Friday, January 13, 2012

Facing the facts: The great EU credit downgrade

Fitch ratings agency said about a month ago they will review France's rating this coming year, but they were beaten to the punch by the S&P. The inevitable downgrade happened even sooner than expected, and in addition to France, with its heavy exposure to Greek debt and significant deficits, S&P downgraded 8 other European nations. S&P lowered its long-term rating on Cyprus, Italy, Portugal and Spain by two notches, and cut its rating on Austria, France, Malta, Slovakia and Slovenia by one notch. The move puts highly indebted Italy on the same BBB+ level as Kazakhstan and pushed Portugal debt into junk status. The US-based credit-rating agency affirmed the current long-term ratings for Belgium, Estonia, Finland, Germany, Ireland, Luxembourg and the Netherlands. S&P put all 14 of the above euro-zone nations — Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain — on "negative" outlook for a possible further downgrade. Only Germany was the retained its AAA rating and a stable outlook.

The downgrade has been precipitated by the breakdown of talks between Greece and its creditors over a debt swap seen as crucial to avert a Greek default. Officials said more talks are likely next week, but also mentioned that there's no agreement on any of the issues involved in a voluntary 'haircut', which is a nice euphemism for being fleeced 40-60% on investments. Chances of Greek default in March are significant, so it's understandable that rating agencies will want to get ahead of the curve.

"Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policy makers in recent weeks may be insufficient to fully address ongoing systemic stresses in the euro zone," S&P said in a press release announcing the downgrade.

S&P is more diplomatic than yours truly. I simply said that the European plan is a smoke screen. This is wishful thinking mascaraing as a policy. No responsible engineer can build a bridge based on hope alone, without adequate calculation. It's unlikely that there's a total lack of understanding for the fundamentals that are apparent even to a layman like me, therefore, I said the leadership (Merkozy and Co.) have been simply lying to the public. Austerity and budget discipline alone were not sufficient to fight the debt crisis and risked becoming self-defeating, the ratings agency said. How much are these people paid? I wrote two months ago: "The idea that austerity alone, or in combination with stricter rules, as Angela Merkel wishes to do, could solve EU's problems, stemming from trade imbalances, is a lie." Almost that far back I also wrote blogging ahead of the curve about the huge cuts such a plan would entail, and the lack of political will for such enormous cuts. I pointed out the inherent weakness of the French AAA credit rating in another article, after UK dissed new EU rules, provoking French comments on the weakness of the British economy, and unsustainability of its credit rating. The goal is not to be self-congratulatory, but merely to point out; once again, the unfolding events were so easily predictable, that the only way to deny them is either total incompetence (which I don't believe) or outright misrepresentation.

The first rule of suicide pact is to lie early and often. Experts agree this is a suicide pact: the chief economist of Commerzbank, Joerg Kraemer, said that the consequence of the downgrade is that the European Financial Stability Facility (EFSF) also will lose its triple-A rating. "That may irritate markets in the short term but wouldn't be a big problem in a world where the U.S. and Japan also don't have a triple-A rating anymore. Triple-A is a dying species," he said.

This is exactly what I mean by the suicide pact in general: a horrible decision taken jointly. This is why Obama's presidency is so favorable for Europe: by following EU's inane pattern of overspending the US has dramatically increased its debts and deficits. European troubles will have been much worse if US had act together, because it would make investments in EU less attractive, and greatly increase its borrowing costs.

The consequence of the downgrade, which was already partially priced into the borrowing rates of soverign nations, is likely to result in additional increase of these costs. The AAA rating is crucial for the functioning of the EFSF, and one of the consequences of downgrade is the need to pump additional money into the bailout fund. At the same time, the downgrades of banks make triggered forced selling of sovereign debt resulting in increased borrowing costs of these nations.

EU monetary affairs commissioner Olli Rehn called S&P’s decisions “inconsistent” and suggested they ignored the “decisive action” taken by the eurozone to commit to budget, structural and banking-sector reforms, and to a more powerful rescue fund.

The German government said the Eurozone’s determination to overcome the debt crisis stood “beyond question”, echoing the sentiments expressed by other countries. At the same time, in Frankfurt, the ECB criticized the draft of a new fiscal discipline treaty for the euro area, saying that the latest version amounted to “a substantial watering-down” of tough deficit levels that could allow “easy circumvention of the [deficit] rule” by struggling governments.

So, there you have it. The leaders are proclaiming piety, while their bean counters are noting that the proposed strict rules are simply wishful thinking. Lies, actually.

Wednesday, January 11, 2012

Insanity of Israeli media

Israel had finally negotiated the release of Gilad Shalit, a soldier kidnapper in 2006 from Israel by Hamas last fall. The country had welcome its soldier-son home, but released 1027 Palestinian prisoners, some of them mass murderers. I would like to admire a country that goes so far to bring back one of its own. But I can't. All I see is weakness and stupidity.

Spare me the righteous rhetoric starting with "If it was your son...". A vast prisoner release is a matter of state security. How many murderers went free to secure the release of one Israeli? Many of the released prisoners already swore to go back to terrorism. How many Israelis will die by their hands?

It may seem an admirable goal - doing 'everything' to secure the release of a soldier. But did Israel really do everything? Shalit was held incommunicado, (and he looks starved in all his photos) he had no access even by the Red Cross. Under such conditions, why didn't Israel at least demand equal rights for him?

Shalit during his release interview looked like
an inmate from a Nazi concentration camp.
Shalit was kidnapped from Israel; he wasn't serving in Gaza or West bank at the time. By what right was he detained for 5 years? Unlike the Palestinian terrorists he was never accused of anything. Just being a Jew in Israel is enough.

The trade Israel has carried out 1 for 1027 is not only asymmetrical; it's totally immoral because it draws a false parallel between an innocent youth, and criminals who were found guilty in a court of law. Palestinians often press their cases in Israeli courts - they know Israeli laws a fair.

In fact, Israel was should have demanded Shalit's release. They have non-military leverage, which they never even attempted to use. Israel could threaten to deny visitation rights to Palestinians until Shalit was given access. They could stop remitting taxes to Gaza, limited their electricity, etc. and laid the fault at the feet of Hamas, which runs Gaza since 2006. Nothing of the sort was ever attempted, despite the fact that it would not only further the goal of bringing back Shalit, but weaken Hamas through popular resentment. Apparently 'everything' refers only to Bugs Bunny politics: all carrot.

Immediately after Shalit's release, the Popular Resistance Committees (PRC), a Palestinian militant group has vowed to abduct a “new Gilad Shalit” in order to force Israel to free the remaining 6,000 Palestinians still languishing in Israeli prisons. "We are going to capture another soldier and cleanse all the Israeli jails of our prisoners," said a masked spokesman, according to UK's Daily Telegraph newspaper.

It gets worse. Gilad's father, Noam Shalit, has gotten used to the spotlight. Now he wants to go into politics. He even reinstalled the Israeli flag on his roof. His actions betray the inversion of JFK's philosophy: "What can my country do for me?" For five years Noam Shalit was Hamas' champion facilitated by the willing media. You can hear from about this case from Dr. Boaz Ganor, who's the Associate Dean of the Lauder School of Government, the founder and Executive Director of the International Institute for Counter-Terrorism (ICT), and the head of the Homeland Security Studies Programs.

I care about Israel, but these are very bad signs about the power of the left-wing media, and gullibility of the public. A major sobering up after some of the released prisoners are seen engaging in terrorism is inevitable. It will provide a lesson similar to the failed Ozlo initiatives that the media is also going to ignore.

It seems that the sentiment below: "Dear Hamas take me!" applies to the whole country. The affair has been similar to placing a 'kick me' sign on all the military personnel.

Shalit should have been liberated, but not exchanged at ridiculous rate in a way that also contributed to erasing the distinction between citizen-soldiers and terrorists.

Politics of personal destruction: target Romney

Romney has achieved something nobody except incumbent presidents have managed for decades: winning bot the Iowa and New Hampshire primaries. The main (lame) street media cannot not bring itself to acknowledge the fact.
Newt Gingrich has shown himself to be a callow opportunist, using attacks on Romney's economics record which are going to be picked up and quoted by the Dems in the general election.

In 2008 media handed the victory to Obama by not vetting him. They allowed 'hopey, changey' rhetoric to go unchallenged, and ignored Obama's record of long-term associations with radicals like his pastor of 20-years Wright("G-d damn America!"), and the man who started Obama's political career in his living room - Bill Ayers.

What does this have to do with Romney? We're about the see the most expensive and disgusting politics of personal destruction. Dems are going to try to annihilate Romney as a viable candidate, because the Obama administration doesn't have a record to stand on.
Media has grown disaffected with Obama, but what can they do - vote Republican? They are still rooting for him. Now that Obama has a record (unlike in 2008) the only way for him to win is to attack his opponents not of a political, but more of a personal level. Most of these attacks will be performed gratis by the media.

Expect a return of the fairness doctrine, which is a nice euphemism for shutting down forums for conservatives (e.g. Rush Limbaugh radio, Fox). It is becoming increasingly necessary as the media is slowly losing popular support/viewers. Fox is already watched by as many people as the rest of the networks combined, but neither this rejection by the viewers, not dropping profits have dissuaded these shameless propagandists from their biased programming. They can and will operate at a loss and some, like NY Times, have been doing that for years. The elitists need to brainwash people is so great, profits are a secondary concern. Besides, these folks never had much faith in capitalism.

I'm going to make a prediction: the media (ABC, CBS, CNN, and MSNBC) are going to embarrass themselves with vitriolic, gratuitous attacks on Romney. This prediction is based on my assessment of these TV networks being run by corrupt apparatchiks, more interested in political dominance than in intellectual honesty, or professionalism.

It's time to not only ditch Obama, but turn off these media outlets: expose their propaganda and utterly unprofessional behavior (how much flak did CBS suffer from Dan Rather's insistence of veracity of obviously fake document about G.W.Bush?). This country cannot function with the 'fourth estate' (media relative to 3 branches of government) behaving like a 'fifth column'(traitors to journalistic professionalism and, therefore, the country).