European Central Bank council member Ewald Nowotny suggested the bank may compromise and allow a temporary Greek default as officials scramble to fix a sovereign debt crisis that’s spreading to Italy and Spain before a leaders’ summit in two days.Hmmm...I bet this soon-to-end moment of clarity had something to do with this:
Greecenugget from Portugal Prime Minister Pedro Passos Coelho today:
"Portugal's new leader Pedro Passos Coelho has told the nation to brace for further austerity measures after his government discovered a "colossal" €2bn (£1.7bn) hole in the public accounts left by the outgoing Socialists."European socialists lying about squandered tax dollars? Well I never! While many Euro citizen's blind faith in their elected leaders to run their respective countries into bankruptcy all while delivering thousands upon thousands of transfer payments for non-work should serve as a lesson for the rest of the world, you wouldn't get that impression judging from the likes of government/Keynesian worshipers like Obama's former director of the White House National Economic Council (so you know he is good!) Larry Summers. In a recent interview with Charlie Rose:
Never forget, never forget, and I think it’s very important for Democrats especially to remember this, that if Hitler had not come along, Franklin Roosevelt would have left office in 1941 with an unemployment rate in excess of 15 percent and an economic recovery strategy that had basically failed.Well here I thought I had heard everything, but then here comes a former U.S. Treasury Secretary and President of Harvard University actually praising not one, but two fascists! So let me get this straight: for the almost ten years prior to WWII Roosevelt was in office saving capitalism (as if regulating the hell out of it constitutes as saving it), spending exorbitant amounts of money, and micromanaging the economy by arresting such criminals who sold their goods below a government approved "fair price," the economic recovery everyone thought would come didn't. Before our entrance into World War II, as Summers graciously points out, unemployment was still persistently high and a genuine recovery was nowhere on the horizon. But according to Summers, a tarnished record for Franklin Roosevelt and government intervention into the economy would be such a horrible thing to have so thank God a mass murderer came along that forced the U.S. government to devote millions of dollars of resources towards fighting another war.
What sort of sheltered, demented world do guys like Summers come from?
But wait, I am not done with my idiot list for the day yet. Check out this brilliant solution on how to end the U.S. government's current debt problem:
Philippa Malmgren, a former advisor to the Bush administration, has told CNBC the US debt must be paid off.That's right America, because Congress has spent your tax dollars appeasing labor unions, Wall Street, military contractors, and senior citizens, all you gotta do is work 10 more years to pay it off! Who's in??
Malmgren, who was a member of the Plunge Protection Team when she worked in Washington D.C. for the Bush Administration, is no Ron Paul. She said the debt crisis could be solved easily by having everybody work an extra 10 years and that it will happen.
After all that lunacy, perhaps it is time for some actual intelligence. I heard Glenn Beck (don't ask) talking about this on the radio this morning. Here is mulit-million dollar business man Steve Wynn on the Obama administration's brilliant economic policy thus far:
I believe in Las Vegas, I think its best days are ahead of it, but I'm afraid to do anything in the current political environment in the United States. You watch television and see what's going on on this this debt ceiling issue. And what I consider to be a total lack of leadership from the President, and nothing will get fixed until the President himself steps up and wrangles both parties in Congress. But everybody is so political, so focused on holding their job for the next year, that the discussion in Washington is nauseating.Chalk up another one person from the business community criticizing the current administration.
And I'm saying it bluntly that this administration is the greatest wet blanket to business and progress and job creation in my lifetime. And I can prove it and I could spend the next three hours giving you examples of all of us in this marketplace that are frightened to death about all the new regulations, our health care costs escalate. Regulations coming from left and right. A President that seems, you know -- that keeps using that word redistribution.
Okay, so on this blog I have been keep tracking of a proposal in Congress to reign in the debt by essentially messing with the calculation of the Consumer Price Index to underscore inflation in order to pay out smaller and smaller COLA payments for Social Security recipients. It's basically the last refuge of inflationists trying to cover their tracks. Well, the proposal in Congress is continuing to gain traction:
According to a copy of a summary of the Gang of Six plan, obtained by POLITICO, the group would impose a two-step legislative process that would make $500 billion worth of cuts immediately followed by a second bill to create a “fast-track process” that would propose a comprehensive bill aimed at dramatically restructuring tax and spending programs. The plan calls for changes to Social Security to move on a separate track, and establishes an elaborate procedure for considering the measures on the floor.Remember baby boomers, just because the price of meat goes up doesn't mean that catfood isn't a legitimate alternative. And just because Wall Street gets all those newly printed greenbacks first doesn't mean you are losing out, some people just get luckier than others.
The $500 billion in cuts would come from a range of sources, including shifting to a new consumer price index to make cost-of-living adjustments to Social Security. The plan would impose statutory spending caps through 2015, freeze congressional pay and sell unused federal property.
But seriously though, if understating inflation in order to increase the monetary base even more isn't another gift to the bankers than I don't know what is.
Thankfully, Charles Hugh Smith over at Of Two Minds has a unique solution on how to fix the U.S. economy in 8 easy steps:
1. Force all banks to mark all their assets to market at the end of each trading day, including all derivatives of all types, including over-the-counter instruments.
2. Allow citizens to discharge all mortgage and student loan debt in bankruptcy court, just like any other debt.
3. Banks must mark all their real estate to market weekly as defined by "last sales of nearby properties" adjusted for square footage and other quantifiable measures (i.e. like Zillow.com).
4. Require mortgage servicers and all owners of mortgage-backed securities to mark every asset within each pool to market weekly.
5. Any mortgage, loan or note which was fraudulently originated, packaged and sold, including the misrepresentation of risk, the manipulation of risk ratings, fraudulent documentation by any party, etc., will be discharged as uncollectable and the full value wiped off the books and title records without recourse by any of the parties.
If a bank fraudulently originated a mortgage and the buyer misrepresented material facts on the mortgage documents, then both parties lose all claim to the note and the underlying asset, the house, which reverts to the FDIC for liquidation, with the proceeds going towards creditors' claims against the bank.
6. Any bank which misrepresents marked-to-market asset values will be fined $10 million per incident.
7. Any bank which is insolvent at the end of a trading day will be closed and taken over by the FDIC the following day, and liquidated in an orderly manner via open-market auctions of all assets, including REO (real estate owned).
8. All derivative positions held by the insolvent bank will be unwound immediately, and counterparties who fail to make good on their claims will also be closed, given to the FDIC and liquidated.
Of course such action would practically destroy the banking system, but that wouldn't necessarily be a bad thing consider the path they are on already. Don't look for Obama embracing the plan anytime soon though despite his "eat the rich" rhetoric:
In late June Barack Obama huddled over a meal in New York with business and finance industry heavyweights, who paid $35,000 a head for the privilege of dining with the president at the upmarket French eatery, Daniel.
Mr Obama reported in filings with the Federal Election Commission on Friday that he had raised $86m in the three months to the end of June, $46m for his own campaign and just under $40m for the Democratic National Committee.I will end with another great interview with Ron Paul on Yahoo! Finance:
Score another one for the Austrian Business Cycle Theory on slightly mainstream media!