On the European economic crisis front, S&P yesterday afternoon placed 15 European Union countries on a negative credit watch, indicating that all or some of these countries, including Germany and France, risked a downgrade in their national credit rating.
Both France and Germany worked to downplay the effects of this possible downgrade. However, in Canada's Globe and Mail, today's report on business examines how the S&P's 'coup de grace' changes the game in Europe...
While the markets appear to be taking the move in stride, S&P has put a knife to the throat of those six countries, and, arguably, put the German chancellor and French president in a much better position to get what they want. S&P did not mince words when it cited the dithering politicians of the euro zone who have failed to stem the crisis after two years.
But, noted CMC Markets analyst Michael Hewson, it also creates more problems in certain of the nations.
"The downgrade threat also makes it much more politically difficult for countries that have a large euro sceptic element like Finland who are also more fiscally conservative," Mr. Hewson said.
"Given they have been more fiscally conservative they probably have more to lose and rather begs the question, why ratify a treaty change that could well precipitate a ratings downgrade? It also seems likely to raise the political pressure in Germany with respect to the costs of closer integration. This it would seem is the price of admission towards closer fiscal integration, the question now being asked around Europe in the triple-A' countries is whether it's a price worth paying."
The European Union bureaucracy is fighting back against the S&P - an EU watchdog has announced that it is commencing an investigation into rating agencies in response to the nations being placed on credit warning. This commission can impose very heavy sanctions on the ratings institutions if they find any evidence of wrongdoing by these institutions. Does anyone suspect that they will not find wrongdoings?
The following story from the hard left leaning British newspaper, The Guardian, provides more details about the plans being advanced by German Chancellor Merkel and French President Sarkozy for the solution of the current Eurozone economic crisis. Citing a confidential paper by European Union Council President Herman Van Rompuy, the solution proposes empowering the European Commission to impose by fiat austerity measures on Eurozone countries being bailed out - and to be able to take punitive actions including stripping those countries of their EU voting rights if they do not adhere to the assigned austerity measures. As The Guardian notes, these are seen as a 'new punitive regime overseen by EU institutions given new powers of intervention'. For a hard left newspaper, this is quite a condemnation of the plan.
The German news magazine Der Spiegel has an interesting story about how the Greek banking crisis is getting significantly worse - to the point today where banks in Greece "lack the scope to finance growth". This is being caused by very high levels of withdrawals from Greek banking institutions that are worsening the banking crisis. Since 2010, the levels of Greek savings are down 30%. Today, Greeks only have about 170 billion Euros in their banks, while these same banks have over 253 billion Euros in loan exposures - with 20% of that classified as bad loans. This is a ratio that points to a strong liquidity risk in Greek banks if funds continue to be withdrawn....
Nikos B., a doctor in the Greek military, has had enough of the never-ending crisis his country is going through. While the 31-year-old has a secure job, repeated salary cuts have made it increasingly hard for him to make ends meet.
He needs most of his money to make loan repayments for a small car. "How can I clear my account? There's hardly anything in it," he says. He started learning German two months ago and wants to leave Greece. "As soon as possible!"
Nikos pauses and looks down. He quietly utters words that must be painful for a proud Greek. "It would be best to change nationality."
Today's World View covers the Euro crisis by acknowledging that Merkel and Sarkozy are only kicking the can down the road with their proposed 'solution'. Other interesting reports include information from a Senior Chinese official who is warning of increased social unrest because of China's growing economic challenges and Saudi Arabia is going to obtain nuclear weapons from Pakistan if Iran goes nuclear.
In Russia, police and protesters clashed over voting fraud complaints from this past weekend's elections. Russian President Medvedev has issued a warning to Western nations against any actions to criticize Russia over the alleged voting fraud. Protesters claim that voting fraud is the only reason why the party of President Medvedev and Prime Minister Putin approached the level of support (@49%) as they did.
An editorial in the Jerusalem Post today highlights the growing belief in Israel that the United States is no longer an ally of Israel...and that after the major win by Islamists in Egypt, Egypt is no longer a reliable anti-terror ally for either the US or Israel. Specifically, the author of the editorial says that instead of warning Egypt to uphold their treaty obligations with Israel, US officials chose to criticize Israel instead.
This viewpoint is only going to become more prevalent. Evidence is building that shows President Obama was pushing for early / accelerated elections in Egypt knowing that it would likely lead to an Islamist victory.
Moving to domestic issues, the Investor's Business Daily is reporting today that the Dodd - Frank banking regulations are going to cost a considerable number of jobs. Banks are warning that these new rules and regulations are going to 'crush employment' - with the potential to wipe out private employment gains that are being seen in this anemic economic recovery...as the Federal Government continues to hire thousands more bureaucrats to enforce the news rules.
"The level of real GDP could be 2.7% less by the year 2015 than would otherwise be the case for the United States," said Stephen Wilson, outgoing chairman of the American Bankers Association. "This could result in 2.9 million fewer jobs being created."
By comparison, the economy has created 1.78 million private jobs since the recovery officially began in June 2009.
The massive dump of documents by the Department of Justice late last Friday afternoon are causing more problems for the senior officials of the DoJ than they were intended to resolve. These documents support the accusations that senior DoJ officials deliberately misled Congress over their role and the specifics of the Fast and Furious ATF operation. These officials either need to be held accountable (via loss of their jobs as well as criminally) for their misrepresentations or if one is to believe that they were misled by the former acting head of the ATF and the former US Attorney out of Phoenix, AZ, then they need to be sacked for being incompetent.
The Communist Party USA is actively working on a 'new and improved' pro-Obama Occupy movement to replace the sputtering OccupyWallStreet movement. I doubt Occupy 2.0 will be any more effective than the first release. The problem isn't the execution, it's the architecture. But you knew that....
This Dilbert cartoon covers not only the real goals behind the left's efforts for the Occupy movement, but unfortunately covers a lot of world history of the last several hundred years....
In California, Governor Jerry Brown starts the process to take a massive CA income and sales tax hike straight to California voters - targeting the 2012 election cycle (June / November). The Governor claims that these tax hikes are needed as the only way that California will get its budget crisis under control.
California government watchdog organizations are responding by starting their own processes to get voter adoption of new legislation via the proposition process to limit state government spending. They cite that in the last 10 years, California's government has increased their spending by $39 billion - a nearly 40% increase which is well beyond that of inflation or the population growth of the state. During that same time, California's rankings in terms of education, business friendliness, and infrastructure have dropped significantly.
Contrary to the claims of Governor Brown and the other progressives who dominate California's government, the challenges come from irresponsible government spending not from insufficient tax revenues. While the latter are down because of the effects of the recession, they are also depressed because of the anti-business regulatory and tax policies put in place by the progressives in California.
Finally, polls are now showing that California voters would reject the high speed rail project if there would be a second chance to vote on the project....