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the lesson of Cyprus: solvency is the new sovereignty

“European officials reached an agreement to support Cyprus, which initially sought aid in June 2012. Cyprus will become the fifth euro zone country to receive assistance,” writes Marc to Market in a Zero Hedge blog burst titled The meaning of Cyprus.

Caption: The final phase of the nation-state system of organization–the market state–has passed into its opposite on the island of Cyprus.

[...] There will be an immediate tax on depositors in Cyprus.  Large deposits, which are defined as in excess of 100k euros, will lose 9.9%.  The government will take 6.75% from small depositors.    This is expected to raise 5.8 bln euros.  

Electronic transfers have been frozen and reports suggest ATMs have run out of cash within hours of the announcement.  Cyprus is on holiday on Monday and when the banks re-open on Tuesday the tax will have been collected; the funds confiscated.

This is the most controversial aspect of the concessions.  It is unprecedented in terms of euro area aid programs.  It is not though unprecedented in modern times in Europe.  Italy, it may be recalled, taxed (confiscated) 5% of savings to ensure it would be able to join the monetary union in the first place.  Moreover, what is generally not appreciated is that in the EU, unlike in America, depositors do not have preferred status over bond holders.  This makes them significantly more vulnerable [...]

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Consumer Financial Protection Bureau student-loan ombudsman Rohit Chopra: “student loan debt [crisis] could even hold back a housing recovery”

Caption: Self-inflicted.

More on the student loan debt crisis by Martha C. White in a Time Magazine Business & Money blog burst titled Student Loan Debt Crisis: How’d We Get Here and What Happens Next?

[...] The broader economic implications are troubling. Graduates struggling to dig out from a mountain of student debt also tend to put off getting married, buying homes, and having kids. And since a bigger chunk of their income will go towards servicing the mortgages or car loans they are able to obtain at higher rates, they’ll have less spending power when they do eventually buy big-ticket items like homes and cars. Consumer Financial Protection Bureau student-loan ombudsman Rohit Chopra warned last year that the magnitude of student loan debt could even hold back a housing recovery. “Student-loan borrowers are sending big payments every month to their loan servicers rather than becoming first-time homebuyers,” he said [...]

The era of cheap money in the form of super-low interest rates that incent debt over equity or savings is killing not just our economy but entire generations in the form of elderly who cannot live on their savings, under-performing pension funds, and our future economy in the form of our debt-slave university graduates who can’t find jobs anyway.

Good times!

yours &c.
g.

U.S. Economy contracts for first time since 2008

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  1. Just yesterday Lisa Mahapatra of Business Insider announced the “dawn of a new stock market super-cycle”

  2. We Could Be Witnessing The Dawn Of A New Stock Market Super Cycle

    Despite its huge rally from its March 2009 low, the stock market has effectively gone sideways for the last decade. Many have characteriz…
    Lisa Mahapatra
    ·

    Today the laws of physics issue their verdict on the DOW and only the latest bubble caused by the cheap money of low interest rates. Witness:

  3. US economy shrinks 0.1 pct., first time in 3 ½ years; deep cut in defense spending key factor

    The surprise contraction could raise fears about the economy’s ability to handle tax increases that took effect in January and looming sp…
    Associated Press
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  4. GDP report: U.S. economy contracts in the fourth quarter of 2012

    Uncle Sam cut spending in the fourth quarter of 2012, causing the U.S. economy to contract for the first time in more than three years. G…
    Cnn
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  5. Economy in U.S. Unexpectedly Shrinks as Defense Spending Plunges

    The economy in the U.S. unexpectedly shrank in the fourth quarter, restrained by the biggest plunge in defense spending in four decades a…
    Bloomberg
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  6. Advance Estimate of GDP for the Fourth Quarter of 2012 | The White House

    According to the “advance” estimate released by the Bureau of Economic Analysis today, real GDP edged down 0.1 percent at an annual rate …
    WhiteHouse.gov
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  7. Economy Shrank 0.1% in the Fourth Quarter; Analysts Expected Growth of 1.0%

    Kick Images | Getty Images This is a breaking news story. Please check back here for updates. Economists expected the first reading on gr…
    Cnbc
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  8. News Release: Gross Domestic Product

    Data on gross domestic product (GDP), personal income/outlays, corporate profits, fixed assets, government receipts/expenditures. Plus in…
    Bea
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  9. U.S. Private-Sector Jobs Rise by 192,000

    Private businesses added new employees at a rapid clip in January despite layoffs at the largest U.S. companies, according to a tally of …
    Wsj
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Student loan debt larger than sub-prime, distorting labour markets

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  1. Student Loan Update: “This Situation Is Simply Unsustainable” | Zero Hedge

    “The delinquency rate today on student loans that were originated from 2005-2007 is 12.4 percent. The comparable figure for student loans…
    Zerohedge
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  2. Tumblr
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    Tue, Jan 29 2013 21:37:14

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  3. The bodies are aligned, are they not?
  4. Subsidies Create Glut Of College Grads

    Higher Education: A new study finds almost half of Americans with college degrees are working at jobs that don’t require one. It’s the la…
    Investors
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Paris is the New Athens as France enters economic death-spiral

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  1. The euro crisis no one is talking about: France is in free fall

    The euro zone’s second-largest economy is suffering more than any other member from a shocking deterioration in competitiveness. And it’s…
    Shawn Tully, senior editor-at-large
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  2. Sorry, but Europe’s Economic Crisis Is Not Over

    Financial conditions in Europe are improving, and the sense of imminent doom has lifted. Some commentators are daring to say that Europe’…
    Bloomberg
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  3. Frankrupt Damage Control “France Is A Truly Solvent Country, France Is A Truly Credible Country” | Zero Hedge

    In a move farcically reminiscent of Inspector Clouseau, the French Finance Minister made an impromptu appearance on the BBC to confirm wh…
    Zerohedge
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  4. Mish’s Global Economic Trend Analysis: France “Totally Bankrupt” Says Labour Minister; Inappropriate or Inaccurate?

    Mish’s financial blog covers global news and macroeconomic events regarding the world economy. The blog’s primary focus is inflation, def…
    Blogspot
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Yuri Nosovsky for Pravda.Ru: “Psychologists have not yet decided on the name of the social and psychic phenomenon. Some suggest the term ‘cute aggression.’”

Yuri Nosovsky writes the following for Pravda.Ru in an article titled Beauty won’t save the world:

[...] It turns out, beauty is not an insurance against evil, on the contrary, it often contributes to the manifestation of the darkest parts of human soul. It is more than jealousy or desire to have the same thing as your neighbor. Beautiful creations of nature can also manifest dark instincts.

After a series of studies, this phenomenon was noticed by scientists at Yale University in the U.S. Often, for example, seeing a pretty baby, even the baby’s relatives squeeze their cheeks, clearly mimicking pinches. While no real pain is inflicted, the intent is obvious. A similar reaction may be caused by cute kittens, puppies, etc. [...]

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the system will persist until the very moment it does not: how the progressive position on debt, deficits, and entitlement reform, is at odds with the laws of physics

The U.S. President in his second inaugural address issues the following contradiction: “We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.” The solution to resolve this contradiction seized on by the courtier-classes of press and commentariat has been to emphasize that (a) the electorate endorses the system as it stands, and (b) the system as it stands is threatened not by debt, not by deficit, nor by market registers of the performance of nation states or other polities (What crisis?).

Caption: Wait. That should read Now Here, as in, you are now here, right?

Both (a) and (b) are true on their face, just as it is true as I write this that the weather is cold. But for how long, as the days are even now growing longer? At some point a combination of incremental, quantitative changes will produce the qualitative change of a change in seasons. Let us explore an example of the reasoning of the centre-left on the issue of entitlement-reform. In a Political Animal blog burst titled Four years later, Paul Ryan wants more of the same, Samuel Knight writes: Read More »

colour me gobsmacked: Time-CNN poll has Gingrich at 33 to Romney at 20 in Iowa

The numbers are here for Iowa, New Hampshire, South Carolina, and Florida, the four early primary states where Gingrich holds commanding double digit leads in 3 of the 4. The core premise of Willard Mitt Romney’s campaign was a divided conservative base that would allow him to develop momentum by means of early primary victories in the form of electoral pluralities. So now he is suddenly where he never wanted to be: in a head to head struggle against a perceived conservative candidate going into Iowa with the conservative base rapidly consolidating its position both locally in the early primary states and nationally.

You may as well try to fly. Read More »

the anti-campaign of the anti-campaigner

[Willard Mitt Romney's] Hopes for wrapping up the nomination with a quick-strike victory, which would require a strong showing in Iowa, are fading, write Jonathan Martin, Maggie Haberman and Reid J. Epstein for POLITICO.com in a story titled Gingrich surge prompts Romney reboot

Martin, Haberman, and Epstein continue:

Romney’s comments effectively marked a public concession that the play-it-safe approach he’s held to so far this year – limiting his interviews and doing only modest amounts of retail campaigning – simply won’t cut it anymore [...] Read More »

wintery knight: “So Romney is saying to Republican voters ‘never mind what I am saying in my own words in those videos, just read my book instead’”

Wintery Knight concludes his post titled Mitt Romney gaffe: Romney fails miserably in interview with Bret Baier: “Is this thin-skinned RINO the person we want in the Oval office in 2012? Why elect a clone of Obama?”

Romney tells Baier his interview was overly aggressive:

Romney-Baier interview part 1

Commentary: Read More »

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