Category : Credit Markets

(WSJ) Why Entitlements Keep Growing, and Growing, and . . .An interview with John Cogan

Mr. [John] Cogan has just written a riveting, massive book, “The High Cost of Good Intentions,” on the history of entitlements in the U.S., and he describes how in 1972 the Senate “attached an across-the-board, permanent increase of 20% in Social Security benefits to a must-pass bill” on the debt ceiling. President Nixon grumbled loudly but signed it into law. In October, a month before his re-election, “Nixon reversed course and availed himself of an opportunity to take credit for the increase,” Mr. Cogan says. “When checks went out to some 28 million recipients, they were accompanied by a letter that said that the increase was ‘signed into law by President Richard Nixon.’ ”

The Nixon episode shows, says Mr. Cogan, that entitlements have been the main cause of America’s rising national debt since the early 1970s. Mr. Trump’s pact with the Democrats is part of a pattern: “The debt ceiling has to be raised this year because elected representatives have again failed to take action to control entitlement spending.”

A faculty member at Stanford’s Public Policy Program and a fellow at the university’s Hoover Institution, Mr. Cogan, 70, is one of those old-fangled American men who are always inclined to play down their achievements. The latest of his is the book that draws us together in conversation. To be published later this month by Stanford University Press, it is a 400-page account of how federal entitlement programs evolved across two centuries “and the common forces that have been at work in causing their expansion.”

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Posted in America/U.S.A., Budget, Credit Markets, Economy, Ethics / Moral Theology, Medicare, Politics in General, Social Security, The U.S. Government

(FT) Church of England fund becomes top world performer w yoy return on assets of 17.1%

The Church of England’s £7.9bn investment fund, which has in the past struggled to reconcile questions of morality and mammon, achieved its strongest returns in more than three decades last year, lifting it into the top ranks of the world’s best-performing endowment funds.

The Church Commissioners annual report discloses total return on assets of 17.1 per cent in 2016, with strong performances from global equities, private equity and timber.

Over 10 and 20 years, the fund returned 8.3 per cent and 9.5 per cent per annum respectively, compared with its target return of 5 per cent per annum above inflation. By contrast, returns from the Yale University endowment, top of the eight-member Ivy League, rose 3.4 per cent in the year to last June, with 10 and 20-year returns at 8.1 per cent and 12.6 per cent per annum respectively.

Read it all (subscription needed).

Posted in Church of England (CoE), Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Stock Market

(BI) U.S. public pension plans are headed for a disaster on the current trajectory

The combined debt held by U.S. public pension plans will top $1.7 trillion next year, according to a just-released report from Moody’s Investors Services.

This “pension tsunami” has already forced towns like Stockton, California and Detroit, Michigan into bankruptcy. Perhaps no government mismanaged their pension as badly as Puerto Rico, where a $43 billion pension debt forced the commonwealth to seek protection from the federal government after having defaulted on its obligations to bondholders ”” a default which is expected to spread to retirees in the form of benefit cuts.

While the disastrous outcome of Puerto Rico’s pension plan ”” which is projected to completely run out of assets by 2019 ”” represents the worst-case scenario, the same series of events that led to its demise can be found in most public pension plans nationwide.

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Posted in * Culture-Watch, * Economics, Politics, Aging / the Elderly, Anthropology, City Government, Corporations/Corporate Life, Credit Markets, Economy, Ethics / Moral Theology, Labor/Labor Unions/Labor Market, Pensions, Personal Finance, Politics in General, Psychology, State Government, Stock Market, Theology

(Guardian) Germany split on EU's future as some call for a European government

The ideological split within German politics is essentially about whether the European commission should become more political after Brexit, or less so. Almut Möller of the European Council on Foreign Relations thinktank said: “All parties can see that the situation requires political answers, but that the European commission isn’t up to it ”“ that’s the dilemma.”

Henrik Enderlein, the director of the Jacques Delors Insitut in Berlin, said: “There are two possible roles the European commission could take in the future: either as a strong, political body that can take [the] initiative in key policy areas and during a crisis, or as a technocratic body that merely protects the treaties. At the moment, it is a hybrid of the two, and that has to change.”

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Germany, History, Politics in General, Theology

(Independent) Forget Brexit ”” Italy is poised to tear Europe apart

All eyes have turned to Britain’s vote to leave the European Union as having the most drastic political and economic impact onto the 28-nation state but if you look at the country’s economic data, bank issues, and the impending constitutional referendum coming up, Italy is like a bomb waiting to explode.

The Italian financial system, which to put it gently, is in a major state of flux right now. While Britain’s EU referendum in June was seismic in terms of having economic and political repercussions across the bloc, there is another referendum of equal importance, coming up in Italy in October, and the result could fundamentally alter the state of the already delicate Italian economy.

Italians will have a say on reforms to its Senate, the upper house of parliament, in October. The proposed reforms are widespread, and if approved could improve the stability of Italy’s political set up and allow Prime Minister Matteo Renzi to push through laws aimed at improving the country’s economic competitiveness.

Read it all and make sure to take a careful look at the productivity graph.

Posted in * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Italy, Politics in General, The Banking System/Sector, Theology

(FT) Brexit: the world’s most complex divorce begins

The goal is to unwind Britain’s 43-year membership of the bloc, disentangle and sever the legacy of shared sovereignty, and then reshape the biggest single market on earth.
Three fundamental issues arise.
On substance, what political and commercial arrangements will Brexit Britain demand and will the EU accept them?
In execution, will the exit deal ”” the divorce and breaking of old obligations ”” be struck at the same time as a trade agreement covering post-Brexit trade? And if no, is a transition possible to ensure a soft landing?

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, History, Ireland, Law & Legal Issues, Politics in General, Scotland, Stock Market, Theology, Wales

This looks interesting–The Economist guide on Brexit

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Posted in * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Europe, Foreign Relations, Politics in General, Stock Market, Theology

(FT) Brexit fears trigger market rush for safety

The prospect of Britons voting to leave the EU next week fuelled global market upheaval on Tuesday, with investors rushing for safety and sending the UK currency and stocks to their lowest levels in months.
The accelerating shift, which came after a trio of opinion polls showed Leave leading by significant margins, was most marked in government bonds, where a series of records were smashed as cash flowed into the relative security of sovereign debt.

German 10-year Bunds traded with interest rates below zero for the first time after Japan’s benchmark fell to a new low of minus 0.185 per cent. The UK’s 10-year gilt yield recorded a new low, and the 30-year bond dropped below 2 per cent for the first time.

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Posted in * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Europe, Foreign Relations, Politics in General, Stock Market, Theology

Doug Carswell on Brexit–Remain is Losing because they are fearmongering and Leave is optimistic

What is going on? There is an honorable, decent case for Britain to stay in the union. The problem for the Remain camp is that no one has been making it.

Throughout the campaign, the Remainers have highlighted “experts” from bodies like the International Monetary Fund, the Organization for Economic Cooperation and Development and the Bank of England, which all think that Britain should stay. They talk of being “shut out” of the room where decisions are made in Brussels.
These warnings sound like the neuroses of career politicians, not the concerns of the public, who see things very differently. Ordinary voters are weighing what is best for National Health Service hospitals and public services. By making the case from a political elite’s perspective, the Remain campaign has alienated, even antagonized, voters.

Instead of advancing arguments, Remainers have resorted to a campaign of exaggeration and intimidation. Vote to leave, they suggest, and food prices will rise. Farming will fold, science will suffer, financiers will flee. Trade will tumble, there will be a global recession. And World War III, apparently.

Far from persuading people, these confected claims come across as hectoring and supercilious.

Read it all from todays NYT op-ed page.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Europe, Foreign Relations, Politics in General, Psychology, Stock Market, Theology

(Bloomberg) Most Federal Reserve Officials Saw June Hike Likely If Economy Warrants

Federal Reserve policy makers indicated that a June interest-rate increase was likely if the economy continued to improve, boosting market expectations they will act next month.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” according to minutes of the Federal Open Market Committee’s April 26-27 meeting released Wednesday in Washington.

Officials were divided over whether those conditions were likely to be met in time. “Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting,” the minutes stated.

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Posted in * Economics, Politics, Credit Markets, Currency Markets, Economy, Federal Reserve, Personal Finance, Stock Market, The U.S. Government

(C Of E) Church Commissioners announce total 2015 return on investments at 8.2%

The Church Commissioners for England have announced their latest financial results with the publication of their annual report.

The Church Commissioners’ total return on their investments in 2015 was 8.2 per cent, exceeding their long-term target rate by 2%. Over the past 30 years the fund has achieved an average return of 9.7% per annum. After taking account of expenditure, the fund has grown from £2.4bn at the start of 1995 to £7.0 billion at the end of 2015.

In 2015, the charitable expenditure of the Commissioners was £218.5 million, accounting for 15% of the Church’s overall mission and ministry costs. Commissioners-funded projects ranged from clubs and drop-ins to youth work and food bank hubs, all supported by local churches.

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Posted in * Anglican - Episcopal, * Christian Life / Church Life, * Culture-Watch, * Economics, Politics, Anglican Provinces, Church of England (CoE), Corporations/Corporate Life, Credit Markets, Economy, Ethics / Moral Theology, Globalization, Parish Ministry, Stewardship, Stock Market, Theology

(Fulcrum) Andrew Goddard–The EU Referendum: How Should We Decide?

In deciding how to vote it is important that we recognise that we are answering a different sort of question from that at general elections but, as there, we also need to keep front and centre the test of what it means to love our neighbours and how our vote can serve the common good. That means not deciding on the basis of what is best for me personally (usually understood in simple financial terms) or even for the UK alone but to look at our personal and national good in the context of international society and the importance of good relationships. It also means trying to step back and take in the bigger picture both historically but also in terms of the present nature and likely future development of the EU. At least three broad areas require serious Christian reflection and evaluation in discerning how to vote.

First, as regards its form, the EU is an international legal and political entity based on treaties between national governments. This means considering a Christian attitude to the role and limits of nations and national identity and the dangers of empire as well as consideration of the principle of the free movement of peoples and how it relates to our sense of belonging and place of national borders. Second, the EU also has motives and aims which shape its ethos. Here Christians must evaluate how it has assisted in moving Europe from war to peace, whether and how it has enabled solidarity both within Europe and between Europe and the poorer parts of the world, and whether, particularly in relation to economic life, it is driven by our contemporary idols in the Western world and, through the Euro and austerity, serving or undermining human flourishing. Finally, as the EU is best viewed as a political community it needs, from a Christian perspective, to be assessed in terms of how well it serves the pursuit of justice and whether its political structures are ”“ or can be – representative of its 500 million people and whether they uphold the principle of subsidiarity which seeks to respect local and national governing structures and non-governmental forms of social life.

In the light of all these issues a number of arguments on both sides need to be rejected by Christians but, after exploring each of these areas, I believe it is possible to sketch out potential Christian arguments for each side of the debate focussing on these issues, often neglected in the wider political debate.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, England / UK, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, History, Law & Legal Issues, Politics in General, Religion & Culture, Theology

(Telegraph) Anthony Evans-Pritchard This is a global stock market rout worth celebrating

We toiling workers can allow ourselves a wry smile. For most of the last eight years the owners of wealth and inflated assets have had things their own way, while the real economy has been left behind.

The tables are finally turning. The world may look absolutely ghastly if your metric is the stock market, but it is much the same or slightly better if you are at the coal face.

The MSCI index of world equities has fallen almost 20pc since its all-time high in May of 2015, implying a $14 trillion loss of paper wealth. Yet the world economy has carried on at more or less the same anemic pace, and the OECD’s global leading indicators show no sign that it is suddenly rolling over now.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Energy, Natural Resources, Ethics / Moral Theology, Euro, Europe, European Central Bank, Federal Reserve, Foreign Relations, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, Stock Market, The U.S. Government, Theology

(WSJ) Charles Moore–Western countries must honestly face The Middle-Class Squeeze

Since the financial crisis of 2007-08, which Western leader could boast of spreading ownership in any important way? In the U.S. and Britain, the percentage of citizens owning stocks or houses is well down from the late 1980s. In Britain, the average age for buying a first home is now 31 (and many more people than before depend on “the bank of Mom and Dad” to help them do so). In the mid-’80s, it was 27. My own children, who started work in London in the last two years, earn a little less, in real terms, than I did when I began in 1979, yet house prices are 15 times higher. We have become a society of “have lesses,” if not yet of “have nots.”

In a few lines of work, earnings have shot forward. In 1982, only seven U.K. financial executives were receiving six-figure salaries. Today, tens of thousands are (an enormous increase, even allowing for inflation). The situation is very different for the middle-ranking civil servant, attorney, doctor, teacher or small-business owner. Many middle-class families now depend absolutely on the income of both parents in a way that was unusual even as late as the 1980s.

In Britain and the U.S., we are learning all over again that it is not the natural condition of the human race for children to be better off than their parents. Such a regression, in societies that assume constant progress, is striking. Imagine the panic if the same thing happened to life expectancy.

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, Foreign Relations, Globalization, History, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Pensions, Personal Finance, Politics in General, Senate, Taxes, The U.S. Government, Theology

(FT) Martin Wolf–China risks an economic discontinuity

There are at least three reasons why China’s growth might suffer a discontinuity: the current pattern is unsustainable; the debt overhang is large; and dealing with these challenges creates the risks of a sharp collapse in demand.

The most important fact about China’s current pattern of growth is its dependence on investment as a source of supply and demand (see charts). Since 2011 additional capital has been the sole source of extra output, with the contribution of growth of “total factor productivity” (measuring the change in output per unit of inputs) near zero. Moreover, the incremental capital output ratio, a measure of the contribution of investment to growth, has soared as returns on investment have tumbled.

The International Monetary Fund argues: “Without reforms, growth would gradually fall to around 5 per cent with steeply increasing debt.” But such a path would be unsustainable, not least because debts are already at such a high level. Thus “total social financing” ”” a broad credit measure ”” jumped from 120 per cent of GDP in 2008 to 193 per cent in 2014. The government can manage this overhang. But it must not let the build-up restart. The credit-dependent part of investment has to shrink.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Foreign Relations, Globalization, Politics in General, Theology

(Bloomberg) France’s Hollande Proposes Creation of Euro-Zone Government

French President Francois Hollande said that the 19 countries using the euro need their own government complete with a budget and parliament to cooperate better and overcome the Greek crisis.

“Circumstances are leading us to accelerate,” Hollande said in an opinion piece published by the Journal du Dimanche on Sunday. “What threatens us is not too much Europe, but a lack of it.”

While the euro zone has a common currency, fiscal and economic policies remain mostly in the hands of each member state. European Central Bank President Mario Draghi made a plea this week for deeper cooperation between the euro members after political squabbles over Greece almost led to a rupture in the single currency.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, History, Politics in General, The Banking System/Sector, Theology

(Economist Erasmus Blog) The euro, theology and values–The meaning of redemption

When big questions, like the future of Europe, hang in the balance, it can be tempting to toy with grand theories about the ways in which religion affects culture and economics. A famous one was put forward by Max Weber (pictured), who posited a link between capitalism and Protestant ideas of guilt and salvation. Such theories usually contain a grain of truth, but religious determinism shouldn’t be pushed too far because there are always exceptions.

Still, as religious-determinist theories go, an interesting one was put forward by Giles Fraser, a well-known left-wing priest of the Church of England, in a recent radio broadcast. He suggested that behind the financial standoff between Greece and Germany, there was a theological difference (between western and eastern Christians) in the understanding of how humans are reconciled with God.

As Mr Fraser recalled, traditional Protestant and Catholic teaching has presented the self-sacrifice of Christ as the payment of a debt to God the Father. In this view, human sinfulness created a debt which simply had to be settled, but could not be repaid by humanity because of its fallen state; so the Son of God stepped in and took care of that vast obligation. For Orthodox theologians, this wrongly portrays God the Father as a sort of heavenly debt-collector who is himself constrained by some iron necessity; they prefer to see the passion story as an act of mercy by a God who is free. Over-simplifying only a little, Mr Fraser observed: “the idea that the cross is some sort of cosmic pay-back for human sin [reflects] a no-pain-no-gain obsession with suffering,” from an eastern Christian viewpoint.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Christology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, G20, Germany, Greece, Politics in General, Religion & Culture, Soteriology, The Banking System/Sector, Theology

(Globe and Mail) Greece bailout deal keeps country in the euro, but for how long?

Greece has received a tentative reprieve from exiting the euro, but the harsh austerity demands piled onto the recession-damaged country may still ultimately force it out the door, economists say.

Some of them think the chances of a Greek exit form the euro ”“ Grexit ”“ have not in any way diminished now that Greece and its creditors have tentatively approved a three-year, €86-billion bailout package that will boost Greece’s debt, increase taxes and trigger privatizations at what will likely be fire-sale prices.

In a note published Monday, Manulife chief economist Megan Greene said the deal, if approved by both sides and the national parliaments of the euro zone countries “will almost certainly be a failure for both political and economic reasons. The immediate risk of Grexit may be slightly lower following the summit conclusions this weekend, but the overall risk of Grexit is materially higher.”

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Posted in * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Greece, Politics in General, The Banking System/Sector, Theology

(FT) Wolfgang Münchau–Greece’s brutal creditors have demolished the eurozone project

The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident ”” and there are still many things that could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might challenge German economic orthodoxy will face similar problems.

This brings us back to a more toxic version of the old exchange-rate mechanism of the 1990s that left countries trapped in a system run primarily for the benefit of Germany, which led to the exit of the British pound and the temporary departure of the Italian lira. What was left was a coalition of countries willing to adjust their economies to Germany’s. Britain had to leave because it was not.

What should the Greeks do now? Forget for a moment the economic debate of the last few months, over issues such as the impact of austerity or economic reforms on growth, and ask yourself this simple question: do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Germany, Globalization, Greece, History, Politics in General, The Banking System/Sector, Theology

(AP) Greece reaches deal with creditors, avoids euro exit

Greece reached a deal with its European creditors Monday, pledging stringent austerity to avoid an exit from the euro and the global financial chaos that could have followed.

The deal calls for Greeks, already reeling from harsh measures and economic decline, to cut back even further in exchange for more loans without which its financial system would surely collapse. The deal, which still needs approval from Greece’s parliament, will be the country’s third bailout in five years.

To get to a deal, Greek Prime Minister Alexis Tsipras had to overcome the fundamental mistrust of many of his allies among the 18 other countries that use the euro, known as the eurozone. Just a week earlier, at his urging, Greeks had voted in a referendum to reject many of the measures he agreed to Monday, and the deal forced him to renege on many of his election promises.

“We managed to avoid the most extreme measures,” Tsipras said. “Greece will fight to return to growth and to reclaim its lost sovereignty.”

Read it all.

Update: Politico also has a summary article on the deal there.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Globalization, Greece, Politics in General, The Banking System/Sector, Theology

(Telegraph) Greek deal in sight as Germany bows to huge global pressure for debt relief

The contours of a deal on Sunday are starting to emerge.

Syriza has requested a three-year package of loans from the eurozone bail-out fund (ESM) – perhaps worth as much as €60bn ”“ and is reportedly ready give ground on tax rises and pension cuts.

Germany’s subtle shift in position comes as the United States, France, and Italy joined in a united call for debt relief, buttressed by a crescendo of emphatic statements by Christine Lagarde, the head of the International Monetary Fund.

“Greece is clearly in a situation of acute crisis, which needs to be addressed seriously and promptly. We remain fully engaged in order to find a solution to restore stability, growth and debt sustainability,” said Ms Lagarde.

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Posted in * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Germany, Greece, Politics in General, The Banking System/Sector, Theology

([London] Times) Merkel faces rebellion in Berlin over Greek bailout

More than 100 MPs in Angela Merkel’s conservative party group have already written Greece out of the euro, even as its government scrambles to cobble together a plan acceptable to creditors.

The size of the rebellion in her own ranks ”” the Christian Democratic Union and Christian Social Union faction ”” limits the German chancellor’s ability to soften her position against Greece and all but kills off its hope of a huge debt write-off as part of the new bailout plan it needs to prevent a banking collapse.

Alexis Tsipras, the Greek prime minister, has been given until midnight tonight to submit plans justifying another multibillion-euro loan deal to keep Greece afloat or face a future outside the euro, with the EU already preparing humanitarian aid for the Greek people.

Announcing its intention yesterday to seek a three-year bailout, Greece said it wanted to make its €323 billion debt mountain “sustainable and viable over the long term”, code for the cut of 30 per cent demanded by Mr Tsipras.

Read it all 9requires subscription).

Posted in * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Germany, Greece, Politics in General, The Banking System/Sector, Theology

(London Times) Make concessions by tomorrow or you’re out, Greece told

The German Red Cross said today it was willing to rush medical and other humanitarian aid to Greece as the country’s economy teetered on the brink of collapse.

“We are ready in every respect,” spokesman Dieter Schutz told Leipziger Volkszeitung newspaper. “Pensioners, the poor, the sick and refugees” have been hit hardest, he said.

Donald Tusk, the president of the European Council, who will chair the summit said: “I have no doubt that this is the most critical moment in the history of the EU. This will affect all Europe also in the geopolitical sense.”

President Hollande of France, the most optimistic of eurozone leaders on finding a solution, said: “What is at stake is the place of Greece within the EU and therefore the eurozone.”

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Globalization, Greece, Politics in General, The Banking System/Sector, Theology

(AI) Walter Russell Mead–After The “No” Vote, Soft Grexit Landing Now EU’s Best Option

There are, as many European and American writers have been commenting lately, sound geopolitical reasons to prevent the worst from happening in Greece. Migration issues, NATO issues, energy issues, terrorism, Russia: an angry, inflamed, suffering and radicalized Greece on a kind of Venezuelan path to national destruction could make life much more difficult for Europeans and Americans both. These considerations should be enough to command some attention and resources from policymakers on both sides of the Atlantic sufficient to avert worst case scenarios for the Greek people.

For Grexit to be a step forward rather than a step back, Western and Greek leaders need to become more creative and forward-looking. Washington needs to stop bleating platitudes about the evils of austerity and to start thinking hard about bolstering an alliance that remains critical to its global position; Brussels and Berlin need to move beyond anger at Greek tactics to a sober calculation of Europe’s interests; the Greeks need to reflect on the cost of being represented at a grave hour of national crisis by inexperienced politicians who none of their counterparts in Europe trust or respect.

But Brussels and Berlin (and Paris, Rome and Madrid) need to realize something else. Greece’s problems under the euro have been worse than anyone else’s, but Greece is not totally unique. There are deep design flaws in the euro and the common currency has not worked nearly as well as any of its proponents hoped. The discussion over the future of Greece needs to be delinked from the discussion over the future of the euro””but that doesn’t mean that the future of the euro doesn’t need to be discussed.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Globalization, Greece, Politics in General, The Banking System/Sector, Theology

(PS) Mark Roe–Europe and Greece on the Brink

…the risks have not been eliminated. The margin for error for the major banks and other financial institutions is narrow. Because they are still not strongly capitalized, modest losses from direct defaults and indirect losses from companies with business in Greece can threaten bank equity, causing bankers to cut back on lending. A few miscalculations in a major institution could have substantial repercussions. Making matters worse, central bankers have only a limited capacity to buoy the economy, as interest rates are still near zero.

The second channel through which risk and loss can spread from Greece is other heavily indebted countries, like Spain and Italy. So far, the financial markets have not panicked over the ability of these countries to repay their bonds. But a shift in the political situation ”“ especially in Spain, where the left-wing Podemos party is doing well in the polls ”“ could change that in an instant.

Finally, a Greek default and exit from the eurozone could unleash unpredictable political forces with a knock-on effect on the European economy. After all, it was the first wave of austerity in Greece that led to the election of Syriza, a left-wing party that few had expected would ever govern.

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Posted in * Economics, Politics, * International News & Commentary, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Greece, Politics in General, The Banking System/Sector, Theology

(NPR) Hours From Greek Bailout Vote, 2 Sides Evenly Divided

Greece’s prime minister has put his political clout behind the “no” camp in a referendum to decide whether the country should accept the terms of an international bailout. But the people appear to be evenly split on the issue, according to two new opinion polls.

One survey, conducted by the respected ALCO institute just 48 hours before the referendum that could decide Greece’s economic fate and future in the eurozone, gives the “yes” camp 44.8 percent against 43.4 percent for the “no” side, according to Reuters.

But a second poll, conducted by Public Issue and published in the ruling party’s newspaper, reports a 0.5-percentage-point lead for those opposed to the bailout.

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Posted in * Economics, Politics, * International News & Commentary, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Foreign Relations, Greece, Politics in General, The Banking System/Sector

(NYT) Mixed Messages and No Progress in Greek Crisis

In the past few days, Prime Minister Alexis Tsipras of Greece has blown up negotiations with European creditors on staving off default, then retreated and accepted more or less the same terms, only to have European leaders tell him the offer had expired.

Greeks are supposed to vote on a referendum this weekend, but no one there or elsewhere seems sure what they will be asked, or what the consequences will be for voting yes or no.

And European leaders here and in Berlin and Paris have been saying distinct ”” sometimes directly contradictory ”” things about whether there is a bailout deal for Greece still on the table, and whether they want Greece to hold its referendum before they can renew discussions about it.

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Posted in * Economics, Politics, * International News & Commentary, Anthropology, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Europe, Foreign Relations, Greece, Politics in General, The Banking System/Sector, Theology

(FT) Gideon Rachman–Europe’s dream is dying in Greece

The danger now is that, just as Greece was once a trailblazer in linking a democratic transition to the European project, so it may become an emblem of a new and dangerous process: the disintegration of the EU. The current crisis could easily lead to the country leaving the euro and eventually the union itself. That would undermine the fundamental EU proposition: that joining the European club is the best guarantee of future prosperity and stability.

Even if an angry and impoverished Greece ultimately remains inside the tent, the link between the EU and prosperity will have been ruptured. For the horrible truth is dawning that it is not just that the EU has failed to deliver on its promises of prosperity and unity. By locking Greece and other EU countries into a failed economic experiment ”” the euro ”” it is now actively destroying wealth, stability and European solidarity.

The dangers of that process are all the more pronounced because Greece is in a highly strategic location. To the south lies the chaos and bloodshed of Libya; to the north lies the instability of the Balkans; to the east, an angry and resurgent Russia.

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Posted in * Economics, Politics, * International News & Commentary, Anthropology, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Euro, Europe, European Central Bank, Foreign Relations, Greece, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Politics in General, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, Theology

(Upshot NYT) Neil Irwin–Does It Really Matter Exactly When the Federal Reserve Raises Rates?

What is in Fed officials’ control is what they do today and tomorrow and in their policy meeting Sept. 16 and 17. So by deciding to raise rates then (or deciding not to), they are sending a more powerful signal than any speech or written statement that they believe it is time to start winding down the era of easy money.

The thing is, Ms. Yellen and her colleagues know this, and that comments like those she made Wednesday won’t do much to change it. The best they can do is try to manage expectations so that people don’t assume that a quarter-percentage point rise in the Fed’s interest rate target in September automatically translates to much higher rates in a year or two.

In other words, Ms. Yellen may be an economist, but she is well aware that her tools for managing the economy work via financial markets. So how bond traders interpret the Fed’s words and actions matter a great deal.

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Posted in * Culture-Watch, * Economics, Politics, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, Psychology, The U.S. Government, Theology

(FT) Regulators warn of cyber threat to financial stability

US regulators are increasingly concerned about the threat that cyber attacks pose to financial stability after assaults on Sony Pictures and Target highlighted the proliferating range of techniques used by digital raiders.

In a new report on risks to the financial system, regulators also sounded the alarm on risk-taking by institutions searching for higher investment yields, as well as the threat of rising interest rates triggering market volatility.

On cyber security, the annual report from the Financial Stability Oversight Council said “the prospect of a more destructive incident that could impair financial sector operations” was even more concerning than recent breaches that have compromised financial information.

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Posted in * Culture-Watch, * Economics, Politics, Blogging & the Internet, Corporations/Corporate Life, Credit Markets, Currency Markets, Defense, National Security, Military, Economy, Ethics / Moral Theology, Globalization, Law & Legal Issues, Science & Technology, Stock Market, Theology