Archive for the ‘Economics’ Category

Greece: Contagion Watch

Monday, April 20th, 2015

Amidst word that other European banks are urging Greek banks to dump Greek securities, and continued mutterings of Greek contingency plans to nationalize banks, Zero Hedge just tweeted this:

Not seeing confirmation yet, but if true, those quiet bank runs in Greece are about to stop being quiet…

Update: Here’s Zero Hedge’s post, citing an (unlinked) Bloomberg piece citing internal Greek decree, saying it’s the start of capital controls. If so, bank runs are all but assured…

Update 2: Now seeing news reports saying that Greece is “The Greek government is forcing the country’s municipalities to transfer cash reserves to the Bank of Greece in a bid to shore up its short-term finances, according to officials…The decree on Monday mandates the transfer of cash that is not needed to cover spending in the next 15 days, as Athens continues negotiations with creditors to unlock bailout funds.”

So, no forced bank funds transfers.

Yet.

Texas vs. California Update for March 26, 2015

Thursday, March 26th, 2015

Time for another Texas vs. California roundup:

  • Forget all those snide liberal cracks about Texas’ public education system, since we have some of the highest graduation rates in the country.

  • “San Bernardino has defaulted on nearly $10 million in payments on its privately placed pension bond debt since it declared bankruptcy in 2012.”

    The missed payments illustrate the trend among cities in bankruptcy to favor payments to pension funds over bondholder obligations, which has increased the hostility between creditors and municipalities.

    San Bernardino declared last year that it intends under its bankruptcy exit plan to fully pay Calpers, its biggest creditor and America’s largest public pension fund with assets of $300 billion.

    The city continues to pay its monthly dues to Calpers in full, but has paid nothing to its bondholders for nearly three years, according to the interest payment schedule on roughly $50 million of pension obligation bonds issued by San Bernardino in 2005.

    If you’re a bank, a retirement fund, or a hedge fund, why on earth would you buy California municipal debt when there are safer alternatives? (Hat tip: Ace of Spades HQ Doom roundup.)

  • So how’s that San Francisco minimum wage law working out? Exactly like everyone who understands economics expected. “Some restaurants and grocery stores in Oakland’s Chinatown have closed after the city’s minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.” Plus this: “Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.”
  • California’s Legislative Analyst’s Office suggests phasing out state health care for workers entirely.
  • California is dead last in spending transparency among the 50 states, with an F rating and a piddling score of 34. Texas ranks 13th with an A- and a score of 91. (Hat tip: Cal Watchdog.)
  • “North Texas gained an average of 360 net people per day from July 2013 to July 2014, a testament to the job-creating machine in the Lone Star state, according to the U.S. Census Bureau…North Texas and Houston were the only metropolitan areas to add more than 100,000 people during that one-year period.”
  • Just because California has some of the highest taxes in the nation doesn’t mean that the state’s Democratic legislature doesn’t want to add still more.
  • Meanwhile, the Texas Senate just passed a $4.6 billion tax cut.
  • California is rolling out more subsidies for Hollywood.
  • The Los Angeles Department of Water and Power not only has the highest employe costs in the country, it also ranks last in customer satisfaction. (Hat tip: Pension Tsunami.)
  • While Texas is certainly in much better shape than California on public employee pensions, things here are not entirely cloudless either. “The Texas Employee Retirement System is reporting unfunded liability of $14.5 billion in 2014, compared with liability of just $6.3 billion in 2013. By comparison, all of the state government’s general obligation debt as of 2013 was $15.3 billion. The Texas Law Enforcement and Custodial Officer Supplemental Retirement Plan is reporting unfunded liability of $673.1 million in 2014, compared with $306.7 million in 2013.”
  • Unlike California, Texas looks to get ahead of the curve on pension concerns with House Bill 2608, which restores control of pension funds to the local level by eliminating legislative approval for pension changes. I”nstead of locking up significant benefits in state statute, HB 2608 would allow city pension systems, like the Houston Firefighters’ Relief & Retirement Fund, to solve pension problems at the local level by changing benefit structures, if they so chose.”
  • “Support for the “bullet train” is ebbing across California, except, perhaps, in the Governor’s mansion.”
  • California raisin packer West Coast Growers files for Chapter 11.
  • American Spectrum Realty, a real estate investment management company that operates self-storage facilities under the 1st American Storage brand, has somehow managed to file for bankruptcy in both California and Texas. I think it’s safe to say that financial shenanigans are involved…
  • Lawsuit over misappropriated funds in a Napa Valley winery leads to a murder/suicide. It’s one of those stories that sounds too strange not to link to…
  • Eurocrat Summarizes Greek Problem

    Monday, March 23rd, 2015

    Sure, Jose Manuel Barroso, the former president of the European Commission, is a self-interested Eurocrat, but here he provides a nicely concise statement of the obvious concerning Greece’s problems

    Greece’s problems can be laid at its own door and the country needs to provide a clear commitment to reform to reach an agreement with its creditors, Jose Manuel Barroso, the former president of the European Commission, told investors in Hong Kong.

    “The Greek people went through extremely difficult moments, hardship. But these difficulties of Greece were not provoked by Europe,” Barroso said in an address at the Credit Suisse Asian Investment Conference in Hong Kong.

    “It was provoked by the irresponsible behavior of the Greek government.”

    “The situation of Greece is the result of unsustainable debt that was created by the Greek government, mismanagement of their public finances, huge problems with tax evasion and tax fraud [and] problems of the administration,” he said, noting that the country had also misled the European Union by filing false figures on its economy.

    A nice statement of the problem. To which I can only add: And Greece continues to compound the problem, because it refuses to reduce government spending to match receipts. And it refuses to do because it’s welfare state is unsustainable.

    All this talk of bailouts, relief, reparations, agreements and grexits is just filigree on the essential problem: Greece’s government spends more money than it takes in and refuses to change its ways.

    Greece: Turning and Turning in a Narrowing Gyre

    Thursday, March 19th, 2015

    It appears we may finally be reaching the endgame of the endgame on Greece.

    Greece is suffering a bank run and owes just over $2 billion in debt payments due Friday, but shows no signs of having the money or meeting the Troika’s conditions for obtaining more. Quite the opposite. Greece’s left-wing Syriza government is increasingly acting like an erratic heroin addict refusing to check into rehab and howling through the streets at night in search of an angry fix, heedless that there’s an arrest warrant out in his name.

    “The International Monetary Fund, one of Greece’s main three creditors, was reported to have called Greece ‘the most unhelpful client’ the Fund has dealt with in their 70-year history.”

    “During the teleconference, the Greek representative said his government wasn’t prepared to talk about the country’s finances with technical experts and instead wanted European Union leaders to discuss the issue at a summit in Brussels, one of the European officials said.”

    I’m sure telling your bank that you’re “not prepared to discuss my finances” when asking for your fifth bridge loan would go over really well.

    Also this: “There was a general feeling that the Greek side is completely out of touch with reality.”

    You think? How about the fact that Greek parliament just passed a raft of anti-austerity spending measure, which is rather like a man with stage 4 lung cancer lighting up a couple of stogies in route to the operating room.

    Some are wondering if Syriza wants to see Greece kicked out of the Euro.

    EU institutions seem far more ready for what lies ahead. “The European Central Bank (ECB) is preparing for a possible Greek exit from the euro zone.” Conversely, EU insiders have also floated the idea of imposing capital controls to prevent Greece from leaving the euro.

    And the one person whose opinion matters the most? “German Chancellor Angela Merkel said Thursday that Greece has no choice but to carry out economic reforms if it wants to receive more financial aid, dashing any hopes Athens might have had for a softening in Berlin’s stance.”

    Carrying out real reforms (like stop spending more money than the government takes in) is what Greece in general, and Syriza in specific, has steadfastly refused to do. And the reason they refused is that the European cradle-to-grave welfare state has become more sacred to voters than the capitalist economics and fiscal discipline necessary to support it.

    This is not a recipe for happiness.

    There’s a chance that all of this is posturing on both sides, and that a kabuki compromise involving small reforms in exchange for still more loan extensions may yet kick the can a few more feet down the road. But there is every sign that EU institutions have finally tired of Greece’s show, and are willing to see the final curtain drop. And the Greeks are about to learn that the vengeance of the gods of the copybook headings cannot be delayed indefinitely…

    Greece Snarls At The Hand That Feeds It

    Wednesday, March 11th, 2015

    Angela Merkel tamped down a party revolt to extend the Greek bailout terms by four months. And her reward for extending that lifeline? Greek Prime Minister Alexis Tsipras reviving demands that Germany pay World War II reparations to Greece.

    Before Syriza came to power, the rest of the EU and the Troika seemed content to play along with the Greece farce (extending further loans in exchange for yet more empty promises of reform) at least a little while longer. However, Syriza’s virulently anti-EU and anti-Germany rhetoric seem to have finally exhausted their patience with the show. It seems even Europeans have limits to the abuse they’re willing to take from perpetual welfare recipients. It’s bad enough to underwrite a freeloader, but evidently having to put up with constant insults from them was too much.

    At this point, everyone knows Greece will neither reform nor pay back their debts to the Troika (or anyone else). That’s why Europe has finally started taking a real hard line with them, insisting on inspectors on the ground to see reforms are actually implemented.

    Either Tsipras has severely overplayed his hand (quite possible), or he is deliberately preparing to use Germany as the theoretical scapegoat for exiting the Euro.

    To say that Tsipras and Syriza has no plan B to escape the crisis is misleading, since their cunning “insult our creditors into giving us more money” doesn’t even count as a plan A.

    A bailout from Russia? It’s not like Putin is rolling in dough following a fall in oil prices and his continuing isolation over his invasion of Ukraine. Let Putin subsidize Greece all he wants. (And I doubt a Greek navel base would give him any advantage over what he has in Sevastopol.)

    Greece could have avoided all this many years ago if their government had just stopped spending more money than they took in. Given their addiction to a bloated welfare state, this is the one thing they have proven singularly unwilling to do.

    I doubt Syriza has thought through just how nasty a divorce from the Eurozone might turn out. Never mind asking they repay their debts, I’m thinking a complete halt to all bank transfers between the Eurozone and Greece, and international foreign exchanges refusing to list a newly floated drachma. People hate having their welfare benefits cut, but they really, really hate being unable to buy food…

    Greece has finally reached the stage of socialism where they’re run out of other people’s money, and the results are not going to be pretty.

    Experience is a dear teacher, but fools will learn from no other…

    LinkSwarm for February 6, 2015

    Friday, February 6th, 2015

    I’ve got a cold and my dog had major dental surgery yesterday, so pardon me if I seem out of it.

  • Democratic Party makes it clear they expect reporters to be good little lapdogs, going so far as to escort them to the restroom to keep them from talking to congressmen.
  • Muslim attack in the Philippines kills 49.
  • London Mayor “Boris Johnson says [jihadists] watch pornography and masturbate excessively.” (Hat tip: Legal Insurrection.)
  • Entire Rotherham City Council resigns. Not enough Many should be in prison.
  • ISIS is big on book burning.
  • Guy builds real Nine Inch Nailgun. Because #Merica:

  • When the CEO of your startup gets convicted on child pornography charges, there’s a good chance you’re not IPO-bound.
  • Minimum wage hike kills San Francisco independent science fiction bookstore Borderland Books. I’ve bought books from Alan before, so I have a personal connection here.
  • Is that a Batmobile in your pocket, or are you just happy to see me?
  • Venezuelans Now So Screwed They Can’t Afford to Get Screwed

    Wednesday, February 4th, 2015

    Thanks to the Magic Power of #Socialism™, in Venezuela a 36-pack of condoms now costs as much as an iPhone:

    Venezuelans who already must line up for hours to buy chicken, sugar, medicines and other basic products in short supply now face a new indignity: Condoms are hard to find and nearly impossible to afford….

    On the auction website MercadoLibre, used by Venezuelans to obtain scarce goods, a 36-pack of Trojans sells for 4,760 bolivars ($755 at the official exchange rate), close to the country’s minimum monthly wage of 5,600 bolivars.

    It take a special kind of socialist magic to make your people too poor to have sex.

    In other Venezuela news:

  • The Maduro government has seized a supermarket chain. I’m sure that will do wonders to make more basic goods available to people.
  • They’re also arrested pharmacy owners for “conspiring” to create long lines out their stores. Maybe Maduro thinks business owners can conjure hard currency out of their own asses.
  • Interview with opposition leader Henrique Capriles.
  • One wonders if The Road to Serfdom or Economics in One lesson have ever been translated into Spanish…

    Greece Inches Closer to the Endgame

    Monday, December 29th, 2014

    Just because the European Debt Crisis hasn’t been in the headlines much as of late doesn’t mean it’s gone away.

    Greece’s government has fallen again and they’ll be holding general elections next month. “Opinion polls point to a victory by the radical leftist Syriza party, which wants to wipe out a big part of Greece’s debt, and cancel the terms of a bailout from the European Union and International Monetary Fund that Greece still needs to pay its bills.”

    The problem is that Greece wants to continue spending other people’s money to prop up a bankrupt welfare state, and the rest of Europe has decided they would really prefer to stop pouring money down that particular rathole. Syriza is against “austerity,” which is to say they oppose the Greek government even pretending to practice fiscal restraint. Because pretending is all they’ve done.

    Remember, real austerity is reducing outlays until they match receipts. All those “austerity” street protests were over lowering Greece’s budget deficit from 9% of GDP to 7.5% of GDP. The rest of Europe didn’t ask them to stop digging their own grave, they just asked them to dig more slower. And this year, Greece’s budget deficit stood at 12.2% of GDP. Evidently even fake austerity is too much to ask of them; even the illusion of fiscal restraint is intolerable. This is why all news that Greece has “balanced” next year’s budget should be taken with several grains of salt.

    So we’ll see another election, and if Syriza wins we’ll see another round of demands for more bailouts and debt writedowns, with Greece threatening yet again to exit the Euro. We’ve seen this movie before. The most likely outcome is that another cabal of EU-phillic insiders in the Greek government will engineer a last-minute cave-in to demands from Brussels and Frankfurt, ram another toothless austerity measure through parliament in exchange for still more credit (and perhaps even a small symbolic measure of debt forgiveness), dissolve the government again following the inevitable public outrage, then have the Greek bureaucracy ignore even those woefully inadequate reforms, setting the stage for the farce to repeat itself in another 12-18 months, or until mean old Aunt Angela finally cuts up the credit card.

    Europe has had several years to acclimate itself to the fact the Greece might exit the Euro, and the possibility of a “grexit” has been priced into the markets for some time now. I do not pretend to understand the intricacies of the European banking system, but my impression is that much of the “stress testing” of European banks this year was to prepare for one or more of the PIIGS leaving the Euro. I suspect that the European elite have minimized their own exposure to a Greek default (which is really all they care about), and that the EU and the European Central Bank has found new, sneaky ways to put taxpayers on the hook for any possible sovereign defaults, strengthening the banking system without addressing Europe’s long-term economic problems (unsustainable levels of debt to support cradle-to-grave welfare states for shrinking populations).

    It would be great if Greece actually undertook real structural reforms of their bloated, dysfunctional government, but I see precious little evidence that they’ve actual done so. Expect more pain ahead, and at least one more bailout…

    Texas Economy Continues to Kick Ass

    Monday, December 22nd, 2014

    Two bits of news dropped right after I put up the most recent Texas vs. California update.

    First, Texas added 34,800 nonfarm jobs in November, and 441,200 more jobs year-over-year, more than any other state. And this happened despite the drop in oil prices.

    One reason Texas does so well is that it has the highest level of economic freedom of any state (tied with South Dakota).

    Needless to say, those two facts are strongly correlated. In the long run, free states produce jobs and economic activity while less free states produce dependency and stagnation.

    (Hat tip: TPPF.)

    LinkSwarm for November 21, 2014

    Friday, November 21st, 2014

    Here in Austin, we’re enjoying a temporary respite from Winter in November, but I don’t expect it to last long.

    Links!

    All the lies of ObamCare:

    The growing impression that politicians don’t play straight with their constituents is completely toxic, particularly to Democrats, who actually want to use government to improve people’s lives. It’s one thing to downplay unpalatable choices made in the law; it’s another to never disclose the consequences of legislation until it’s too late for anyone to react. Combine that with the moustache-twirling of a Jonathan Gruber, saying that the idiots should be happy for what they got, and you have basically every conservative stereotype about liberal elites confirmed.

    Also: ObamaCare is designed for people buying insurance through it to get a nasty sticker shock in year two. (Hat tip: Instapundit.)

  • House Republicans file suit over Obama’s unilateral actions on ObamaCare.
  • The administration is lying about ObamaCare signup numbers. Again.
  • “Why Texas Could Remain a Republican Stronghold for Another Generation.”
  • “The president’s promises have been proven to be worthless…How many illegal immigrants want to come out of the shadows and identify themselves to law enforcement based upon this promise?”
  • Jay Carney admits that with his illegal alien amnesty, Obama is doing something he previously called unconstitutional.
  • Mickey Kaus thinks the courts could very well act quickly to squash Obama’s illegal amnesty, much as they did with Harry Truman’s steel mill seizures.
  • Aaron Worthing thinks illegals will pass on Obama’s amnesty as a bad deal.
  • “These illegal aliens are willing to do the work that Americans will no longer do — namely, vote Democrat.”
  • How desperate are the Democrats? They’re saying Republican opposition to Obama’s illegal alien amnesty will lead to ethnic cleansing. (Hat tip: Moe Lane.)
  • Top Obama bundler arrested on child rape charges.
  • Lefty lawyer Alan Derschowitz on Harvard’s kangaroo court sexual assault rules: “Harvard’s policy was written by people who think sexual assault is so heinous a crime that even innocence is not a defense.”
  • How come Bill Cosby gets convicted in the media for rape allegations by Bill Clinton gets a pass? “There is more sympathy for a white southerner like Clinton than a black comic like Cosby.”
  • A giant leap backward for woman-kind.
  • Price of ground beef hits record highs.
  • Oh lovely: Microsoft is deploying Daleks.