Thursday, December 1, 2011

Quick Hits - December 1, 2011

First Day of December...

The Bank of England warns the Eurozone is plunging the UK into a second credit crunch (2008 the first)...
With bank profits hit by billions in writedowns on the debts of struggling eurozone nations, its gloomy report warned: "There are early indications from market contacts that some banks may be starting to pass on higher funding costs to household and corporate customers through higher prices."

European banks are looking to slash their balance sheets by as much as €2trillion (£1.7 trillion) to bolster their financial position and withstand the sovereign debt storm but their action risks triggering an "adverse feedback loop", Governor Sir Mervyn King warned.

He said: "An erosion of confidence, lower asset prices and tighter credit conditions are further damaging the prospects for economic activity and will affect the ability of companies, households and governments to repay their debts. That, in turn, will weaken banks' balance sheets further. This spiral is characteristic of a systemic crisis."

Despite the large gains made yesterday in the stock markets, few, if any, are defining the Eurozone crisis as over.  At best, the decision by major central banks was seen to have bought some time, kicked the can down the road a little more, for the Eurozone as the fundamental problems remain.  By the Eurozone's own calculations, there are only eight more days left to save the monetary union and the Euro.

Canada's Globe and Mail makes an excellent case as to why the central bank intervention announced yesterday should make us more worried...
If anything, the central bank moves – along with a surprise Chinese decision to reduce bank reserve requirements – plainly signal that the situation has gone from bad to worse.

The debt woes of a handful of fiscally challenged euro-zone governments have spread far beyond their regional confines to infect major banks in Europe. As investors and depositors have moved money out of euros, it becomes more difficult for their banks to find the money to make loans and keep the continent’s economy growing.

“We’re now seeing that solutions haven’t been working and they’re reaching for straws,” said Alex Jurshevski, managing partner of Recovery Partners, an expert on debt restructuring. “These are just patch moves. They’re not long-term solutions for anything because what you have in Europe right now is a broken funding model. What you have is a currency that no one wants to be in any more.”

Just as nearly 2 million strikers crippled the UK yesterday protesting the Government's planned austerity measures to reduce their deficit spending, Greece also experienced major disruptions as public services were shutdown by unions and union members protesting that government's austerity measures. These measures are being required by the EU for the latest $8B Euro bailout that Greece needs to avoid default mid-month.

The comments from the union members of the UK are quite interesting - as Monty from Ace of Spades notes:
It turns out that British public-school teachers and other public-sector workers are just as venal and self-serving as their counterparts in the Colonies. The issue? Pensions and benefits, of course. Money quote:
Brigid Falconer, 50, a social worker standing near the King’s Cross subway station in central London, said she was striking over “more than just my pension. It’s about what kind of society we want to have.

“I’m scared we will become more like America, with extremes in inequality,” she said.
I'll bet that my American readers had no idea we were living in such a feculent hellhole.

Continuing along in a similar vein, despite the OccupyLondon protesters who have defecated inside St. Paul's Cathedral during their encampment, the Regents of St. Paul's are putting politics before any concerns about the lack of respect shown to the Cathedral. They have announced that if the police attempt to enforce the eviction notices given the OccupyLondon protesters, they will give sanctuary to the protesters inside the Cathedral. It's putting the idiot in useful idiots to maximum effectiveness.

With an Administration actively supporting and encouraging unions (For example, How the National Labor Relations Board helped the Machinists union shakedown Boeing...) we've not seen this level of demonstrations and riots in this country yet. We've also not taken any needed austerity measures. Our experience at this remains limited to the union demonstrations in Wisconsin from last winter and the OccupyWallStreet jacobins.

Unions are extremely active in Wisconsin collecting signatures for the recall of Governor Scott Walker. The unions are only collecting, they are not verifying the signatures which has opened concerns that duplicates and fraud will be rampant not only in the 300,000 signatures already claimed, but in the final tally as well. It will be interesting to see if this becomes only the third successful recall of a Governor in the history of the US - particularly since Governor Walker ran on a platform of restoring fiscal responsibility to Wisconsin - and has succeeded.

Former SEIU President and still communist supporting Andy Stern embraces his inner Walter Duranty and pens a commentary that fully endorses "China's Superior Economic Model" over that of the United States. This as China's manufacturing output falls, the majority of their people still earn substandard wages, and the concept of workplace safety for workers non-existent.  Unfortunately, too many unions and union members continue to endorse the intellectually, ethically, morally, and fiscally bankrupt Marxist viewpoint.

Tensions are likely to increase even more in the Middle East as it appears the Muslim Brotherhood and Salafis are going to control about 65% of Egypt's new Parliament based on the election results from the election earlier this week. This is a decisive victory for the Islamists in Egypt. Despite the asinine comments of the President's National Security Advisor earlier this year about the Muslim Brotherhood being a more 'secular' organization, the Brotherhood appears still pushing for a fundamentalist embracing of the Qu'ran and basing Egypt's legal system on Shari'a law.

Wrapping up today's report, we're revisiting a favorite local theme - California's High Speed Rail Network boondoggle. California's independent Legislative Analyst's Office has issued a brutally harsh report on the business plan and latest efforts from the Network board as well as Governor Jerry Brown to move the program forward. The report defines the initial $6B needed for construction as a 'waste of tax funds at the expense of social services, education, and other infrastructure projects'. Furthermore, the release of funds approved by voters in a proposition authorizing the sale of bonds to fund the effort is illegal because the initial phases of construction do not conform to the requirements stipulated in the proposition. The LAO also says that it is 'highly uncertain' the full project will ever be built as there are no private investors investing in the project and the Federal Government seems unable / unwilling to allocate new funds that are needed given the current split in Congress.

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