Both wholesale inventories and sales rose in February, giving another sign that there is some sort of recovery on the way.
Also, it looks like the EU has dotted its “I”s and crossed its “T”s on an aid plan for Greece, which means that someone has gotten the Germans generally, and Angela Merkel in particular, to STFU, to the tune of about €30 billion in loans and guarantees.
It appears that his plane crashed in a heavy fog, while attempting to land in Smolensk, killing Poland’s president, Lech Kaczynski.
He was on his way to the Katyn Woods, where Polish and Russian authorities were to have a memorial service for the Polish officers and politicians murdered by the NKVD in 1940, which is kind of ironic:
Russian emergency officials said 97 people were killed. They included Polands deputy foreign minister and a dozen members of Parliament, the chiefs of the army and the navy, and the president of the national bank. They included Anna Walentynowicz, 80, the former dock worker whose firing in 1980 set off the Solidarity strike that ultimately overthrew Polish Communism, as well as relatives of victims of the massacre that they were on their way to commemorate.
Among them, the Polish government said, were Mr. Kaczynski; his wife, Maria; Ryszard Kaczorowski, who led a government in exile during the Communist era; the deputy speaker of Polands Parliament, Jerzy Szmajdzinski; the head of the presidents chancellery, Wladyslaw Stasiak; the head of the National Security Bureau, Aleksander Szczyglo; the deputy minister of foreign affairs, Andrzej Kremer; the chief of the general staff of the Polish Army, Franciszek Gagor; the president of Polands national bank, Slawomir Skrzypek; and the commissioner for civil rights protection, Janusz Kochanowski.
My condolences to the victims families.
Note that President is a mostly ceremonial position under the Polish system, though a quick search through my archives seems to indicate that he was a bit of a euro-skeptic.
Basically, the Tories have been slipping in the polls, and so Gordon Brown has called for a May 6 election.
I think that it still an uphill battle, but the Tories appear to be in, “Stepping on their own dick,” mode right now, and one poll shows the margin to be only 4%, so it is an opportune time for Labour to call an election.
I think that it will be a close thing, but my record on such things is less than stellar.
Well, it looks like the issue with a possible default by Greece has been resolved, for a while at least, by a joint action of the EU and the IMF.
I think that this puts to rest the idea that Greece will leave the Euro, for a while at least, but the real problem is that the Germans have structured the Euro with the goal of furthering their mercantilist export driven goals, much as the Chinese have with the Yuan, and the solution here is not to kick the Greeks out of the Euros, but to kick the Germans out of the Euro.
Simply put, the German desire for new export markets has made them push aggressively for countries to join the monetary union before it is prudent, and to encourage them to do so by providing economic aid and by overvaluing the sovereign currency.
Unfortunately, this creates asymmetries that are creating the problems that we have now, and it will be a tough thing to avoid something like the downfall of European Exchange Rate Mechanism that occurred when George Soros, “Broke the Bank of England.”
The problem is that, absent the labor mobility that exists in the United States, where one need neither a work permit nor to learn a new language, these asymmetries will persist.
This has been further reinforced by the efforts of Europhiles to jump-start the mechanisms of European integration through direct and indirect subsidies to entice new members to join prematurely.
Damn ………… I gotta make this a longer form, and submit it to Marketplace as a guest editorial.
So, the Northrop-Grumman/EADS team has bowed out, and EADS CEO Louis Gallois has said that it is impossible for them to make a solo bid by the May 10 deadline.
This is not surprising, they would have to develop a plan to establish a manufacturing facility, reconfirm and/or create arrangements with suppliers, etc.
Well, the Pentagon understands that, and is willing to extend the deadline to allow for a bid from EADS:
The Department has received notification from EADS North America indicating possible interest in competing for the Air Force’s KC-X Tanker and we would welcome that. Consistent with our commitment to conduct a fair and open competition, the Department invites proposals from all qualified contractors and, if necessary, we would consider a reasonable extension to the RFP deadline. That is not unusual. In fact, a few recent examples include BAMS, VH-71, Small Diameter Bomb (SDB) II, LOGCAP IV, LCS, LPD-17 Repair Services, and FMTV.
So, it sounds to me like the USAF really wants to light a fire under Boeing with the prospect of some competition, because otherwise they know that the tanker will be both expensive and late without a the possibility of meaningful competition.
EADS has has not ruled out bidding if the deadline is extended (press release):
EADS will assess new situation on US Tanker Request for Proposal
Leiden, 19 March 2010
Yesterday the US Department of Defense (DoD) indicated it would welcome a proposal from EADS North America as prime contractor for the KC-X tanker competition. This is a significant development. EADS is assessing this new situation to determine if the company can feasibly submit a responsive proposal to the Department’s request for proposal (RFP).
And while this development is a positive sign that the DoD seeks competition, it does not address EADS’ underlying concerns that the RFP clearly favors a smaller, less capable aircraft, and that the additional combat capability offered by our system may not be fully valued.
An important prerequisite for our consideration of entry into this competition will be a significant extension to the period within which to prepare and submit a proposal. EADS welcomes the DoD’s recent statement which indicated a willingness to extend the timeframe. Though this is essential, it is only one factor in making a decision for EADS to compete. In the end, the company will only submit a proposal if there is a fair chance to win, after evaluating all relevant factors.
EADS is a global leader in aerospace, defence and related services. In 2009, the Group – comprising Airbus, Eurocopter, EADS Astrium and EADS Defence & Security – generated revenues of € 42.8 billion and employed a workforce of more than 119,000.
OK, I bet you have a question now, why did I say that this was weird?
After all, this appears pretty normal in the world of defense contractors angling for maximizing their chances at a Pentagon contract.
Well, the weird does not come from Boeing, nor does it come from EADS. Rather we are getting our dose of weird from the Russians, who are proposing that a modified version of their Ilyushin Il-98, called the Il-98, for the competition.
While I can see the aircraft being cheaper, low cost is what Russian aerospace has as its chief asset, I cannot see anyone going with a 4 engine aircraft, the operational costs would be higher.
Furthermore, were a Russian aircraft to get the contract, it would have the effect of reinforcing a world-wide spares and maintenance infrastructure for Russian civil aircraft generally, which would be bad for both EADS and Boeing, since this would make Russian aircraft far more competitive.
My guess is that this announcement involves a sick sense of humor and a bit of Vodka.
Or, perhaps they are trying to get a payment from Boeing not to bid.
(on edit)
My bad, the Russians will be offering a 2 engine based on the Il-96 to create the Il-98, so the economics might not be quite so bad, and given its Soviet origins, it may very well be able to operate off of less robust airfields, since Soviet designs typically have more/larger tires, and so lower ground pressure.
Still, this is just freaky.
The EU has an as yet undisclosed bailout plan, and S&P reaffirmed Greece’s BBB bond rating.
As I have said before, the problem was that the governments were too eager for integration, so they used unrealistic exchange rates to bring in the less well off EU members into the Euro, basically payoffs, and so you now have imbalances that need to sort themselves out.
Still if I were a betting man, I’d bet on the Germans being complete dicks about all of this, because it’s how they roll.
We have a report that Denmark is withdrawing from the JSF program, and will instead purchase F/A-18 E/Fs.
Here is the Danish report translated.
I’m not surprised.
When you compare the $50 million F/A-18, with the let’s-be-serious-here $100 million + F-35, and the fact that with global warming and the potential opening of the Northwest Passage, the Danes will need to patrol around Greenland, it gives a 2nd engine has some real value.
Then again, we could have a denial tomorrow.
And by overwhelmingly, I mean that the vote against the referendum was 93.2 percent, with about 1% of the votes being spoiled.
As Dean Baker so profoundly notes, the entire bailout is predicated on the idea that bankers can, and should, be allowed to gamble and that the rest of us should be left on the hook:
It should also point out how the Iceland makes a mockery of anyone who claims to support leaving financial activities to the market. In almost all cases, actors in financial markets assume that governments will stand behind banks at the end of the day. Therefore when they say want the government to leave things to the market they are lying. They just want to be able to take risks with taxpayers money, without being fettered by regulations limiting the extent of these risks. In short, the finance boys want a free lunch, not a free market.
In the case of Iceland, this hook is about about €13,000 for every man, woman child on the small island.
We need our bankers, and stockbrokers to be stupid and dull again, because these smart guys are killing us.
EADS will get another €3½ Billion to make the aircraft, with €2 billion being pure bailout, and €1½ billion being recouped on export sales.
Note that the original budget was for €20 billion, and I’m sure that this is not the last of the cost escalations.
With banking having left the nation dunned by creditors demanding something more than $20,000 from every man woman and child in the tiny island nation, Iceland may have found a replacement, and this one may actually produce something of real value.
Specifically, they are looking at “passing the strongest combination of source protection, freedom of speech, and libel-tourism prevention laws in the world“: (see also here and here)
On Tuesday, [Feb 16] the Icelandic parliament is expected to introduce a measure aimed at making the country an international center for investigative journalism publishing, by passing the strongest combination of source protection, freedom of speech, and libel-tourism prevention laws in the world.
Supporters of the proposal say the move would make Iceland an “offshore publishing center” for free speech, analogous to the offshore financial havens that allow corporations to hide capital from authorities. Could global news organizations with a home office in Reykjavík soon be as common as Delaware corporations or Cayman Islands assets?
“This is a legislative package to create a haven for freedom of expression,” Icelandic member of parliament Birgitta Jónsdóttir confirmed to me, saying that a proposal for comprehensive media law reform will be filed in parliament on Tuesday, and that whistle-blowing specialists Wikileaks has been involved in drafting it. There have been persistent hints of an Icelandic media move in recent weeks, including tweets from Wikileaks and a cryptic message from the newly created @icelandmedia Twitter account.
It might not be a big market, but with a population of 320,000, it does not need to be, and we all win.
I think that the libel tourism laws might be the most significant, if it can be structured in a way that has meaning; Too many times, the UK’s draconian libel laws are used as a cudgel against free speech.
It’s one of the questions I’ve always wondered about regarding the internet: Why haven’t countries used this to their advantage, rather than just knuckling to the US acting as laptog to the RIAA, MPAA, and other acronyms.
H/t Murray Waas.
So, now it’s time to look at the mess that is Greece.
Greece has been a mess for a very long time, and of the Nato members who joined the Euro, it’s probably the one that should not have joined.
John Mauldin notes, correctly, that the core of the problem is that the terms of joining the Euro block were excessively generous for the less well off nations, basically Germany and France successfully created a mechanism which over valued their national currencies.
This served to both minimize their labor cost advantages with regard to Northern Europe and to provide a market for northern European products:
First, we need to go back to the creation of the euro. Most of the Mediterranean countries that are now in trouble were allowed into the union with an exchange rate that overvalued their currencies relative to the northern countries, but especially to Germany. That meant that Greek consumers could buy products and services that previously may have been out of their reach. Plus, with government debt at low rates, the Greek government could borrow more to finance deficit spending, without the threat of higher interest rates. And Greece began to increase its debt with abandon.
Of course, there was the problem that the debt, and deficits, were exceeding the Euro Zone mandates, but with the use of some clever financial instruments it traded with about 15 banks, most notably that great vampire squid wrapped around the face of humanity,* Goldman Sachs, it concealed this debt from regulators:
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.
Note also that this was a mess that the Panhellenic Socialist Movement inherited from the right wing New Democracy party:
George Alogoskoufis, who became Greece’s finance minister in a political party shift after the Goldman deal, criticized the transaction in the Parliament in 2005. The deal, Mr. Alogoskoufis argued, would saddle the government with big payments to Goldman until 2019.
Mr. Alogoskoufis, who stepped down a year ago, said in an e-mail message last week that Goldman later agreed to reconfigure the deal “to restore its good will with the republic.” He said the new design was better for Greece than the old one.
It sounds a lot like the mess that Bush and His Evil Minions™ left for us.
One of the problems in dealing with this is that the Germans, remembering the hyper-inflation of Wiemar Germany as if it were yesterday, are suggesting that austerity measures are the way to go, and there are rumblings from them that they want Greece expelled from the Euro and losing voting rights in the EU Parliament.
In response, Greece is accusing Germany of not providing compensation for the stuff that they stole from Greece in WWII:
Athens has accused Germany of failing to meet its World War II compensation obligations following the Nazi occupation of Greece in 1941, a claim Berlin has firmly rejected.
In a radio interview on Wednesday (24 February), Greek Deputy Prime Minister Theodoros Pangalos criticised Germany’s attitude towards the ongoing Greek debt crisis, adding that Athens had never received adequate war reparations.
“They took away the Greek gold that was at the Bank of Greece, they took away the Greek money and they never gave it back. This is an issue that has to be faced sometime in the future,” Mr Pangalos told the BBC World Service.
<sarcasm>It’s so nice when you have mature people solving problems.</sarcasm>
One of the problems here is that the prescription by the central bankers is more austerity for Greece, but the reality is that Greece has among the most austere social safety net, and spending in the Euro zone.
The real problem is that because of endemic tax evasion and systemic corruption throughout the bureaucracy, their tax collections are truly pathetic.
One bright side to all this is that a number of people are starting to realize that Goldman Sachs is not simply a banker, but that all roads on most of this corruption lead to the Squid*, most notably those in the European Commission, who are, if Simon Johnson is correct, going to execute a detailed audit of Goldman’s dealings in Europe.
It doesn’t help that Goldman Sachs engaged in similar maneuvers with other European governments:
Greece’s 2001 deal to swap some of its debt using currency derivatives was in line with what other euro-zone countries were doing, Yiannos Papantoniou, the country’s finance and economy minister when the deal was made, told CNBC.com Wednesday.
………
“We took a loan that was to be repaid in 2019,” he said in a telephone interview. “It was public. I know that what we’ve done then was consistent with what was done by many euro zone countries.”
………
Italy, France and Spain were among the euro zone members doing such swaps at the time, he added. Eurostat, the European Union’s statistics office, has asked Greece for explanations on these debt swaps by Feb. 19.
What’s more it appears that these transactions may have been a part of a fraud perpetrated by the banks on these governments, which is why law enforcement officials in Milan have frozen accounts of a number of banks, “UBS AG, Deutsche Bank AG, JPMorgan Chase & Co. and Depfa Bank Plc,” as a part of an investigation.
BTW, while we are at it, it should be noted that Bank of Italy Governor, and dark horse candidate for ECB president, Mario Draghi used to work with the Vampire Squid.*
As it stands right now though, it appears that Greece should be able to do its required borrowing for the next 2-3 weeks.
*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
I said that there would be blowback when GM decided not to sell Opel and suck up all the state aid itself, and it appears taht I was right
We are now seeing that the taskforce reviewing GM’s plans with Opel is saying that, they are inadequate, and aid should not be awarded:
General Motors’ restructuring plan for Opel/Vauxhall has been dealt a potentially serious setback on Wednesday after a German government taskforce said it had doubts about the scheme.
The US carmaker presented the turnaround plan for its lossmaking European operations last week and formally applied to Berlin for €1.5bn ($2bn) in loans or guarantees – the biggest portion of the €3.3bn it says it needs to finance its plan.
However, the federal task force advising Berlin on GM’s plans has deemed the proposals “unqualified for government loan guarantees”, three officials in German states with GM plants told the Financial Times on Wednesday.
(emphasis mine)
Part of the reason for this, though it is not explicitly spoken, is the belief that GM will strip mine Opel to support its US operations.
There has been a tepid denial from the board about this report, but I’m inclined to believe that they want guarantees that the money is not going to Detroit.
With Greece mired in a debt crisis of their own making, and coming to the EU for aid, perhaps one of the conditions for any aid should be for them to stop being so pissy about admitting Macedonia to the EU, because the Greeks want to claim Alexander the Great was “Greek.”
He was a Macedonian, who led a nation that did not speak Greek, though he, as a royal child, was tutored by the best Greek scholars, and doubtless spoke Greek, albeit with a foreign accent.
But, even if he were Greek, it was 2000 years ago, and the government of Greece needs to focus on the hear and now.
The Labor Party has pulled out of government over a proposal to extend the tour of Dutch forces in the region, leaving Christian Democratic Alliance head, and Prim Minister Jan Peter Balkenende no choice but to dissolve government.
What is interesting here is that the troops were supposed to return in 2008, but have remained deployed because no replacements could be found amongst other NATO members, and Labor pulled out as a result.
This means that elections will be held a year ahead of time, probably in May, and that the main issue is likely to be the deployment of Dutch troops to Afghanistan, and given the nature of the electorate in Holland, and Europe generally, I think that the parties who favor immediate withdrawal are likely to gain the upper hand.
This may have political significance to other nations deploying troops to the campaign.
The German tax authorities have decided to pay €2.5 million to a whistle blower who stole information on 1500 accounts, with the payments being dependent on the data being real. (See also here, and here) in order to catch tax evaders.
They did this before, with Lichtenstein in 2008, where payment netted tax revenues in excess of €200 million.
The Swiss have a problem, because I bought a 4 Gig memory stick a year ago for $12, and it’s smaller than a pack of gum.
Even if you assume 100K per account, this stick can hold about 40,000 accounts on each memory stick, and with the going rate from German tax authorities of about €1,666 per account, that memory stick could net an insider well over €50 million, with a bulk discount.
Their style of bank secrecy is likely to go away, because it is unsupportable.
Now, Germany needs to learn about the “Perp walk”.
Turns out that it was Roman, this example dates from around 200 CE:
It appears that even the Roman Legions needed a toothpick.
Capital One charge-off rates, H/t Calculated Risk
Well, the New York Federal Reserve Bank just released its Empire State Manufacturing, Index, and it rose more than expected, from 15.9 in December to 24.9 in January, though I have no clue as to how the numbers went up:
……The details of the report were mixed. New orders slowed to 8.8 in February from 20.5 in the prior month. Shipments inched lower. However, inventories were flat in February after 17 straight negative monthly readings. Employment was positive for the second straight month……
I’m a little bit confused, but it appears that what we are seeing here is almost entirely stronger inventories, so as been noted before, it appears to be an inventory bounce.
In consumer credit, things appear to be moderating, in that default rates for the major card companies did not increase last month, or more accurately they didn’t rise last month for major credit card companies, except for Capital One, whose charge off rates rose from 10.14% to 10.41% in January. (See chart pr0n)
In real estate the National Association of Home Builder confidence index rose last month, albeit from an amazingly unambiguously crappy 15 to startlingly unambiguously crappy 17, where 50 is neutral.
In England, inflation rose sharply in January, to a 3.5% annual rate, which really isn’t scary at all, and additionally it should be noted that much of this was driven by the VAT (sales tax) increasing from 15% to a 17.5 as that stimulus measure expired, as shown by the fact that the, “CPIY rate of inflation, which strips out the effect of indirect taxes, fell from 2.8 per cent in December to 1.9 per cent in January.”
I just want to say, once again, that low inflation is a part of the problem, and another parts are the inflation hawks, both among regulators and among bond investors.
In currency, the dollar fell on reduced concerns about the Greek financial meltdown, which increased risk appetite.
I am not sure why investors had reduced concerns about Greece though. (I’ll get to the Greek crisis in more detail later)
Additionally, we have a report that the Bank of Japan is planning more quantitative easing if the Yen strengthens to OJ May Expand Easing Should Yen Reach ¥87:$1.00.
In any case, the falling dollar had commodity traders buying oil, which drove the price higher.
As today is a holiday in the United States, it was a fairly slow news day, but over the weekend, we got a report on house prices in the UK, and the asking price rose at the fastest rate in 3 years, of course, the whole problem with the real-estate crisis was the disconnect between ask and offer, so I’d wait for sale prices to rejoice.
In real estate in the US, delinquencies on commercial mortgage backed securities (CMBS) jumped in January.
On the brighter side, Japanese GDP grew strongly, largely on capital spending driven by exports.
In currency and energy, the Euro hit a 9 month low on the mess that is Greece, while crude oil was basically flat, up 6¢/bbl.
In the UK, the Financial Services Authority (FSA) has told banks that if their bonuses do not comply with regulations, the face the forfeiture of their banking licenses:
In an extraordinary ultimatum that has shocked some of the City’s biggest companies, the Financial Services Authority (FSA) told bank bosses that 60pc of all pay must be deferred, with no exceptions, even for those whose contracts conflicting with the edict.
Many of the global players have in recent weeks made representations to the City watchdog, in particular about pre-existing employment contracts that guarantee bonuses over a year or more. But their appeals have been met with the FSA’s toughest yet response.
One pay executive in a major bank told The Daily Telegraph: “The message came back that while the FSA agreed that it does not have jurisdiction over contractual law, it does have jurisdiction over issuing bank licences in London, and that we should go away and unwind the contracts.“
Bankers at Merrill Lynch are among the first affected. Those with pre-existing contracts were told about the FSA’s tough stance on Friday when their bonuses were agreed.
(emphasis mine)
This is very canny on the part of the FSA. They aren’t instructing banks to break contracts, which might create all sorts of problems with EU or WTO “free trade courts”, they are saying, “This is the rule, if you don’t comply, bye bye licens(c)e.”
If an employee refuses to modify their contract, it’s pretty clear that they are deliberately engaging in an activity which would cause the loss of their firm’s banking license, which in a sane universe is grounds for dismissal.
I wish that I lived in a country with meaningful banking regulations.
This doesn’t fly, it is just so ugly that it repels the earth
In a move away from about 50 years convention in materials and aerodynamics, European aerospace firms are looking at faceted sharp edged reentry vehuicles: (paid subscription required)
Advanced thermal protection systems, to be tested in upcoming hypersonic experiments, will enable development of a reusable “sharp-edged” orbital launch vehicle with much greater flexibility than blunt-capsule or shuttle-type designs, say German researchers.
The team at the German Aerospace Center (DLR) in Bremen believes the move to simple, faceted geometries—away from the curved surfaces of conventional reentry vehicles— should also help cut costs while simultaneously offering improvements in aero-thermodynamic performance.
Basically, they are suggesting that the use of flat surfaces will make for more easily constructed heterogeneous materials, kind of like how Chobham armor give tanks angled surfaces, and that this can allow for sharp edged re-entry vehicles that can give more cross range performance and far lower G loads during reentry.
This is not an easy nut to crack. Not only are the temperatures higher with a weak shock wave, on the order of nearly 5,000°F as versus about 2300°F for the shuttle, but the high speed portion of reentry would take something on the order of an hour, as opposed to 10 minutes.
The technologies involved are ceramic matrix composites, basically composites where ceramics replace the conventional resin, advance ablative systems, and effusion cooling, which is basically where very small holes in the surface are used to pass a cooling fluid that carries away heat directly, as well as creating a thin film of relatively cool gas on the surface in question.
Effusion cooling has already been applied to cool combustors, but might prove more problematic in the rather less well controlled environments during reentry.