Category: Europe

Economics Update

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The final numbers for US GDP in the 3rd quarter came in, and they were slightly lower than estimates, with a 2.6%, as opposed to the 2.7% forecast, growth rate, while core inflation was at a 50 year low.

So I don’t think that either inflation or a robust recovery are around the corner, particularly with oil rising above $90/bbl, a 2 year high, which has in turn driven gasoline prices near to $3.00/gallon.

Unfortunately, the dollar has continued to fatten up versus the Euro, because people see more pain and woe from Ireland, Greece, Portugal, Spain, and Italy.

EuroFail

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The Euro Zone monetary authorities are crowing about the success of Latvia, because they held the hard peg to their currency.

It appears that their GDP may grow this quarter, after as Matthew Yglesias observes, their GDP feel by 4.2% in 2008, 18% in 2009, and will fall slightly this year.

This is not success. As Paul Krugman writes, “They have made a desert, and called it successful adjustment.”

Compare their progress to those of the Icelanders, Dr. Krugman supplied the graph pr0n) who devalued, and eschewed austerity.

Note also that Iceland’s meltdown was the most severe this far seen, but, because they eschewed the nattering nabobs of negativism that are the pain caucus, they had what amounts to the mildest and shortest downturn.

EU Court Rules that Irish Abortion Law Violates Human Rights Standards

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I would argue that this is a another example of how Ireland is a 3rd world nation masquerading as a modern one by virtue of geography, but that critique would apply to the US as well:

Ireland’s constitutional ban on abortion violates the rights of pregnant women to receive proper medical care in life-threatening cases, the European Court of Human Rights ruled Thursday in a judgment that harshly criticized Ireland’s long inaction on the issue.

The judgment from the Strasbourg, France-based court will put Ireland under pressure to draft a law extending limited abortion rights to women whose pregnancies represent a potentially fatal threat to their own health.

A right to receive proper medical care?

Well, that doesn’t exist here either.

Assange Granted Bail

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Basically, the terms of his bail amount to house arrest:

Britain’s high court today granted bail to Julian Assange, the WikiLeaks founder who is wanted in Sweden for questioning over allegations of rape.

Mr Justice Duncan Ouseley agreed with a decision by City of Westminister magistrates court earlier in the week to release Assange on strict conditions: £200,000 cash deposit, with a further £40,000 guaranteed in two sureties of £20,000, and strict conditions on his movement.

This is good news, but we are hearing more reports of the US looking for ways to indict him, this time by ginning up a conspiracy case:

Federal prosecutors, seeking to build a case against the WikiLeaks leader Julian Assange for his role in a huge dissemination of classified government documents, are looking for evidence of any collusion in his early contacts with an Army intelligence analyst suspected of leaking the information.

Justice Department officials are trying to find out whether Mr. Assange encouraged or even helped the analyst, Pfc. Bradley Manning, to extract classified military and State Department files from a government computer system. If he did so, they believe they could charge him as a conspirator in the leak, not just as a passive recipient of the documents who then published them.

Among materials prosecutors are studying is an online chat log in which Private Manning is said to claim that he had been directly communicating with Mr. Assange using an encrypted Internet conferencing service as the soldier was downloading government files. Private Manning is also said to have claimed that Mr. Assange gave him access to a dedicated server for uploading some of them to WikiLeaks.

It should be noted that these activities, cultivating and providing a source a way to get his information to you, are staples in the diet of investigative journalism.

Any prosecution under these circumstances would be an full frontal assault on freedom of the press, which is profoundly disturbing to anyone who cares at all about the Constitution.

Unfortunately, I think that this sort of assault on the press, and by extension leaking, appears to be something that Barack Obama, who must have been the worst professor of Constitutional law ever, really would like to do.

His administration is more vociferously hostile toward leaks and leakers than Bush/Cheney ever was.

Of course, this is why this administration is allowing the leaker, PFC Bradley Manning to be tortured pre-trial, because they want to coerce an accusation against Assange.

This Ain’t a Bad Thing

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The folks at the Financial Times blog, FT Alphaville, are running around like chickens with their heads cut off because inflation is approaching 3¼%:.

They refer to the number as “dismal”, and note that, “While today’s reading won’t surprise the BoE — it expects inflation to average 3.2 to 3.3 per cent in the fourth quarter and circa 3.5 per cent early in 2011 — there’s bound to be (further scepticism) that the inflation genie will be back in the bottle by the end of 2011.”

These are people who do not understand.

This financial crisis is because too many people owe too much debt, and lack the wherewithal to dig themselves out of this hole.

Inflation serves to devalue the currency and so devalue the debt.

It’s not a bad thing when we are in a liquidity trap, it’s a good thing.

It’s more than a good thing, it’s essential to recovery.

Now I Wish I Were Irish

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And it has nothing to do with harps, beer in its various forms, the natural beauty of the land, or the stunning red heads with milky white skins.

Instead, I envy them their banking regulators:

Allied Irish Banks, the lender that is being bailed out by the government, has decided not to award senior staff about 40 million euros ($53 million) in bonuses for 2008 after the country’s finance ministry intervened late Monday.

Ireland’s finance minister, Brian Lenihan, told RTE radio on Tuesday that it was “galling to think” that at a time when taxpayers were investing in the bank, 36 million to 40 million euros “would be paid out of that bank to employees in respect to bonuses during a period that the bank got itself into the difficulties it is now in.”

The bank has already received 3.5 billion euros in government aid.

The ministry acted after months of public outrage over the bonuses to be paid to 2,400 senior bank managers at a time when Ireland was seeking an international bailout of 85 billion euros, largely because of weaknesses in its banking sector. In a letter Monday to the Allied Irish board, Mr. Lenihan said that further cash injections by the government — which the bank desperately needs — were dependent on the condition that no bonuses be paid.

“The provision of further state funding to A.I.B. will be conditional, inter alia, on the nonpayment of any bonuses, no matter when they may have been earned,” Mr. Lenihan wrote. He told the cabinet at a meeting Tuesday that the provision on the bonuses would be added to a bank restructuring bill being discussed.

I wish I lived in a country that regulated its banking sector as honestly and effectively as the Irish.

If you are uncertain as to whether that last sentence is serious of sarcastic, well so am I.

Iceland Out of Recession

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Unlike Portugal, Ireland, Greece, and Spain, the PIGS, Iceland has a currency, which it has allowed to devalue, and it has largely defaulted on its banks debts, though its government had to be dragged into this kicking and screaming through a plebiscite, but now Iceland’s economy grew sharply in the 3rd quarter:

Iceland’s decision two years ago to force bondholders to pay for the banking system’s collapse appeared to pay off after official figures showed the country exited recession in the third quarter.

The Icelandic economy, which contracted for seven consecutive quarters until the summer, grew by 1.2% in the three months to the end of September.

Iceland famously agreed in a referendum to reject a scheme to repay most of its debts that were once worth 11 times its total national income.

In contrast to Ireland, Iceland’s taxpayers refused to foot the bill for the debts accumulated by the banking sector. Bondholders were told to accept dramatic reductions in the value of repayments on bank debt after the sector borrowed beyond its means to fund ambitious investments abroad.

By contrast, Ireland guaranteed all depositors and all bond holders, and will be crushed by that debt for years.

Rule number one of these sorts of meltdowns is that the bond holders are professionals, and they get interest because they are taking a risk, and risk means a chance of default.

The argument that is made against Greece, or Ireland, or the rest of the PIGS taking a similar approach is that it they need to maintain the confidence of the markets in order to prosper economically.

This is wrong.  It is literally a confidence game.

The Root of the Irish Economic Problem

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So, they have cut a deal for the Irish to cut their own economic throats, but I think that all the commentary misses the big picture on the Republic of Ireland.

Before the boom, Ireland was a 3rd world country that happened to be a part of the EU.

At the height of the bubble, Ireland was a 3rd world nation that was part of the EU, and part of the Euro zone, which drove a speculative frenzy being driven by massive foreign cash flows.

It was still, and remains, a 3rd world nation that was a part of the EU.

To be fair, it might better be called a 2-¾ world nation, but still…..

Let There Be No Kings……

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In 1997, I was reading Usenet,* and my wife rushed in, and told me that Diana, Princess of Wales, was in a serious car wreck, and I paraphrased the words of George Washington† to her, noting that the affairs of the British royal family is really not a proper for Americans to exhibit the level of fascination that it does with the subjects of the crown.

Well, I now learn that Prince William and his long time girl friend Kate Middleton will get married, and so I feel compelled to add both of them to my list of They Who Must Not Be Named.

Unlike many of the other denizens of the list, I do so without malice.

I have no knowledge of any specific wrongdoing from either of them, and I wish the happy couple the best.

I just never want to hear about them.

That being said, in homage to our founding fathers, who thumbed their nose at the British crown, I feel an obligation to engage in a snark before consigning them to the list, and the good folks at The Awl found what is likely the best snark on the internet:

In any event, welcome to the best Internet comment ever, from here: “Her parents can’t be overly happy. She has been largely unemployed since she left school and is now marrying someone who has been on welfare most of his life. With the new government’s promise to cut housing benefit and force those who repeatedly turn down work into manual labour I do worry for them.”

Heh.

In any case I have no interests in toothless constitutional monarchs.

*Yes, remember Usenet? It was a wonderful way for people with common interests to get together, but eventually, the trolls, spammers, and the rest of the tragedy of the commons, drove most of the useful dialogue to other technologies.
†Actually, his response to the suggestion that he be king was far more eloquent and evocative:

To Lewis Nicola

George Washington

Newburgh, May 22, 1782

Sir: With a mixture of great surprise and astonishment I have read with attention the Sentiments you have submitted to my perusal. Be assured Sir, no occurrence in the course of the War, has given me more painful sensations than your information of there being such ideas existing in the Army as you have expressed, and I must view with abhorrence, and reprehend with severety. For the present, the communication of them will rest in my own bosom, unless some further agitation of the matter, shall make a disclosure necessary.

I am much at a loss to conceive what part of my conduct could have given encouragement to an address which to me seems big with the greatest mischiefs that can befall my Country. If I am not deceived in the knowledge of myself, you could not have found a person to whom your schemes are more disagreeable; at the same time in justice to my own feelings I must add, that no Man possesses a more sincere wish to see ample justice done to the Army than I do, and as far as my powers and influence, in a constitutional way extend, they shall be employed to the utmost of my abilities to effect it, should there be any occasion. Let me conjure you then, if you have any regard for your Country, concern for yourself or posterity, or respect for me, to banish these thoughts from your Mind, and never communicate, as from yourself, or any one else, a sentiment of the like Nature. With esteem I am.

What the Dickens??!?!?

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And yes, I mean the author, as in in the Scrooge quote, “Are There No Prisons? Are There No Workhouses?”

The new Conservative government in the UK is going Charles Dickens on the unemployed:

Ministers have defended their plans to force the long-term unemployed to do manual work or lose benefits.

Chief Secretary to the Treasury Danny Alexander told the BBC the idea was not to “punish or humiliate” but to get people back into the habit of working.

But the Archbishop of Canterbury Rowan Williams said the changes could drive people “into a downward spiral of uncertainty, even despair”.

Work and Pensions Secretary Iain Duncan Smith is to unveil the plans this week.

Under the plan, claimants thought to need “experience of the habits and routines of working life” could be put on 30-hour-a-week placements.

Anyone refusing to take part or failing to turn up on time could have their £65 Jobseekers’ Allowance stopped for at least three months.

Of course, the Tories like this because they hate poor people, and their coalition partners, the Lib-Dems love this, because it hearkens back to a time when they had political relevance, those halcyon days before World War I.

With unemployment at the highest levels since the great depression, and unemployment in the UK among the highest in western Europe.

As Deputy Labour leader Harriet Harman notes, “But she said the government needed to understand that to get people back into work, there had to be jobs for them to go to – and at the moment there were five people chasing each vacancy.”

I think that Labour doesn’t get it. The Conservatives plan to destroy enough so that people will be ready to dismantle the National Health Service for something more disastrously like the US system.

The barbarians are not at the gates, the barbarians are in the gate.

Not Gonna Happen……

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The real reason for the UK independent deterrent

With the draconian British budget cuts, and the conversion of their carrier aviation from the STOVL F-35B to the CTOL F-35C, there is now talk of the British engaging in some form of joint carrier operations with the French:

London’s decision to fit catapults on its planned second aircraft carrier opened up the prospect of French Rafale strike fighters flying off a British flattop, with reciprocal rights for British aircraft off the French carrier, French Defense Minister Hervé Morin said Oct. 26 at the Euronaval trade show.

Morin asked the French military staff to assess whether the installation of catapults would allow French aircraft, such as the Rafale, to operate off the Royal Navy vessel, and the answer was: “Yes, it’s technically feasible,” he told journalists.

That opened up potential opportunities of interoperability and mutual interdependence between the British and French fleets, he said. With such cross-deck operations came the possibility of a “permanent presence at sea,” he said.

I just don’t see it happening.

While the French and British have on occasion used common aircraft, most notably the SEPECAT Jaguar, given the nearly thousand-year history of animus between the two nations (see “Yes Prime Minister” vid), I just cannot see them operating jointly in this manner.

All Your Stonehenge Are Belong to Us

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English Heritage, an organization that manages many of the historical sites in the UK has now sent cease and desist letters to image libraries claiming that they own all rights of all photographs of Stonehenge ever taken:

English Heritage, the organization that runs and manages various historical sites in the UK, such as Stonehenge, has apparently sent letters to various photo sharing and stock photo sites claiming that any photo of Stonehenge that is being sold violates its rights, and only English Heritage can get commercial benefit from such photos. In fact, they’re asking for all money made from such photos, stating: ‘all commercial interest to sell images must be directed to English Heritage.’ As one recipient noted, this seems odd, given that English Heritage has only managed Stonehenge ‘for 27 of the monument’s 4,500 year old history.

All this IP nuttiness is getting on menhir my nerves.

As a commenter noted, the rights to the photographs belong with the aliens what built the monument anyway.

The Military Side of the UK Budget Cuts

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It’s pretty grim:

  • Scrapping the existing carriers.
  • Scrapping the Harrier fleet.
  • Replacing the 138 F-35B STOVL with somewhere around 50 of the F-35C carrier variant.
  • The two carriers will be built, but one will not be fitted with catapults or arrestor gear, and so will never carry airplanes.
  • Scrapping the nearly new Sentinel surveillance aircraft as soon as they are back from Afghanistan.
  • Reduce MoD civilian staffing by 25,000 and military staffing by 17,000.
  • Canceling the late and over budget Nimprod MRA4.
  • Delaying a new SSBN.
  • Significant cuts to the surface fleet.
  • Speeding up the return of troops based in Germany

From a pure perspective of governance, you have to give the Tories props: When they said they would cut the budget, they applied this to the Ministry of Defence as well, which is, at least consistent.

Realistically, these cuts mean that, outside of low intensity UN peacekeeping missions, the British will be incapable of engaging in an operation independently of the US, but that has been the political reality since Suez in 1957 anyway.

The British Attempt at Slow Seppuku

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The British are engaging in truly draconian spending cuts in the face of a recession to the tune of £156 billion (roughly 20% of the current budget) and 490,000 employees.

By way of perspective, the UK Budget in 2-7-2008 was about £520 billion, and the job losses would be equivalent to the loss of over 2½ million jobs in the US, and that is just the direct losses, when one considers the follow on effects, essentially the jobs that are held by people who provide goods and services to these public employees, are likely to be even larger.

If one assumes that the total job losses will be roughly double the civil service cuts, and this is a conservative estimate, with the UK’s workforce size of roughly 30 million, we would see at least a 3% increase in unemployment.

On the bright side, unlike their fellow wingnuts on this side of the Atlantic, they are also applying the cuts to their Defen(c)se establishment as well (more in a later post).

I think that Paul Krugman has a wonderful bit of snark on this, where he calls the people who will be hurt by this British Fashion Victims:

In the spring of 2010, fiscal austerity became fashionable. I use the term advisedly: the sudden consensus among Very Serious People that everyone must balance budgets now now now wasn’t based on any kind of careful analysis. It was more like a fad, something everyone professed to believe because that was what the in-crowd was saying.

And it’s a fad that has been fading lately, as evidence has accumulated that the lessons of the past remain relevant, that trying to balance budgets in the face of high unemployment and falling inflation is still a really bad idea. Most notably, the confidence fairy has been exposed as a myth. There have been widespread claims that deficit-cutting actually reduces unemployment because it reassures consumers and businesses; but multiple studies of historical record, including one by the International Monetary Fund, have shown that this claim has no basis in reality.

No widespread fad ever passes, however, without leaving some fashion victims in its wake. In this case, the victims are the people of Britain, who have the misfortune to be ruled by a government that took office at the height of the austerity fad and won’t admit that it was wrong.

…………

It would be funny if it were not tragic.

Bad Ideas Revisited

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The Royal Navy has a problem, which is that with a typical weapons load in a tropical environment, the F-35B STOVL variant of the JSF cannot land without jettisoning some of its (very expensive) stores.

Their solution is the Shipboard Rolling Vertical Landing, for which the Royal Navy has just paid Lockheed $18 million for a viability study, in which the F-35 will land on a carrier deck in a combined wing borne and thrust borne mode, at about 60 kts airspeed without benefit of arrester gear.

So, you have an aircraft weighing something north of 35,000 pounds, which is going to hit the deck at 60+ kts, though the relative speed will likely be closer to 30 kts, and it will then be manually braked to a stop.

What a bloody mess.

Yeah, Like This Name is Accidental

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European missile conglomerate MDBA has announced a successful test of its, “Hard and Deeply Buried Target (HARDBUT) Next Generation Multiple Warhead System (NGMWS).

It appears to be rather different in concept from the penetrators developed by the US, which use mass, metallurgy (ES-1 Steel), and specialized geometry to achieve a target kill. Hardbut appears to rely on a tandem warhead to achieve its goals:

The firing was carried out using a representative missile airframe on the long rocket sled test track at Biscarrosse. The live Precursor Charge (PC) was detonated just in front of the massive concrete target and the inert Follow-Through Bomb (FTB) penetrated through and exited the rear face of the target, demonstrating a penetration capability significantly in excess of any warhead currently produced by MBDA. The trial was also designed to assess the robustness of the compact Ruggedized Electronic In-line Fuze (REIF) which will incorporate embedded smart fuzing algorithms. The target and trial set-up were designed to be operationally representative.

(emphasis mine)

So it appears to me that there is a (probably shaped) charge, with a penetrator that follows behind.

H/t Danger Room.

Economics Update

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Click for full size

The paradox of thrift continues

It’s jobless Thursday, and initial unemployment claims fell out of the 450K-485K sweet spot that they have been bouncing around in for most of the year. Initial claims fell by 11,000 to 445,000, better than forecast, with the 4-week moving average falling by 3,000 to 455,750, with continuing claims falling by 48,000 to 4.46 million, and emergency claims rising by 257K to 5.14 million.

So fewer people are losing work, but hiring has not picked, so overall unemployment has increased (257K – 48K – 11K = 198K more people collecting unemployment).

We also had good news on the retail front, with better than expected same store retail sales in September, though I am unclear how consumers are financing this, since wages are stagnant, and consumer credit fell in August. (See graph pr0n)

I guess that it could be that people took out their credit cards more in September, and that the conflicting figures are simply the result of month to month changes.

In Europe, both the Bank of England and the ECB held rates steady, and the BoE says that it will continue quantitative easing (printing money).

ECB bank president Jean-Claude Trichet went further full inflation idiot in statement to the press, tut-tutting other central banks easing moves, andstating that the ECB will be, “gradually phase out its non-standard liquidity measures.”

Yes, we are seeing more pronouncements from the pain caucus about austerity, and the most vocal of these folks, Tory PM David Cameron, has apparently succeeded in pushing UK house prices down by 3.6% in the month of September.

Note that I am not talking about a -3.6% annual rate, I am talking about a £6,000 drop in home prices in just that month. (!)
UK home prices -3.6% in a month (!)

I’m Sure That ADL President Abraham Foxman will Be Endorsing Them

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Considering the degree to which Abraham Foxman has allied himself with the right-wing, nativist, and bigoted Christofascist right, it’s only a matter of time before he shows up at a fundraiser for the Swedish SD far right anti-Islamic party:

‘It won’t be long before Sweden Democrats show true anti-Semitic nature’

Far-right, anti-immigrant party won an unprecedented number of seats in recent elections; local Jewish leader warns its pro-Israel stance is just an expression of anti-Islam policy.

By Danna Harman

It will not be long before the true anti-Semitic nature of the far-right anti-immigrant Sweden Democrats (SD) party – which won an unprecedented number of seats in Sunday’s elections, is revealed – a leader of the local Jewish community there warned on Monday.

“This is a neo-Nazi party… articulate, and talented…but very dangerous,” said Lena Posner, President of the Official Council of Jewish communities in Sweden, an umbrella organization of Jewish groups in the country. “We know where these people are coming from. They are Nazi sympathizers who, under their jackets, are still wearing their brown shirts.”

The local Swedish Jewish community, at least in the person of Ms. Posner , is showing way more sense and decency that does Mr. Foxman did on the entire Park51 community center matter.

Swiss Freeze Fighter Purchase

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I think that the Swiss decision to delay any decision on fighter purchases has a number of causes.

First, they realize that changes in banking regulation may cut seriously into their revenues, and second, I think that they may be able to get some lightly used fighters cheaply from bankrupt nations like Spain, who is on the hook for a significant numbers of Eurofighter Typhoon:

Switzerland on Wednesday postponed its search for new air force fighter jets for several years, just weeks before it was expected to announce a decision on the multibillion dollar tender.

Swiss Defence Minister Ueli Maurer said at a news conference that the postponement of the replacement of about half of the Swiss army’s ageing fleet of F-5 Tiger aircraft “will last at most until 2015”.

The tender launched in January 2008 led to a fierce battle between European aerospace group EADS’s Eurofighter, French firm Dassault’s Rafale and the Gripen built by Sweden’s Saab.

I think that this impacts Saab more than Dassault or Eurofighter, as they really need a foreign client for their Gripen NG.