Monday, January 16, 2012

SAR #12016

The experiment in unlimited monetary expansion will continue.

Static: Completely ignoring S&P's observation that “a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating”, Frau Merkel still insists that Greece (and others) embrace even more austerity, citing cases of IMF imposed austerity where “very strong phases of growth come after a certain phase of recession." No, don't tell her the IMF now says that austerity is wrong. Now. For Europe.

War Games: The US is keeping two carrier strike groups in the Persian Gulf and sending extra combat troops to the region. The Pentagon says the deployments are not a prelude to war, but are simply “a contingency force”. What contingency? War, of course.

Debtors' Prism: Banks made a lot of really bad loans with a lot of highly leveraged funds. These loans are not going to be paid back. Those who took the loans are essentially bankrupt and can't pay the banks. The banks, in turn, cannot pay back the borrowing (leveraging) they did to make the loans and do not have the capital resources to cover them; they too are bankrupt. This means those whose funds the loan-makers used will not be getting their funds back, either. Anyone who says this can all be worked out without massive suffering is either a Wall Street lackey or a central banker. Or both.

Crime Pays: There is no evidence that for-profit prisons save taxpayers money. There is mounting evidence that for-profit prisons are more violent than state run ones.  And there is a strong suspicion that they benefit politicians handsomely. Or so some in Florida are saying.

Extortion: European banks have sold much of their holdings of Greek sovereign debt to hedge funds, which is holding up the Greek restructuring negotiations because the hedgies think they are in the driver's seat and can demand less in the way of a haircut or get paid by the CDS bets they've made.

Back Of The Envelope: If an effective embargo on Iranian oil comes about (big if), what will really happen is that those Iranian customers the US can lean on will buy their oil elsewhere and those who don't kowtow to Uncle will up their purchases and the world will wobble along. If conflict escalated and Iran's production was taken off the market, a 25 - 50% increase in price would be expected. If the Straits of Hormuz are blocked and 20% of the world's production (and 35% of the export-available production) lost, car-pooling would be the least of your concerns.

Ex-pats: When Obama, on signing the NADA act, said he wouldn't use its indefinite detention provisions against US citizens. That's because the Enemy Expatriation Act was on the way, giving him the power to strip US citizens of their citizenship and then  tuck them away forever without trial.

Porn O'Graph: My, how big you've grown.

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