Archive for February, 2010

Review:The Threat Closer to Home: Hugo Chavez and the War Against America

Posted in Blogroll on February 18, 2010 by Minimux

With the Middle East occupying most of America’s attention during the past eight years, it has taken a little longer for the expected propaganda books about Venezuela to appear in the Current Events section of the local bookstores. For Douglas Schoen and Michael Rowan it’s better late than never, so here they are with the hysterical, ultra-paranoid “The Threat Closer To Home.” Following the classic Bush administration line of thinking when it came to progressive movements down South, Schoen and Rowan rant and rave about the “real threat” to our shores: Hugo Chavez and his diabolical plans for world domination, or at least domination of our hemisphere. Alas, this is nothing but a fanatical disinformation vehicle that ends up coming across more like a bad James Bond movie than an actual work of serious scholarship.

Readers should be aware that starting with the authors themselves, this is a completely unrialable work. Consider that Michael Rowan has good reason to hate Chavez and other Leftist leaders in South America, they are rolling back the disastrous policies of most Rowan’s former bosses, including former corrupt Presidents of countries like Bolivia. Can we also trust Rowan as an objective source when he has also consulted right-wing Venezuela opposition leader Manuel Rosales, who has been connected to narco trafficking and paramilitary activities in the state of Zulia? Amazingly, this is information you can actually read on the book’s jacket.

Let’s get down to the basics of the book’s arguments. The authors claim Chavez is some sort of dangerous destabilizing force in Latin America, throwing the usual accusations about support for Colombia’s FARC, and even claiming Chavez has Hezbollah training camps in Venezuela. They of course provide, vague, crackpot sources already discredited by much more serious scholarship in works by authors like Eva Golinger and Nikolas Kozloff. Like all propagandists, the authors know how to gloss over certain realities and distort known information. For example, the authors never make any mention on how when it comes to Colombia, all the serious scholarship shows that is it is the US-funded, right-wing Colombian government which has pushed the violence to dangerous new levels. Colombia under Alvaro Uribe now ranks as the #1 human rights violator in the hemisphere, with disastrous levels of unemployment and poverty rising hand in hand with the government’s dangerous forms of repression including political assassinations and massacres in the country’s rural zones. But of course to Rowan and Schoen, the real problem is Chavez, who is deemed a “terrorist supporter” because he has demanded a negotiated end to the conflict. As with all statist propaganda, the violence by our clients is acceptable, all else is terrorism and a cosmic threat to our safety. For more information I recommend the books “Evil Hour In Colombia” by Forrest Hylton and “Colombia: A Brutal History” by Geoff Simons. Those are serious works on the subject written by serious scholars who have lived within and understand the culture of the hemisphere.

One of the most biased, fractured and terribly researched chapters has to do with the April 2002 coup which overthrew Chavez for 24 hours only to be broken by the Venezuelan people themselves. The authors claim that Chavez’s protests about the coup being US-backed are fantasies based soley on certain misguided comments by people like Condi Rice soon after the coup. This is a joke. As investigators like Eva Golinger have displayed in works like “The Chavez Code,” official documents obtained through the freedom of information act show that the US was fully aware that the right-wing opposition was planning a coup, no is certain of how far US involvement went, but it is a certainty that the Bush White House knew what was coming and supported it all the way. The authors also try to wiggle around the well-known evidence showing that it was the opposition which carried out the deadly violence which impulsed the coup during protests in Caracas, using laughable excuses including murky Chavez quotes.

One of the most laughable sections for anyone well-versed in recent Venezuelan politics also deals with what happened after the coup, when the plotters installed a puppet businessman, Pedro Carmona as President. The authors rightfully denounce Carmona’s moves to shut down the courts, dismiss congress and make himself a defacto dictator. but they then try to lay all the blame for this on Carmona himself, citing one lonely opposition figure who went against the fascist protocal. It is probably true some coup leaders went against Carmona’s decisions, but the vast majority did not and openly backed them as can be read in “The Chavez Code,” “Hugo!” by Bart Jones or you can judge for yourself on Youtube by watching the excellent documentary “The Revolution Will Not Be Televised.” The authors also make bogus protests about Chavez repressing the coup plotters. Most of them are actually free and participating in Venezuelan political life, some even won back positions of power in the November 2008 regional elections. Carmona went to hide in Miami for a while, now he’s reportedly operating in Colombia.

The rest of “The Threat Closer To Home” is full of the same classic fear mongering always aimed towards those who simply do not follow US orders on how to run their affairs. The authors scream and rant about Chavez forming alliances with Iran, calling this a major threat to the world blah blah blah. Venezuela and Iran do indeed have agreements, but they are no different from any normal trade and cooperation agreements made between nations. The authors actually go on to critique regional moves towards greater global intergration on the grounds that, hey why should Latin America begin to form relations with outside nations when it has us and our crumbling economy right next door?! And of course there is the typical double standard nobody likes to mention. Hugo Chavez apparently cannot conduct relations with Iran, but the US is free to make actual dangerous alliances with brutal regimes in Egypt, Colombia, Peru, Mexico, Jordan, and let’s not forget Israel, which killed over 1,000 civilians in December when Venezuela’s death count from imposed aggression on neighbors stands at 0.

According to the authors, Hezbollah is apparently training somewhere in Venezuela, possibly even Hamas. This is a lunatic claim which has been advanced particularly by right-wing Republican politicians from Miami such as Lincoln Diaz Balart and Illiana Ros-Lehtinen. It should be noted that Lehtinen and Balart are notorious for supporting armed terrorists and groups like Luis Posada Carriles, Alpha 66 and Omega, which operate in Miami and are responsible for bloody acts of violence towards Cuba. Carriles and Bosch (who Lehtinen campaigned to be pardon by Bush I), bombed a Cuban airliner in 1976, killing 73 civilians. The authors again provide vague, pathetic sources and second-hand gossip as evidence. Interesting that no serious Israeli scholarship or government report from Tel Aviv has denounced this rather alarming development right down south from our border. In fact, it is quite alarming that the Bush White House never made a point about this development considering the accusations have been floating around since 2003 at the earliest.

Chavez is accused in the book of crushing democracy at home, stealing elections, crushing dissent etc. A Carter Center quote is taken out of context concerning the 2000 elections, the authors of course never mention the Carter Center quotes about the 2004 referendum and 2006 elections which it called some of the most transparent ever. Carter himself confirms this in his book “Palestine: Peace Not Apartheid,” he ranks them in transparency next to the elections in…gasp! The Palestinian territories! Someone hurry! Jimmy Carter is a terrorist sponsored by Hamas! Poll after independent poll also continues to show Venezuelans are the most satisfied people in the hemisphere with their democratic system.

One of the book’s greatest faults is that it tries to attribute the recent tide of Left-leaning elections in Latin America soley to Chavez’s influence and his promotion of “hatred” towards the United States. Of course it is inconvenient to mention the real reason for the recent shift in political power which is that neoliberal, economic policies turned the region into a greater catastrophe, virtually collapsing the economy of Argentina in 2001 and turning Nicaragua into the second poorest country in the hemisphere after Haiti (where another US-backed coup took place in 2004 with chilling similarities to what almost happened in Venezuela in 2002). The authors also never mention that when Chavez came to power under the Clinton White House, relations between Venezuela and the US remained pretty steady and respectful. It was after the 2002 coup that Chavez truly radicalized and declared his project as socialist, very similar to Cuba’s own declaration of a Communist state following the Bay of Pigs. Facts of course, always swiped under the rug by propagandists.

“The Threat Closer To Home” claims that instead of bombs, Chavez uses oil to threaten us. His most dangerous weapon is apparently providing free heating oil to poor US families through Citgo. The authors of course never make an effort to condemn US oil companies for rejecting social groups’ request for the service in the first place. Of course this is dangerous, not because it is part of Chavez’s plans for regional hegemony, but because he is doing what the American corporate culture refuses to do, and if it works, it might just make Americans look at their neighbors through different lenses apart from typical cliches.

Like Cuba, the Sandinistas, Grenada etc., Venezuela is now the new “imminent threat” to the most powerful and armed country in the world according to the authors. Are there things we can criticize about Hugo Chavez? Of course. But this book is not a serious critique, it is pure yellow journalism that offers nothing new. The authors seem to have just collected every anti-Chavez slur of the past ten years into one volume. Serious readers should seek serious works of scholarship. This book will no doubt join the club of those now forgotten works from the 1980s warning us about Nicaragua planning a mass scheme to then reach across tiny Central America and destroy our way of life. “The Threat Closer To Home” threatens to waste your time.

Financial Markets Outlook 2010, When Hope Turns To Fear

Posted in Blogroll on February 9, 2010 by Minimux

What Do Rising Sovereign Credit Default Swaps Mean?

Posted in Blogroll on February 9, 2010 by Minimux

ere are the CDS of Greece, Portugal, Spain and the U.S.:

Rolfe Winkler argues that – in the short-run – the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) will slash their budgets and get bailed out by the EU.

Simon Johnson thinks that the weakening Euro caused by the PIIGS’ woes will hurt American exports (weaker Euro equals stronger dollar), and could lead to problems for leading global banks.

Other commentators fear that the PIIGS’ crisis has as much potential as a financial “contagion” as the subprime meltdown and the failure of Lehman.

But for the long-term view, we need a little more perspective. One of the world’s leading economic historians – Harvard professor Niall Ferguson – says:

The economists are ill qualified to analyse the current economic situation since they lack the overview of historians such as himself.

“There are economic professors in American universities who think they are masters of the universe, but they don’t have any historical knowledge. I have never believed that markets are self correcting. No historian could.”

 

Ferguson warns of huge government debts threatening the solvency of entire nations:

“The idea that countries don’t go bust is a joke… The debt trap may be about to spring … for countries that have created large stimulus packages in order to stimulate their economies.”

But whether or not large nations actually go bankrupt, one thing is clear . . . Larry Summers, Ben Bernanke, Tim Geithner and their foreign counterparts have failed.

As I noted in December 2008:

BIS [the Bank of International Settlements - the "Central Banks' Central Bank] points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:

The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.

In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don’t have, central banks have put their countries at risk from default.

Nothing has changed. As former chief Merrill Lynch economist David Rosenberg writes this week:

First the governments bail out the banks who were (are) basically insolvent. Then these governments, especially in Europe, see their balance sheets explode and face escalating concerns over sovereign default. The IMF now predicts that the government debt-to-GDP ratio in the G20 nations will explode to 118% by 2014 from pre-crisis levels of around 80%.

Now, the ball is put back onto the banks because many have exposure to the areas of Europe that are facing substantial fiscal problems right now. According to the Wall Street Journal, U.K. banks have $193 billion of exposure to Ireland. German banks have the same amount of exposure and an additional $240 billion to Spain. Many international bond mutual funds also have sizeable exposure to sovereign debt of Portugal, Ireland, Greece and Spain as well. Contagion risks are back. Stay defensive and expect to see heightened volatility.

In a nutshell, toxic assets have basically been swept under the rug in the hopes that we will outgrow the problem. Leverage ratios across every level of society are still reaching unprecedented levels as the public sector sacrifices the sanctity of its balance sheet in its quest to stabilize the dubious financial position of the household and banking sectors in many parts of the world.

Whatever bad assets have been resolved have almost entirely been placed on the books of governments and central banks, which now have their own particular set of risks, as we have witnessed very recently in places like Dubai, Mexico, and Greece, not to mention at the state and local government level in the United States. We simply have not seen a reduction in the percentage of properties with mortgages that are “under water”, hence the FDIC has identified 7% of banking sector assets ($850 billion) that are in “trouble”, so how can it possibly be that the financial system is anywhere close to some stable equilibrium?

When accurately measured, including the shadow inventory from bank foreclosures, there is still nearly two year’s worth of unsold housing inventory in the United States, and commercial vacancy rates are poised to reach unprecedented highs, and this excess supply is bound to unleash another round of price deflation and debt defaults this year. The balance sheets of governments are rapidly in decline across a broad continuum, and it is particularly questionable as to whether Europe is in sound enough financial shape to weather another banking-related storm.

The global economy is set to cool off. Not only is China and India warding off inflation with credit tightening measures but most of the fiscal and monetary stimulus thrust in the U.S.A. and Canada is behind us as well. And, the fiscal tourniquet is about to be applied in many parts of Europe, especially the PIIGS (referring to Portugal, Ireland, Italy, Greece and Spain — these countries account for a nontrivial 37% of Eurozone GDP). Greece’s GDP has already contracted by 3.0% YoY, as of Q4, and is expected to contract 1.1% in 2010 and 0.3% in 2011 as a 13% deficit-to-GDP ratio is sliced from 13% to 3% (assuming this fiscal goal can be achieved politically). Portugal has a 9.2% deficit-to-GDP ratio that is in need of repair and Spain has a deficit ratio that is even worse, at 11.4% of GDP.

The bottom line is that even if the fiscally-challenged countries of Europe do not end up defaulting, or leaving the Union, the reality is that they will have to take draconian measures to meet their financial obligations. Devaluation was the answer in the past in Greece but it cannot rely on that quick fix this time around without leaving EMU and if it did, then that could make it even harder to service its Euro-denominated debts — at least not without a restructuring. And, if Greece did attempt at a debt restructuring, rest assured that Italy, Spain, Portugal and Ireland would be next — we are talking about a combined $2 trillion of potential sovereign debt restructuring that would more than triple the $600 billion direct cost of the Lehman bankruptcy.

This poses a hurdle over global growth prospects at a time when Asia will feel the pinch from the credit-tightening moves in China and India. And heightened risk premia will also exert a dampening global dynamic of their own in terms of economic decision-making by businesses and households alike. The intense sovereign risk concerns are not limited to Europe either. In the U.S.A. we saw CDS spreads widen out to their highest levels since the equity markets were coming off their lows last April. According to the FT, the Markit iTrax SivX [sic] index of CDS on 15 western European sovereign credits rose above 100bps on Friday for the first time ever.

The Fateful Geological Prize Called Haiti

Posted in Blogroll on February 9, 2010 by Minimux

President becomes UN Special Envoy to earthquake-stricken Haiti.

A born-again neo-conservative US business wheeler-dealer preacher claims Haitians are condemned for making a literal ‘pact with the Devil.’

Venezuelan, Nicaraguan, Bolivian, French and Swiss rescue organizations accuse the US military of refusing landing rights to planes bearing necessary medicines and urgently needed potable water to the millions of Haitians stricken, injured and homeless.

Behind the smoke, rubble and unending drama of human tragedy in the hapless Caribbean country, a drama is in full play for control of what geophysicists believe may be one of the world’s richest zones for hydrocarbons-oil and gas outside the Middle East, possibly orders of magnitude greater than that of nearby Venezuela.

Haiti, and the larger island of Hispaniola of which it is a part, has the geological fate that it straddles one of the world’s most active geological zones, where the deepwater plates of three huge structures relentlessly rub against one another—the intersection of the North American, South American and Caribbean tectonic plates. Below the ocean and the waters of the Caribbean, these plates consist of an oceanic crust some 3 to 6 miles thick, floating atop an adjacent mantle. Haiti also lies at the edge of the region known as the Bermuda Triangle, a vast area in the Caribbean subject to bizarre and unexplained disturbances.

This vast mass of underwater plates are in constant motion, rubbing against each other along lines analogous to cracks in a broken porcelain vase that has been reglued. The earth’s tectonic plates typically move at a rate 50 to 100 mm annually in relation to one another, and are the origin of earthquakes and of volcanoes. The regions of convergence of such plates are also areas where vast volumes of oil and gas can be pushed upwards from the Earth’s mantle. The geophysics surrounding the convergence of the three plates that run more or less directly beneath Port-au-Prince make the region prone to earthquakes such as the one that struck Haiti with devastating ferocity on January 12.

A relevant Texas geological project

Leaving aside the relevant question of how well in advance the Pentagon and US scientists knew the quake was about to occur, and what Pentagon plans were being laid before January 12, another issue emerges around the events in Haiti that might help explain the bizarre behavior to date of the major ‘rescue’ players—the United States, France and Canada. Aside from being prone to violent earthquakes, Haiti also happens to lie in a zone that, due to the unusual geographical intersection of its three tectonic plates, might well be straddling one of the world’s largest unexplored zones of oil and gas, as well as of valuable rare strategic minerals.

The vast oil reserves of the Persian Gulf and of the region from the Red Sea into the Gulf of Aden are at a similar convergence zone of large tectonic plates, as are such oil-rich zones as Indonesia and the waters off the coast of California. In short, in terms of the physics of the earth, precisely such intersections of tectonic masses as run directly beneath Haiti have a remarkable tendency to be the sites of vast treasures of minerals, as well as oil and gas, throughout the world.

Notably, in 2005, a year after the Bush-Cheney Administration de facto deposed the democratically elected President of Haiti, Jean-Baptiste Aristide, a team of geologists from the Institute for Geophysics at the University of Texas began an ambitious and thorough two-phase mapping of all geological data of the Caribbean Basins. The project is due to be completed in 2011. Directed by Dr. Paul Mann, it is called “Caribbean Basins, Tectonics and Hydrocarbons.” It is all about determining as precisely as possible the relation between tectonic plates in the Caribbean and the potential for hydrocarbons—oil and gas.

Notably, the sponsors of the multi-million dollar research project under Mann are the world’s largest oil companies, including Chevron, ExxonMobil, the Anglo-Dutch Shell and BHP Billiton.[1] Curiously enough, the project is the first comprehensive geological mapping of a region that, one would have thought, would have been a priority decades ago for the US oil majors. Given the immense, existing oil production off Mexico, Louisiana, and the entire Caribbean, as well as its proximity to the United States – not to mention the US focus on its own energy security – it is surprising that the region had not been mapped earlier. Now it emerges that major oil companies were at least generally aware of the huge oil potential of the region long ago, but apparently decided to keep it quiet.

Cuba’s Super-giant find

Evidence that the US Administration may well have more in mind for Haiti than the improvement of the lot of the devastated Haitian people can be found in nearby waters off Cuba, directly across from Port-au-Prince. In October 2008 a consortium of oil companies led by Spain’s Repsol, together with Cuba’s state oil company, Cubapetroleo, announced discovery of one of the world’s largest oilfields in the deep water off Cuba. It is what oil geologists call a ‘Super-giant’ field. Estimates are that the Cuban field contains as much as 20 billion barrels of oil, making it the twelfth Super-giant oilfield discovered since 1996. The discovery also likely makes Cuba a new high-priority target for Pentagon destabilization and other nasty operations.

No doubt to the dismay of Washington, Russian President Dmitry Medvedev flew to Havana one month after the Cuban giant oil find to sign an agreement with acting-President Raul Castro for Russian oil companies to explore and develop Cuban oil.[2]

Medvedev’s Russia-Cuba oil agreements came only a week after the visit of Chinese President Hu Jintao to meet the recuperating Fidel Castro and his brother Raul. The Chinese President signed an agreement to modernize Cuban ports and discussed Chinese purchase of Cuban raw materials. No doubt the mammoth new Cuban oil discovery was high on the Chinese agenda with Cuba.[3] On November 5, 2008, just prior to the Chinese President’s trip to Cuba and other Latin American countries, the Chinese government issued their first ever policy paper on the future of China’s relations with Latin America and Caribbean nations, elevating these bilateral relations to a new level of strategic importance. [4]

The Cuba Super-giant oil find also leaves the advocates of ‘Peak Oil’ theory with more egg on the face. Shortly before the Bush-Blair decision to invade and occupy Iraq, a theory made the rounds of cyberspace, that sometime after 2010, the world would reach an absolute “peak” in world oil production, initiating a period of decline with drastic social and economic implications. Its prominent spokesmen, including retired oil geologist Colin Campbell and Texas oil banker Matt Simmons, claimed that there had not been a single new Super-giant oil discovery since 1976, or thereabouts, and that new fields found over the past two decades had been “tiny” compared with the earlier giant discoveries in Saudi Arabia, Prudhoe Bay, Daquing in China and elsewhere. [5]

It is critical to note that, more than half a century ago, a group of Russian and Ukrainian geophysicists, working in state secrecy, confirmed that hydrocarbons originated deep in the earth’s mantle under conditions similar to a giant burning cauldron at extreme temperature and pressure. They demonstrated that, contrary to US and accepted Western ‘mainstream’ geology, hydrocarbons were not the result of dead dinosaur detritus concentrated and compressed and somehow transformed into oil and gas millions of years ago, nor of algae or other biological material.[6]

The Russian and Ukrainian geophysicists then proved that the oil or gas produced in the earth’s mantle was pushed upwards along faults or cracks in the earth as close to the surface as pressures permitted. The process was analogous to the production of molten lava in volcanoes. It means that the ability to find oil is limited, relatively speaking, only by the ability to identify deep fissures and complex geological activity conducive to bringing the oil out from deep in the earth. It seems that the waters of the Caribbean, especially those off Cuba and its neighbor Haiti, are just such a region of concentrated hydrocarbons (oil and gas) that have found their way upwards close to the surface, perhaps in a magnitude comparable to a new Saudi Arabia.[7]

Haiti, a new Saudi Arabia?

The remarkable geography of Haiti and Cuba and the discovery of world-class oil reserves in the waters off Cuba lend credence to anecdotal accounts of major oil discoveries in several parts of Haitian territory. It also could explain why two Bush Presidents and now special UN Haiti Envoy Bill Clinton have made Haiti such a priority. As well, it could explain why Washington and its NGOs moved so quickly to remove– twice– the democratically elected President Aristide, whose economic program for Haiti included, among other items, proposals for developing Haitian natural resources for the benefit of the Haitian people.

In March 2004, some months before the University of Texas and American Big Oil launched their ambitious mapping of the hydrocarbon potentials of the Caribbean, a Haitian writer, Dr. Georges Michel, published online an article titled ‘Oil in Haiti.’ In it, Michel wrote,

… .[I]t has been no secret that deep in the earthy bowels of the two states that share the island of Haiti and the surrounding waters that there are significant, still untapped deposits of oil. One knows not why they are still untapped. Since the early twentieth century, the physical and political map of the island of Haiti, erected in 1908 by Messrs. Alexander Poujol and Henry Thomasset, reported a major oil reservoir in Haiti near the source of the Rio Todo El Mondo, Tributary Right Artibonite River, better known today as the River Thomonde. [8]

 

According to a June 2008 article by Roberson Alphonse in the Haitian paper, Le Nouvelliste en Haiti, “The signs, (indicators), justifying the explorations of oil (black gold) in Haiti are encouraging. In the middle of the oil shock, some 4 companies want official licenses from the Haitian State to drill for oil.”

At the time, oil prices were climbing above $140 a barrel — on manipulations by various Wall Street banks. Alphonse’s article quoted Dieusuel Anglade, the Haitian State Director of the Office of Mining and Energy, telling the Haitian press: “We’ve received four requests for oil exploration permits…We have had encouraging indicators to justify the pursuit of the exploration of black gold (oil), which had stopped in 1979.”[9]

Alphonse reported the findings from a 1979 geological study in Haiti of 11 exploratory oil wells drilled at the Plaine du Cul-de-sac on the Plateau Central and at L’ile de La Gonaive: “Surface (tentative) indicators for oil were found at the Southern peninsula and on the North coast, explained the engineer Anglade, who strongly believes in the immediate commercial viability of these explorations.”[10]

Journalist Alphonse cites an August 16, 1979 memo by Haitian attorney Francois Lamothe, in which he noted that “five big wells were drilled” down to depths of 9000 feet and that a sample that “underwent a physical-chemical analysis in Munich, Germany” had “revealed tracks of oil.” [11]

Despite the promising 1979 results in Haiti, Dr. Georges Michel reported that, “the big multinational oil companies operating in Haiti pushed for the discovered deposits not to be exploited.” [12] Oil exploration in and offshore Haiti ground to a sudden halt as a result.

Similar if less precise reports claiming that Haitian oil reserves could be vastly larger than those of Venezuela have appeared in Haitian websites. [13] Then in 2010 the financial news site Bloomberg News carried the following:

The Jan. 12 earthquake was on a fault line that passes near potential gas reserves, said Stephen Pierce, a geologist who worked in the region for 30 years for companies that included the former Mobil Corp. The quake may have cracked rock formations along the fault, allowing gas or oil to temporarily seep toward the surface, he said Monday in a telephone interview. ‘A geologist, callous as it may seem, tracing that fault zone from Port-au-Prince to the border looking for gas and oil seeps, may find a structure that hasn’t been drilled,’ said Pierce, exploration manager at Zion Oil & Gas Inc., a Dallas-based company that’s drilling in Israel. [14]

In an interview with a Santo Domingo online paper, Leopoldo Espaillat Nanita, former head of the Dominican Petroleum Refinery (REFIDOMSA) stated, “there is a multinational conspiracy to illegally take the mineral resources of the Haitian people.” [15] Haiti’s minerals include gold, the valuable strategic metal iridium and oil, apparently lots of it.

Aristide’s development plans

Marguerite Laurent (‘Ezili Dantò’), president of the Haitian Lawyers’ Leadership Network (HLLN) who served as attorney for the deposed Aristide, notes that when Aristide was President — up until his US-backed ouster during the Bush era in 2004 — he had developed and published in book form his national development plans. These plans included, for the first time, a detailed list of known sites where the resources of Haiti were located. The publication of the plan sparked a national debate over Haitian radio and in the media about the future of the country. Aristide’s plan was to implement a public-private partnership to ensure that the development of Haiti’s oil, gold and other valuable resources would benefit the national economy and the broader population, and not merely the five Haitian oligarchic families and their US backers, the so-called Chimeres or gangsters. [16]

Since the ouster of Aristide in 2004, Haiti has been an occupied country, with a dubiously-elected President, Rene Preval, a controversial follower of IMF privatization mandates and reportedly tied to the Chimeres or Haitian oligarchs who backed the removal of Aristide. Notably, the US State Department refuses to permit the return of Aristide from South African exile.

Now, in the wake of the devastating earthquake of January 12, the United States military has taken control of Haiti’s four airports and presently has some 20,000 troops in the country. Journalists and international aid organizations have accused the US military of being more concerned with imposing military control, which it prefers to call “security,” than with bringing urgently needed water, food and medicine from the airport sites to the population.

A US military occupation of Haiti under the guise of earthquake disaster ‘relief’ would give Washington and private business interests tied to it a geopolitical prize of the first order. Prior to the January 12 quake, the US Embassy in Port-au-Prince was the fifth largest US embassy in the world, comparable to its embassies in such geopolitically strategic places as Berlin and Beijing.[17] With huge new oil finds off Cuba being exploited by Russian companies, with clear indications that Haiti contains similar vast untapped oil as well as gold, copper, uranium and iridium, with Hugo Chavez’ Venezuela as a neighbor to the south of Haiti, a return of Aristide or any popular leader committed to developing the resources for the people of Haiti, — the poorest nation in the Americas — would constitute a devastating blow to the world’s sole Superpower. The fact that in the aftermath of the earthquake, UN Haiti Special Envoy Bill Clinton joined forces with Aristide foe George W. Bush to create something called the Clinton-Bush Haiti Fund ought to give everyone pause.

According to Marguerite Laurent (‘Ezili Dantò’) of the Haitian Lawyers’ Leadership Network, under the guise of emergency relief work, the US, France and Canada are engaged in a balkanization of the island for future mineral control. She reports rumors that Canada wants the North of Haiti where Canadian mining interests are already present. The US wants Port-au-Prince and the island of La Gonaive just offshore – an area identified in Aristide’s development book as having vast oil resources, and which is bitterly contested by France. She further states that China, with UN veto power over the de facto UN-occupied country, may have something to say against such a US-France-Canada carve up of the vast wealth of the nation. [18]

Notes:

1 Paul Mann, Caribbean Basins, Tectonic Plates & Hydrocarbons, Institute for Geophysics, The University of Texas at Austin, accessed in
www.ig.utexas.edu/research/projects/cbth/…/ProposalCaribbean.pdf .

2 Rory Carroll, Medvedev and Castro meet to rebuild Russia-Cuba relations, London Guardian, November 28, 2008 accessed in http://www.guardian.co.uk/world/2008/nov/28/cuba-russia.

3 Julian Gavaghan, Comrades in arms: When China’s President Hu met a frail Fidel Castro, London Daily Mail, November 19, 2008, accessed in http://www.dailymail.co.uk/news/article-1087485/Comrades-arms-When-Chinas-President-Hu-met-frail-Fidel-Castro.html.

4 Peoples’ Daily Online, China issues first policy paper on Latin America, Caribbean region, November 5, 2008, accessed in http://english.people.com.cn/90001/90776/90883/6527888.html .

5 Matthew R. Simmons, The World’s Giant Oilfields, Simmons & Co. International, Houston, accessed in http://www.simmonsco-intl.com/files/giantoilfields.pdf .

6 Anton Kolesnikov, et al, Methane-derived hydrocarbons produced under upper-mantle conditions, Nature Geoscience, July 26, 2009.

7 F. William Engdahl, War and Peak Oil—Confessions of an ‘ex’ Peak Oil believer, Global Research, September 26, 2007, accessed in http://www.globalresearch.ca/index.php?context=va&aid=6880 .

8 Dr. Georges Michel, Oil in Haiti, English translation from French, Pétrole en Haiti, March 27, 2004, accessed in http://www.margueritelaurent.com/pressclips/oil_sites.html#oil_GeorgesMichelEnglish .

9 Roberson Alphonse, Drill, and then pump the oil of Haiti! 4 oil companies request oil drilling permits, translated from the original French, June 27, 2008, accessed in
http://www.bnvillage.co.uk/caribbean-news-village-beta/99691-drill-then-pump-oil-haiti-4-oil-companies-request-oil-drilling-permits.html

10 Ibid.

11 Ibid. The full text indicated that, “five big wells were drilled at Porto Suel (Maissade) of a depth of 9000 feet, at Bebernal, 9000 feet, at Bois-Carradeux (Ouest), at Dumornay, on the road Route Frare and close to the Chemin de Fer of Saint-Marc. A sample, a ‘carrot’ (oil reservoir) drilled up from the well of Saint-Marc in the Artibonite underwent a physical-chemical analysis in Munich, Germany, at the request of Mr. Broth. ‘The result of the analysis was returned on October 11, 1979 and revealed tracks of oil,’ confided the engineer, Willy Clemens, who had gone to Germany.”

12 Dr. Georges Michel, op. cit.

13 Marguerite Laurent, Haiti is full of oil, say Ginette and Daniel Mathurin, Radio Metropole, Jan 28, 2008, accessed in
http://www.margueritelaurent.com/pressclips/oil_sites.html#full_of_oil.  

14 Jim Polson, Haiti earthquake may have exposed gas, aiding economy, Bloomberg News, January 26, 2010.

15 Espaillat Nanita revela en Haiti existen grandes recursos de oro y otros minerals, Espacinsular.org, 17 November, 2009, accessed in
http://www.espacinsular.org/spip.php?article8942 .

16 The Aristide development plan was contained in the book published in Haiti in 2000, Investir dans l’Human. Livre Blanc de Fanmi Lavalas sous la Direction de Jean-Bertrand Aristide, Port-au-Prince, Imprimerie Henri Deschamps, 2000. It contained detailed maps, tables, graphics, and a national development plan for 2004 “covering agriculture, environment, commerce and industry, the financial sector, infrastructure, education, culture, health, women’s issues, and issues in the public sector.” In 2004, using NGOs and the UN and a vicious propaganda campaign to vilify Aristide, the Bush administration got rid of the elected President.

17 Cynthia McKinney, Haiti: An Unwelcome Katrina Redux, Global Research, January 19, 2010, accessed in
http://www.globalresearch.ca/index.php?context=va&aid=17063.  

18 Marguerite Laurent (Ezili Danto), Did mining and oil drilling trigger the Haiti earthquake?, OpEd News.com, January 23, 2010, accessed in
http://www.opednews.com/articles/1/Did-mining-and-oil-drillin-by-Ezili-Danto-100123-329.html.  

Deepening Debt Crisis: The Bernanke Reappointment: Be Afraid, Very Afraid

Posted in Blogroll on February 9, 2010 by Minimux
by Prof Michael Hudson
  // //
 
 
  // //  
If the economy deteriorates in the L-shaped “hockey-stick” rut that many economists forecast, what political price will President Obama and the Democrats pay for having returned the financial keys to the Bush Republican appointees who gave away the store in the first place? Reappointing Federal Reserve Chairman Ben Bernanke may end up injuring not only the economy but also the Democratic Party for years to come. Recognizing this, Republicans made populist points by opposing his reappointment during the Senate confirmation hearings last Thursday, January 27 – the day after Mr. Obama’s State of the Union address.

The hearings focused on the Fed’s role as Wall Street’s major lobbyist and deregulator. Despite the fact that its Charter starts off by directing it to promote full employment and stabilize prices, the Fed is anti-labor in practice. Alan Greenspan famously bragged that what has caused quiescence among labor union members when it comes to striking for higher wages – or even for better working conditions – is the fear of being fired and being unable to meet their mortgage and credit card payments. “One paycheck away from homelessness,” or a downgraded credit rating leading to soaring interest charges, has become a formula for labor management. Read more »

Financial Market Bubbles in Search of a Pin

Posted in Blogroll on February 9, 2010 by Minimux

 

Stock-Markets / Financial Markets 2010 Feb 06, 2010 – 01:01 PM

By: John_Mauldin

 

A Bubble in Search of a Pin
Unemployment Numbers: A Mixed Bag
A Bubble in Search of a Pin
And Speaking of Bubbles

Should Greenspan and Bernanke have seen the bubble in housing and other assets and acted, or should we accept their defense that you can’t know whether there is a bubble until after the fact? We will look at research that suggests they should have known, and, at the least, policy makers should no longer be allowed to say, “How could I have known?”

// //

 

Of course, the employment numbers came out this morning, and the results are mixed; but that is better than they have been for the past two years. We dig into the numbers to see what they are really saying. And finally, we examine why the markets are so volatile. Is it just Greece, or is there more? There’s a lot of very interesting, and important, material to cover.

But first, and quickly, as I wrote in Outside the Box a few weeks ago, I am starting to very selectively buy biotech stocks, and mostly, though not exclusively, companies associated with the regenerative genetic revolution that is coming our way. I am convinced that this is going to be a decade of the most amazing medical breakthroughs, which will literally change (and in many cases extend) our lives, as therapies to treat all sorts of diseases become available.
Read more »

Retirement Armageddon

Posted in Blogroll on February 9, 2010 by Minimux

 

Personal_Finance / Pensions & Retirement Feb 06, 2010 – 05:38 PM

By: Gary_North

 

I have just posted a video of my 90-minute seminar: “Retirement Armageddon.” It presents the background for a series of nasty surprises.

For those of you who don’t have time to watch a 90-minute video, let me summarize its implications.

// //

 

The U.S. government has a nasty surprise for tens of millions of retirees: a now-empty piggy bank. Two of them, actually: Social Security and Medicare.

Congress will soon have a nasty surprise for voters: a larger deficit than announced to fill these now-empty piggy banks.

The Federal Reserve System will also have a nasty surprise for investors: newly created digital money to fill up the empty piggy banks when the Treasury cannot sell any more debt at low interest rates.

The free market will have a nasty surprise for everyone: rising prices in response to the Federal Reserve’s digital money.

Medicare will have a nasty surprise for physicians who treat Medicare-funded patients: limits on payments per service that are set below urban costs (price controls).

Physicians will have a nasty surprise to patients: longer waiting periods (rationing by sitting in an office). The days of wine and roses are over. The era of nasty surprises has begun.

Social Security will go bankrupt in 2010. It will take new legislation increasing Social Security (FICA) taxes to overcome this. Or it will take siphoned-off money from the general fund. I have covered this issue here.

WHY A VIDEO?

A non-profit research organization brought me in to present a seminar for people who prefer a seminar to reading on-line. Then it produced a DVD of the seminar for its donors. It released the DVD in January.

I persuaded the organization to let me make the seminar available to my readers. Because of the technology of on-line video hosting, this is easy to do.

My targeted audience includes these groups:

1. People who are now retired but under age 70
2. People who think they will be able to afford to retire in the next ten years
3. Sons of members of either of these two groups

For people over age 70, my video probably will do no good. They have made a decision to leave the labor market and become dependent on the government. Their skill sets are rapidly becoming obsolete. Their mental stamina is fading. Their physical stamina is fading. For these people, I am like a physical trainer who recruits customers in a convalescent center for oldsters – a polite name for a facility to house people who are not expected to recover. My seminar offers too much, too late.

It is true that people in their eighties can profit from a rigorous physical training program. It is also true that bad habits are difficult to break, bad ideas are difficult to change, and it’s easier to vegetate in front of a TV screen than to exercise.

I have targeted newly retired people and people who will legally be able to retire and receive Social Security checks at age 62, or full payment at age 66. (To gain Medicare coverage, you must sign up by the day you turn 65.)

My video does not go into the question of whether it is better to go on the dole at age 62 or wait. In either case, the welfare checks will not cover most families’ expenses, according to Social Security.

The video raises other issues, such as how people can avoid a cut-back in their income. There are no easy answers. It is like physical training: there is a choice of which pain to endure. It is not a choice of avoiding pain.

Unfortunately, there are ways to defer pain. This is called “kick the can.” The best example of this strategy in action is Congress.

Kicking the can escalates the pain to be endured later on. But most people are present-oriented. When faced with a choice between pain now and greater pain later, they choose the latter. They discount future pain by a high rate of interest. Or they think this: “The pain is so far away. Something may turn up.”

This outlook is close to universal. This is why Congress can safely play kick the can. There is no politically acceptable way to reform the system in order to avoid the day of fiscal reckoning. Their re-election is not threatened by silence on this issue, because their opponents do not have the courage to raise it. A politician who has no politically acceptable answer to an inevitable problem is safe for as long as his potential opponents also have no politically acceptable answers. Everyone kicks the can.

But fewer people kick the bucket. Life expectancy slowly rises. Medicare is letting people live longer, though more expensively.

Do you know what Medicare’s annual expenses are per person today? Take a wild guess.

The costs vary per county, but the average cost nationally in 2008 was over $11,000 a year. Every oldster you see at Wal-Mart is siphoning this much money out of the government. For the official estimate by Medicare’s Trustees, click here.

I don’t think most voters care. This lets Congress kick the can. Voters think the money will be there to fund their golden years. The money will surely be there. It just will not buy very much.

My seminar gets across this story in a way that most people with enough brains to have a 401(k) or an IRA can understand.

Some older people do not want to hear this story from younger people, especially their adult children. I figured they might listen to someone who is already on the dole.

I have beaten the system . . . so far. I am not a ward of the state . . . yet.

WHAT WENT WRONG?

The Federal government set a trap in 1935: Social Security, a program funded on a pay-as-you-go basis, meaning a promise-as-we-go program for members of Congress. It was never funded. The trust fund is an accounting trick. There is nothing but IOU’s from the Treasury in it.

The trap got sprung in 1983, when Social Security went bankrupt. That was the year Reagan – President Tax Cut – signed a new law for funding Social Security. The new law imposed income taxes on Social Security payments. It also scheduled a series of increases in the wage base subject to FICA taxes.

That emergency measure deferred the day of reckoning until now. The law was passed in the first year of Reagan’s massive deficits: over $200 billion in 1983 dollars, meaning close to $500 billion in today’s money. That was the end of the Republican Party’s commitment to a balanced budget.

Bill Clinton benefited politically from balanced budgets, 1998–2001, but only by means of a statistical trick: using Social Security’s net income after payouts as net revenue for the government, and then burying the liabilities in the government’s off-budget accounts. This has been common practice ever since the Johnson Administration.

That game of political deception will end this year. This year marks the year – like 1983 – when receipts from FICA taxes will not cover outlays in the program. The flow of funds will henceforth move from the general fund to the Social Security Administration.

The public is unaware of this. It means nothing to voters. The Federal deficit is so enormous today that one more needle jabbed into the arm of the Treasury Department will get no attention.

On January 26, the Congressional Budget Office estimated a deficit of $1.35 trillion for fiscal 2010. On February 1, the Obama Administration offered an update: a deficit of $1.6 trillion. In less than one week, the estimate of the shortfall between now and the end of the fiscal year on September 30 rose by $250 billion. Who will get any attention for sounding the alarm about an outflow to Social Security of $10 billion to $20 billion? Glenn Beck might. But he has other, larger fish to fry. Same with Rush Limbaugh.

In any case, potential critics of the program would not dare to tell their audience that the Social Security system is busted, that the Ponzi scheme has hit a brick wall, and that it’s time to reform the whole system. Why not? Because there has never been a politically acceptable plan to reform the system. Politicians have occasionally raised this issue. They do this only once. Self-interested people do not jab their fingers into a hornets’ nest a second time. The most famous example is Barry Goldwater in 1964.

As a Senator, he had on occasion suggested that the government should implement certain aspects of voluntarism into the Social Security system. The Democrats took advantage of this. As recently as 2009, a Time Magazine article on the politics of Social Security reported on this.

President Lyndon Johnson’s campaign ran a TV ad showing a pair of hands ripping a social security card in half as a narrator says: “On at least seven occasions, Senator Barry Goldwater said that he would change the present social security system. But even his running mate, William Miller, admits that Senator Goldwater’s voluntary plan would destroy the social security system. President Johnson is working to strengthen social security.”

The Goldwater campaign went into full reverse as a result of this ad. Here is an extract from one of his campaign brochures.

“I favor a sound Social Security system and I want to see it strengthened. I want to see every participant receive all the benefits this system provides. And I want to see these benefits paid in dollars with real purchasing power.

“Social Security is a system of basic protection for the aged. In addition, most Americans now participate in private pension plans while many have their own savings and investments Social Security was never intended to replace these voluntary programs. Its prime purpose was and is to supplement them, to provide a basic floor. I am convinced it can do this job, the job for which it was created.

“Essentially, protection against need in America depends upon a free economy which produces an ever-growing abundance and an ever-greater opportunity for all. In this framework, I believe Social Security has a vital and legitimate supporting role.”

Politicians can take the hint. They know what not to mention in public. Social Security reform and Medicare reform are two such forbidden topics.

PREPARING FOR PERMANENT HOUSEHOLD GUESTS

You may think your parents have their financial house in order. Maybe they do. If they do, they are unique among Americans.

You should assume that they will live longer than their parents.

If you know anything about their habits and health, you can get an estimate of their life expectancy by using an on-line life expectancy calculator. Here is a good one.

Once you have an idea of how long they will live, you can make an estimate on when they will run out of money.

The trouble is, no one asks about someone else’s assets. We can at best make guesses.

If your parents were blue-collar workers, maybe they had a corporate pension if they worked for a large company like an auto company. Go on-line to see what the condition of the company’s pension fund is.

If they worked for a small company, they probably have no pension. They may have savings. Assume that these will be gone five years after retirement. Most people do not adjust their spending habits in the year they retire. It takes several years. Depleted savings force this change.

If they own their home, this is no longer a source of funding. Home equity loans are scarce. They may be tempted to take out a reverse mortgage. This is like an annuity, but with the home’s equity as the initial investment used to purchase the reverse mortgage. If you want the home as your inheritance, you will lose it if they do this. To get the house, you may have to make them an offer of a reverse mortgage. You will pay them a monthly stipend. You wind up as owner. Consult a CPA for details of what formula to use.

The advantage here is that they do not move in with you until they are infirm. When they do, you own their home. You can rent it out for income. You pay now, collect later.

Frankly, I do not recommend this. I recommend buying a home located close to you. Buy it from a highly distressed seller. Rent it out. Let the renters pay off the mortgage. If your parents ever need living space closer to you, evict the renters and let your parents move into the house. Renters understand this. They are unlikely to resent this. Just tell them up front: you do not plan to sell the house, but if your parents ever need living space, the house is for them. No problem. That sounds like a safer deal for them as renters. You really will not sell the house out from under them.

The other way is to convert your garage to a bedroom apartment. Don’t apply for zoning if you think there will be major hoops to go through. Just do it.

CONCLUSION

Most old people don’t want to think about all this. It’s too painful. It threatens their retirement plans. People don’t like to re-structure their lives away from their lifetime dream. But, at some point, tens of millions of retired Americans will have to do this. Better sooner than later.

That’s why I did the seminar. Maybe older people will listen to an older person.

I listened to my high school civics teacher when he warned us in 1959 that Social Security would go bankrupt. It happened in 1983. It will happen again in 2010.

I planned ahead. I did not retire. I am not a ward of the state.

Euro-Zone Debt Default Risk Crisis, “UR ALL PIGS FROM HELL!”

Posted in Blogroll on February 9, 2010 by Minimux

 

Economics / Global Debt Crisis Feb 09, 2010 – 04:45 AM

By: Gordon_T_Long

Economics

Diamond Rated - Best Financial Markets Analysis ArticleWhether you’re in Central Europe, such as Ukraine or Romania, the Med countries such as Portugal, Italy, Greece, Spain, or from Hungary to the Baltic States of Estonia, Latvia or Lithuania, you all have one common problem —The hell that is the Euro!

// //

 

“Euro members drew down their benefits in advance – ‘ex ante’ — when they joined EMU and enjoyed “very easy financing” for their current account deficits. They cannot expect ‘ex post’ help if they get into trouble later. These are the rules of the club” (1)

Jean-Claude Trichet, President, European Central Bank

The Euro is still an experiment. Like any experiment it needs to withstand the results of testing under stress conditions. The present stresses within the PIGS have pushed the Euro and the viability of the EMU onto the global stage with all the attention of “The Emperor has no Clothes”!

Whether the Euro is your domestic currency; or you peg your currency to the Euro; or you are significantly influenced economically by the Euro, you are now infected by the possibility of contagion.

EURO – EMU EXPERIMENT (E3)

“At the heart of the problem is Europe’s unwillingness more than a decade ago to choose either unification or separation. It wanted economic unification and continued political independence of nation states. In short, it wanted the best of both worlds, and for a time it seemed to have succeeded in that goal. The success amazed many economists, most of them from Britain and the United States, who had argued that a single currency would require much more political unification.” (1)

The experiment was launched and founded on ‘half measures’. If everything worked over time there was the possibility of political unification. If things failed there was the return to independent monetary policy. Everyone agreed that time would tell.

THE TEST of TIME (T3)

The central premise of the experiment which is now under test conditions is whether:

When sovereign countries are placed under economic pressures, due to governments’ historically inevitable inability to reign in fiscal spending and election entitlement promise, Can they then implement unpopular policy reforms without resorting to currency debasement and the governments’ stealth tax of inflation?

The whole basis of the EMU and Euro currency rests on the outcome of the highly visible public tests underway. Users of the Euro surrendered their option of sovereign monetary policy with their EMU membership which has been historically the escape route for trapped political regimes.

Preliminary indications are not encouraging as the US dollar versus the Euro spike is clearly signaling. “Traders and hedge funds have bet nearly $8bn against the Euro, amassing the biggest ever short position in the single currency on fears of a eurozone debt crisis. Figures from the Chicago Mercantile Exchange, which are often used as a proxy of hedge fund activity, showed investors had increased their positions against the Euro to record levels in the week to February 2. The build-up in net short positions represents more than 40,000 contracts traded against the Euro, equivalent to $7.6bn. It suggests investors are losing confidence in the single currency’s ability to withstand any contagion from Greece’s budget problems to other European countries” (2)

HELL THAT IS THE EURO: Europe’s Sub-Prime Problem

The global financial media and markets are presently riveted on the PIGS! Though there appears every reason for this, due to the dramatic rise in CDS prices, the real looming problem is much more frightening. We have felt strongly since the US Sub-Prime problems unfolded, leading the world to nearly the financial abyss, that Central & Eastern Europe was actually the ultimate “sub-prime” problem. From Hungary to the Baltic States of Estonia, Lithuania and Latvia, financial problems are prevalent and tied in some way to the hell that is the Euro.

The chart from a February report by Dataexplorers (3) showing bond shorting activity confirms the bigger problem is being viewed by investors to be in fact in Central & Eastern Europe. 

Romania, Slovenia, Lithuania, Poland, Slovak and Hungary are all above Portugal & Greece in investor decisions to actually take action and put their money on the line by shorting these countries’ sovereign debt. 

Global investors continue to see headline stories from the WSJ 01-28-10: Latvian Annual CPI Falls Further Amid Deep Recession, and ABC News 02-08-10: Lithuanian Economy Shrinks 15 Pct in 2009 that are worrisome. What may yet not be fully appreciated is that these problems are becoming even more serious due to potential European banking stability concerns, every day the PIGS problem is allowed to fester by ECB dithering.

“The massive expansion of Sovereign balance sheets has been essential to compensate for the complete collapse of the Libor market, but it has left investors increasingly nervous. If the Government is lender of last resort, then what happens when they cannot meet their obligations …… Some market discussion and sell side research has investigated the linkages between these countries – for example, the Greek banks are said to have lent heavily to Romania and Bulgaria; most of the Eastern European countries have focused their borrowing in Austria. Patterns like these will determine whether isolated defaults become falling dominoes.”

Sovereign Debt:Tracking the Short Sellers
Dataexplorers – - February 2010 Report

But is it dithering that is really occurring or the fatal flaw of the whole Euro experiment? 

Is the Euro not fundamentally based on an assumption that democratically elected governments (even those with left leaning policies) and huge legacy entitlements can actually ‘Walk-the-Talk’ and implement tough choices when they are required by EMU charter requirements? We mean specifically the tough choices spelled with a capital “T”; like those testing Greece’s newly mandated socialist party or Portugal’s also recently elected government with a 10 percent Maoist-Trotskyist Bloco vote.

“Portuguese debt surged (02-04-10) to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures. Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. “What is at stake is the credibility of the Portuguese state,” he said. Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year”

Fears of ‘Lehman-style’ tsunami as crisis hits Spain and Portugal 
Ambrose Evans-Prichard – Telegraph.co.uk

“In 2009, downgrades and debt auction failures in countries like the UK, Greece, Ireland and Spain were a stark reminder that unless advanced economies begin to put their fiscal houses in order, investors and rating agencies will likely turn from friends to foes. The severe recession, combined with a financial crisis during 2008-09, worsened the fiscal positions of developed countries due to stimulus spending, lower tax revenues and support to the financial sector. The impact was greater in countries that had a history of structural fiscal problems, maintained loose fiscal policies and ignored fiscal reforms during the boom years.”

The Coming Sovereign Debt Crisis
Nouriel Roubini and Arpitha Bykere – Forbes.com

THE CORE ISSUE:

Under close examination, the one striking similarity of all the countries with heavy bond shorting is that they also all have an electorate that has a history of socialist legacy expectations. This is not a political statement but rather an observation of the likely resistance to the implementation of tougher austerity measures that are certainly ahead.

“As growth slows and debt rises in these countries, government largess for university fees, secure government jobs and lifetime pensions will come under increasing pressure. On a continent where the culture and legitimacy of the mother state are so deeply ingrained – and now in some cases unaffordable – a question remains: can the European Commission say ”no more” to prodigal nations like Greece and, to a lesser extent, Spain and Portugal? And how will the countries themselves confront the political fallout of economic distress? ”People view these welfare polices as acquired rights,” said Jordi Gal, an economist who leads the Centre for Research in International Economics in Barcelona. ”If the Spanish government were to stop paying the fees for students at universities or any move in that direction, there would be a major social uprising.” 

For decades, both conservative and socialist governments in Greece have rewarded the demands of public sector unions with higher pay and more jobs. In 2009, striking farmers were paid €400 million by the government – and this year they are back again, having briefly closed Greece’s border with Bulgaria. Protesting dockworkers extracted big payouts from the government in November. And the country’s tax collectors went on strike on Thursday, even though their services are needed more than ever. Striking is a bit of a national sport in Greece. Last month, the country’s unionized prostitutes took to the streets, protesting unlicensed competition from Russian and Eastern European immigrants. The pressing question now is whether the new Prime Minister, socialist George Papandreou, can break this cycle of appeasing constituencies. (5)

Employment

When the electorate is facing historical unemployment, how exactly do you stimulate the economy while making massive fiscal adjustments to fiscal budgets to meet EMU debt level governance? This is historically when a country resorts to loosening monetary policies, ‘money printing’ or other forms of currency depreciation.

The Misery Index chart shows a significant correlation between the countries being shorted and those also with: failing fiscal policies, fiscal deficits, high unemployment and a disgruntled electorate! Serious social unrest is the obvious consequence that will eventually be blamed on the EMU and the Euro.

Productivity

“The euro has strengthened by more in real terms since its launch in 1999 than any other leading currency. To add insult to injury, Greece and the other peripheral countries have lost competitiveness within the zone. On one measure, Greek unit labor costs rose by 23 per cent against Germany’s between early 2000 and the second quarter of 2009. This is in line with the experience of other peripheral members.” (6)

Is it realistic to expect Greece to fulfill its promise to reduce its fiscal deficit from approximately 12.7 per cent of gross domestic product to 3 per cent by 2012? This has less likelihood of happening then a successful accounting audit of the Greek government financial books!

“The euro zone’s manufacturing sector is growing at its fastest pace in two years.  However, there are dramatic differences in how manufacturing is faring within the eurozone which point to the currency as a major source for the loss of competitiveness in Greece, Spain and Ireland. The eurozone manufacturing purchasing manager’s index came in at 52.4 for January, which is the fourth monthly rise and indicates that the manufacturing sector is expanding in the eurozone as a whole. But expansion is not a uniform condition. At Europe’s old 1957 core, things are looking bright.

France is expanding at the fastest pace in nearly a decade, while the Benelux countries, Germany and Italy are also expanding. However, in Spain, Ireland and Greece, the manufacturing contraction continues apace. The fact is weaker manufacturing nations are steadily losing competitiveness and this is hurting their ability to compete.  In a recent piece on the tensions these differences are creating, Ambrose Evans-Pritchard notes: German goods are flooding the South. In the 12 months to November, Germany-Benelux had a current account surplus of $211bn: Spain had a deficit of $82bn, Italy $74bn, France $57bn, and Greece $37bn. So the Germans and the Benelux nations have an enormous eurozone internal market surplus. Yes, German or Dutch workers are still more expensive than Spanish or Greek ones.  However, when looking at German productivity, the cost differences vanish.  The problem?  The euro”. (7)

SYMPTOMS:

What the press is following with such interest are the symptoms – symptoms of a possible failed experiment based on an unproven assumption. Whatever the outcome or actions taken to remedy the problems, we can be fairly confident it will not be part of the original EMU governing body of laws and regulations.

Julian Callow from Barclays Capital said the EU may need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”

Fears of ‘Lehman-style’ tsunami as crisis hits Spain and Portugal 
Ambrose Evans-Prichard – Telegraph.co.uk

THE CONSEQUENCES:

The chances are good that the present standoff between the ECB and PIGS will end with either 1) the ECB creating a massive new moral hazard situation, 2) an IMF bailout, 3) an EC member countries defaulting or 4) the splintering of the union itself. None of the alternatives are particularly appealing and have consequences.

“Most of the time having an independent currency is nothing but a nuisance. But every so often and quite unpredictably, countries desperately need a safety valve. The 1930s were a time when such relief was needed. Our own era is posing what look like similar challenges. Stuff does, indeed, happen. Having willed the creation of the euro, its members must overcome the difficulties that arise when, as now, stuff happens”.

The Greek tragedy deserves a global audience  
Martin Wolf, Financial Times

What may be an even bigger concern for the global economy overall, is that the consequences of these resolution activities will likely slow the unwinding of the EU financial actions implemented to stem the financial crisis. This will stealthily seal the case for very high levels of inflation to quietly appear on the horizon as we are all distracted.

EXPERIMENTAL RESULTS:           

       E3 => T3 => HELL = INSTABILITY  = PHASE Shift

Gordon T Long   gtlong@comcast.net   Web: Tipping Points

Mr. Long is a former executive with IBM & Motorola, a principle in a high tech start-up and founder of a private Venture Capital fund. He is presently involved in Private Equity Placements Internationally in addition to proprietary trading that involves the development & application of Chaos Theory and Mandelbrot Generator algorithms.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

© Copyright 2010 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

Follow

Get every new post delivered to your Inbox.