seen, the German government argues that, when it comes to export controls, "The effort to prevent proliferation and destabilizing arms accumulations should not unreasonably hinder or impede legal trade, particularly when it comes to economic relations with new regional powers."
The document focuses on so-called "dual-use goods" which have both military and civilian applications. Both "foreign and security policy considerations" as well as "economic interests" should be "adequately considered," the position paper states. German arms exports amounted to €15.1 billion between 2005 and 2010, making it the world's third leading weapons exporter.
The words "human rights" do not make an appearance in the 21-page document, though Merkel frequently emphasizes that her government's security policy is "values driven."

Sunday, November 06, 2011

Dangerous opportunities...

...for governments to jettison principal in the name of expediency.

In Greece and Italy, there has been strong criticism of the perceived arrogance of "Merkozy," as the Franco-German duumvirate are increasingly nicknamed, in summoning their prime ministers to receive ultimatums.

German and French officials shrug off such complaints as inevitable, noting that EU partners are even more unhappy when France and Germany do not agree, since that paralyses Europe.

"There is always a trade-off between legitimacy and efficacy," said an EU official involved in the Frankfurt Group. "The euro area institutions were not designed for crisis management so we need innovative solutions.

"In an emergency like this, we have to have a structure that works," he said, adding that the presence of the European Commission and of European Council President Herman Van Rompuy guaranteed that the interests of smaller member states would be taken into account.

Saturday, November 05, 2011

Powder Kegs... I have said before, Italy is the real weak link in the entire Euro problem.

Nov. 5 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi’s closest aides told him he doesn’t have a majority in parliament anymore and he should consider stepping aside, la Repubblica reported, without saying where it got the information.

Rational response to regulation...

...interesting circumventions should be applauded, not prosecuted. But that is a different world unfortunately. Interesting article.

System D is a slang phrase pirated from French-speaking Africa and the Caribbean. The French have a word that they often use to describe particularly effective and motivated people. They call them débrouillards. To say a man is a débrouillard is to tell people how resourceful and ingenious he is. The former French colonies have sculpted this word to their own social and economic reality. They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of "l'economie de la débrouillardise." Or, sweetened for street use, "Systeme D." This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy. A number of well-known chefs have also appropriated the term to describe the skill and sheer joy necessary to improvise a gourmet meal using only the mismatched ingredients that happen to be at hand in a kitchen.

Channelling Sartre...


Thursday, November 03, 2011


DJ Obama To Merkel: We Are Totally Invested In Your Success

Wednesday, November 02, 2011

Slight improvement...

...with all the turmoil, modest signs of change in growth's pesky second derivative.

Tuesday, November 01, 2011

Sovereignity makes a comeback... Europe of all places.

Animals have a tendency to return home when lost. So it is with politicians who make unwarrented expeditions into Global Goverment.