Jose Manuel Barroso Call Your Office, Existential Threat For You On Line 2

From Ambrose Evans-Pritchard, here:

A day after European Commission chief Manuel Barroso said the "existential threat to the euro has essentially been overcome", we have the monthly jobless data from Eurostat. Unemployment has reached a record 26.6pc in Spain, rising to 56.5pc for youth. It is almost the same in Greece: 26.0, (57.6) ... but Greece's data is old. It will soon be worse. Followed by: Portugal: 16.3, (38.7) / Ireland: 14.6, (29.7) … but improving, since Ireland is highly competitive in EMU / Slovakia: 14.5, (35.8) / Italy: 11.1, (37.1) … though be cautious of the Italian data because it famously undercounts discouraged workers. Italy's rate is probably nearer 14pc, comparing like with like. It is a record 11.8pc for EMU as a whole. ... Mr Barroso was once a Maoist and a student activist in Portugal's Carnation Revolution against the reactionaries. Good for him. Which side would he be on now if he were 40 years younger?

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China Commits $350 Million To Develop Thorium Power

Ambrose Evans-Pritchard has the story here, and tells you better than I can why you should care. What's old may become new again.

The World's Second Largest Economy Is In Turmoil: The Rats Are Jumping Ship

The Chinese Year Of The Rat

Ambrose Evans-Pritchard for the UK Telegraph, here:

The worry is that the transition [of power in China] could go badly awry as 70pc of top cadres and the military are replaced, the biggest changeover since the party came to power in the late 1940s. "That is what is causing capital flight. All the top officials are trying to get their money out of the country," he said.

Monetarist Ambrose Evans-Pritchard Eats Keynes For Dinner, Austrians For Dessert

Frustratingly inconclusive and full of explanatory power at the same time, here:

Monetarists blame the ECB and the Fed for keeping money too tight in early to mid 2008, pushing a fragile credit system over the edge. They blame “pro-cyclical” regulators for aborting recovery ever since by forcing banks to raise asset ratios too fast. They are right on both counts.

Yet the `Austrian School’ is surely right as well to argue that a rise in debt ratios across the rich world from 167pc of GDP to 314pc in just thirty years was bound to end badly. There comes a point when extra debt draws down prosperity from the future. The future arrived in 2008.

Germany's Lonely Realists About The Euro

From Ambrose Evans-Pritchard, here:

Thilo Sarrazin is not everbody’s cup of tea. The ex-Bundesbanker and shock-jock critic of Islam in Europe loves to make mischief.

But his latest broadside against monetary union in the Frankfurter Allgemeine is spot on. ...

Mr Sarrazin is almost alone in German public life, at least until the dam breaks, which cannot be far away.

His one big ally is Hans-Olaf Henkel, former head of the German industry federation and author of a master plan to break EMU in two – with Germany and northern allies withdrawing, leaving France and the Latin bloc with the euro. ...

He is a brave man, the survivor of two years of vilification in the German press for daring to challenge orthodoxy.

Libor Shmibor: If Anyone's Been Manipulating Interest Rates, It's The West

Not just one fine formulation about our banking problems from Nicole Gelinas, reminiscent of Ambrose Evans-Pritchard's picturesque "debt draws forward prosperity", but two in one column just loaded with even more good sense (emphases added in red):

If the West had let markets work in the years leading up to 2008 and beyond, there’d be no need to get rid of this crop of bad actors. When bubble-era banks went out of business because of their disastrous mistakes and mischief, they would have taken their failed leadership with them.

Yes, a few firms did fail, but not enough to change the institutional culture of Wall Street and the City (London’s financial district). Instead, institutions that should have gone under, including the Royal Bank of Scotland, have forged ahead, dragging problems that should have been solved by now into the future and harming economic growth. ...

[I]f anyone has been manipulating interest rates to pretend that everything is A-OK, it’s Western governments. In recent years, central banks in America and Britain (and in Europe) have bought hundreds of billions’ worth of bonds in an effort to keep global interest rates low, financial firms afloat, and middle-class borrowers placated. 

EU Fascism: Methinks Mr. Barroso Doth Protest Too Much Of Democracy

So does Ambrose Evans-Pritchard here, who for prudential reasons does not call Mr. Barroso's EU fascist, but he might as well have:

I would accept that six or seven of the EU states are genuine long-established democracies. Others are – frankly, to borrow Mr Barroso’s diction – on probation, in historical terms. Some do not qualify at all. (I refrain from naming them for fear of extradition by one of their politico-magistrates under the European Arrest Warrant scheme, sold to voters as an anti-terrorism device and now used to muzzle free speech).

As for the EU itself, the organisation toppled the elected governments of Italy and Greece last year, replacing them with EU technocrats.

It ignored the NO votes to the European Constitution in France and The Netherlands, ramming through the slightly-altered text as the Lisbon Treaty without referendums – except in Ireland. When the Irish voted NO to that as well, they too were ignored.

That was the moment when the EU crossed the line altogether and lost fundamental legitimacy (at least for me). Lisbon is a rogue Treaty. Mr Barroso – charming though he may be – is a rogue president of a rogue Commission.

The whole construct has become authoritarian and will become autocratic if this crisis is exploited to force through fiscal union.

So we face democratic danger if they take the necessary steps to rescue the euro, and we face financial danger if they don’t.

Thanks a lot.

It's not like the analogy hasn't occurred to him very recently, either, as here:

It was for this outcome that the Greece’s elected government was toppled last year in an EU Putsch. We now learn from ex-premier George Papandreou that this was "all Sarkozy’s fault".

France’s leader refused to let Papandreou call a referendum on the bail-out terms (which would almost certainly have passed), and Chancellor Angela Merkel went along with this shoddy act of EU colonialism. The EU threatened, in effect, to cut off Troika payments. The PASOK government was replaced by an EU-appointed technocrat. ...

Year after year of "internal devaluation" will drive [Greek] unemployment to catastrophic levels before it breaks the back of the labour movement sufficiently to clear the way for drastic pay cuts. It is basically a Fascist policy. Mussolini pulled it of in 1928 under the Lira Forte policy, but he had coercive advantages.

Goodbye Euro. Get Ready For The New Thaler, The Dollar's Forebear.

From Germany, of course.

Ambrose Evans-Pritchard summarizes the recent developments about a North-South split in Europe, here:

Unease over escalating euro rescues is building by the day in Germany. Forty economists and professors have written a joint letter to Mrs Merkel proposing a break-away "Northern Euro", exhorting her to step back from the brink before making the "even greater error" of ratifying the ESM.

The group said Berlin must clarify exactly how much Germany could stand to lose from the ECB's internal payments system, known as Target2. The Bundesbank claims on fellow central banks have exploded to €699bn, or 27pc of German GDP. The arcane issue of Target2 has fueled a hot-tempered debate in Germany over who foots the bill if monetary union falls apart.

The professors called for study laying out the pros and cons of a return to the D-Mark, or the creation of a new currency or "North Euro" led by Germany, the Netherlands, and like-minded states.

The idea of a North Euro -- or "Thaler", the coin of the late Holy Roman Empire -- was first [m]ooted by the former chief of the German Industry Federation, Hans-Olaf Henkel.

It would let southern EMU states to keep the euro and uphold euro debt contracts. The region could reflate and regain trade competitivenes with a weaker exchange rate.

While the letter is unlikely to sway thinking in Berlin, such radical proposals are gaining a wider hearing. Georg Schuh, chief investor of Deutsche Bank's DB Advisers, said the crisis is terminal. "A break-up of the eurozone is very likely. Capital markets have already priced it i[n]. I think we are in the end-phase," he said.

Retail Collapses in The Netherlands, Unsold Housing Inventory Nearing Spanish Levels

So says Ambrose Evans-Pritchard, here:

Dutch retail sales collapsed by 11pc in April, even worse than the 9.7pc drop in Spain. (Royal holidays cannot explain this). ...

This is not contagion from Greece or any such nonsense. It is the result of the eurozone's destructive policy mix. ...

The consequence of Holland’s accelerating downward slide may well be an anti-euro coalition in The Hague this Autumn.

I reported from Amsterdam in April that the Dutch property market is tipping into deeper slump, with the inventory of unsold homes nearing Spanish levels . . .: Rabobank said home prices have fallen 11pc from their peak in August 2008, or 15pc in real terms, leaving up to 500,000 people in negative equity. The stock of unsold properties has doubled to 221,000 since 2008, almost double the declared level in the US on a per-capita basis.

Greek Exit Could Expose Banking Ponzi in Italy

Ambrose Evans-Pritchard for the UK Telegraph, here:

The IMF said Italian bank exposure to the state is 32pc of GDP, including all forms of lending. ... Almost half of this is owed to foreigners. Italy's central bank owes a further €278bn in 'Target2' claims to peers in Germany, Holland, Finland and Luxembourg, reflecting capital flight.

Italy's former premier Romano Prodi said the EU risks instant contagion to Spain, Italy, and France if Greece leaves. "The whole house of cards will come down", he said. ...

The ECB's emergency lending may have made matters worse, encouraging banks to buy their own states' debt. It has led to an incestous inter-linkange of fragile banking systems and fragile sovereign states, each propping the other up. Many of the banks used ECB money to buy state bonds until they need to roll over their own debt. They are now nursing stiff losses.

Irrational Exuberance in French Real Estate, as in USA, Began in Late 1990s

And a long, steady slide back down is in the cards.

So Ambrose Evans-Pritchard in the UK Telegraph, here:

The price-income ratio was stable from the 1960s to the late 1990s, before exploding over the past 12 years as a perfect storm of demographics, state sweetners and cheap credit led to a 12-year blow-off.

There are parallels with Spain and America but Mr Sabatier said the French twist is a replay of the early 1930s when investors fled stocks after 1929 and rotated into "safe" property. Hence the paradox of rising prices during the Depression. The strange boom did not end until premier Pierre Laval cut rent ceilings in 1935, triggering a long slide.

"Laval's policy change was the catalyst. The same could happen now as austerity forces brutal measures," he said. An array of market props are eroding, including tax relief on some mortages and certain capital gains. ...

A housing slump would hammer the economy just as long-delayed austerity begins in earnest. Property makes up 65pc of French household wealth, compared with 57pc in Germany, 39pc in Japan and 27pc in the US.

Greeks Violate Contract Law Just Like ObamaCare Does in America

Obama and the Democrats have violated hundreds of years of contract law in passing ObamaCare because the law forces Americans to enter into health insurance contracts on penalty of fine or even imprisonment. For contracts to be valid in a court of law, however, contracts must be entered into willingly, not under compulsion.

Now we learn here that the Greek Parliament, having thrown out people who won't vote the correct way, has interfered with bond contracts, rewriting the terms after the fact in order to get what it wants:

The Greek parliament's retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC's are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.

Add to this the US housing MERS scandal which has violated the ancient principle of traceable registered property documentation and I'd say we have a trinity of cases demonstrating a complete and utter repudiation of The West by The West.

Englishman Ambrose Evans-Pritchard Proposes American Fascist Rescue of Europe

Ju-87D Stuka Dive-Bomber

Which is to say, he proposes that the Federal Reserve buy up toxic European bonds in a veritable Blitzkrieg, here:

The Fed could buy €2 trillion of EMU debt or more [!], intervening with crushing [!] power. The credible threat [!] of such action by the world’s paramount monetary force [!] might [!] alone bring Italian and Spanish yields back down below 5pc, before one bent nickel is even spent.

One presumes that the Fed would purchase both the triple AAA core and Club Med in a symmetric blast [!] of monetary stimulus [!] across the board, avoiding the (fiscal) error of targeting [!] semi-solvent states. In sense, the Fed would do quantitative easing for the Europeans, whether they liked it [!] or not [!].

An astute commenter named silqworm got this correct: "What you call necessary to prevent fascism is fascism."

National Review's Exhausted Conservatism Incubates More Liberal Monetarism

As with Ramesh Ponnuru's call here at The New Republic (!) for more monetary loosening and fiscal tightening, a policy neither Democrats nor Republicans embrace.

He must be reading Ambrose Evans-Pritchard at the UK Telegraph since the financial crisis, who keeps calling for same.

He has no understanding of, and pays no attention to, the source of the explosion in debt in The Great Moderation, however, which was a civilizational commitment to misallocation of capital to housing. To finance it, money creation had to pass from the control of central banks to so-called private bankers.

It is they who have brought us to this pass with massive amounts of leverage, with Democrat and Republican accommodation all the way, in exchange for power, money and influence.

National Review is incapable of teaching such things because it's part of the problem, not part of the solution. No wonder Ramesh wanders.

German Leftist Gregor Gysi Savages The Two-Faced Angela Merkel

Ambrose Evans-Pritchard had the quotations, here:

Die Linke ('Left') leader Gregor Gysi was electrifying. "It is the arrogance of power," he began, and never let go.

"Every week you come up with a different story about this crisis."

"We were told there would be no leverage and you have reversed everything in a matter of weeks. Now we learn that the 20pc loss will fall entirely on taxpayers. They alone will pay. That is the decision you are taking."

"Why don’t you tell German taxpayers the truth? They are being asked to pay the losses for French banks."

Those domestick traitors, bosom-thieves,

Whom custom hath call'd wives;

the readiest helps

To betray the heady husbands,

rob the easy.

-- Ben Jonson

America: Phoenix Rising From the Ashes

From Ambrose Evans-Pritchard, here, not in the least because our own energy supplies and manufacturing are coming back, on top of all this:

The global depression will grind on as much of the Western world tightens fiscal policy and slowly purges debt, and as China deflates its credit bubble.

Yet America retains a pack of trump cards, and not just in sixteen of the world’s top twenty universities.

It is almost the only economic power with a fertility rate above 2.0 - and therefore the ability to outgrow debt - in sharp contrast to the demographic decay awaiting Japan, China, Korea, Germany, Italy, and Russia.

Europe's EMU soap opera has shown why it matters that America is a genuine nation, forged by shared language and the ancestral chords of memory over two centuries, with institutions that ultimately work and a real central bank able to back-stop the system.

The 21st Century may be American after all, just like the last.

"Kultur is the Ultimate Economic Fundamental"

Ambrose Evans-Pritchard keeps trying to come to terms with Germany, here.

Wolfgang Schauble Calls Tim Geithner's EFSF Leverage Idea STUPID!

It's about time someone did.

Ambrose Evans-Pritchard has the quotation from the German finance minister, here:

"I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense," he said.

Angela Merkel Believes in Magic, Which is a Very Bad Sign For Us All

As reported here, by Ambrose Evans-Pritchard:

Chancellor Angela Merkel said the ruling validated her rescue policies, and once again vowed to do whatever it takes to ensure the survival of monetary union.

"History has shown that countries with a common currency never wage war against one another, and that is why the euro is far more than just a currency. If the euro fails, Europe fails. It must not fail, and will not fail," she said in an emotional speech.

This faith in a mere currency construct is the same sort of faith neo-conservatives in America have in the political-economic construct known as democracy, the chief article of which faith is that democracies don't make war on democracies. Nevermind that Washington, DC, has been at war with the fifty united States since the American War Between The States. And make no mistake about it . . . that war has not been won even yet, otherwise there would be no such thing as a Tea Party.

If and when that war is won and the Tea Party disappears, the rest of the world should be afraid. Very afraid. For that is when you will discover that democracies have always gone to war to survive.

Long live The Republic.

Democracy? Not so much.

Evidence That Treasury Bill Financial Collateral Has Dried Up in Europe

From a recent column by Ambrose Evans-Pritchard:

Lars Tranberg from Danske Bank said European banks are reduced to borrowing dollar funds for "a week at a time" rather than the usual six to 12 months. "This closely resembles what happened in late 2008 . . .."

It's a run on the primary short-term funding money of the 21st Century, and T-bill yields have gone deeply south to prove it as demand for them increases: 14 day yields are at .005.