Archive for the ‘Welfare State’ Category

Greek Voters to Europe: Screw Your Objective Reality!

Monday, July 6th, 2015

Greek voters have voted no on agreeing to austerity measures for additional bailouts. Since Greece is broke without additional bailouts, times in Greece are about to get very interesting indeed.

Also, Greece’s finance minister Yanis Varoufakis has resigned.

Germany says they’re done talking, and the European Commission says that the previous bailout offer is now off the table.

A member of the European Central Bank’s governing council says “Greek debt held by the European Central Bank can’t be restructured as doing so would contravene the eurozone’s founding treaties.”

And if Greece won’t be forced to pay its debts, voters in Spain, Portugal and Italy will start to wonder why they should pay theirs.

But without additional loans, things in Greece are going to get very bad indeed. How bad? Greek banks are drafting plans to confiscate 30% of bank deposits over €8,000. Greece’s middle class has spent they last decade enjoying spending other people’s money, only to wake up and find that they are now Other People.

Ding Dong, the ExIm Bank is Dead!

Friday, July 3rd, 2015

One bit of good news this week: The charter for one of crony capitalism’s favorite boondoggles, the Export/Import Bank, expired at Midnight June 30.

Hopefully it will stay dead after congress returns from recess, despite attempts to revive it.

If you can’t kill corporate welfare giveaways to Fortune 100 companies, what can you cut?

Stop Me If You’ve Heard This One Before…

Wednesday, July 1st, 2015

Greece’s leftwing Prime Minister Alexis Tsipras wants more negotiations. Because, you know, Europe just hasn’t had enough of those over Greek debt.

Mr. Tsipras said Greece was “prepared to accept” a deal set out publicly over the weekend by the creditors, with small modifications to some of the central points of contention: pension cuts and tax increases.

In other words: Groundhog Day on the Aegean. Yet again.

More Greek crisis links:

  • “Socialism is a one-way ticket to misery and failure.” Also: “The Greeks are simply the vanguard in a long line of nations who have buried themselves under mountains of unpayable debt.”
  • Greece: “We’re suffering so hard!” Poorer countries in Europe: “Suck it up, you proliferate spendthrifts!”
  • Possible post-referendum timelines in Greece. I hope you like flow charts…
  • Greece Officially Defaults on IMF Payment

    Tuesday, June 30th, 2015

    And verily it came to pass.

    Greece lost its financial lifelines Tuesday, as the country missed a crucial payment to the International Monetary Fund amid growing questions about whether it would be able to remain in the euro zone.

    Greek leaders had made a last-ditch attempt to come up with the necessary cash, asking European countries for a new bailout hours before its last ones were set to expire, but E.U. finance ministers rejected the request as unrealistic. The missed payment, confirmed by the IMF, was a landmark moment in Europe’s five-year battle to preserve its common currency.

    A few more Greek tidbits:

  • Greek banks are about to enjoy some ECB-mandated haircuts. He who pays the piper calls the tune…
  • Dear PIIGS citizens: Don’t blame austerity, blame your corrupt politicians.
  • Europe’s Democracy Deficit:

    The bureaucrats in Brussels and their counterparts in Europe’s national governments are furious with the Greeks for daring to consult their own people. Daniel Hannan, a British member of the European parliament, sarcastically tweeted, “Calling a referendum is, to Eurocrats, the most offensive thing a politician can do.” Stripped of their veneer, Eucrocrats’ arguments against all referendums amount to saying that referendums are a bad idea because they shift power from small cliques of unelected but wise rulers to an unsophisticated, nationalistic mob that might fall prey to populism

  • Via the People’s Cube: Greece declares victory.
  • Judgment Day for Greece

    Tuesday, June 30th, 2015

    Today is the day Greece defaults: “Greek Finance Minister Yanis Varoufakis confirms Greece will not pay the International Monetary Fund debt due today. The European part of Greece’s international bailout expires Tuesday and with it any possible access to the remaining rescue loans that it needs to pay its debts of about $1.9 billion to the IMF.”

    And what happens after Greece defaults to the IMF? That’s when things get interesting. First, on Sunday, July 5, the Greek people vote on a badly worded referendum. If they agree to Europe’s terms, they’ll impose additional budget-cutting measures and pension reform, and presumably get a new loan to pay their IMF arrears.

    And if they vote no? Then they’ll have no euros to keep paying for their welfare state, and presumably start printing drachmas. But their debt stays denominated in euros, and there’s no guarantee foreign companies will be willing to deal in drachmas instead of euros, or that European foreign exchanges will even allow drachmas to be traded until Greece comes to some sort of agreement with the European Central Bank and other creditors. (I am largely ignorant of European foreign exchange regulations.) Either way, expect a nice dose of hyperinflation to add to Greece’s myriad coming economic woes.

    The Eurozone is far more likely to survive Greece’s exit than Greece is. Then again, Greece now has so much debt that it’s screwed no matter what happens. Deficit financing to prop up your bloated welfare state is a horrific idea that destroys economies, and Greece looks to follow Venezuela in providing this generation’s example.

    Other Greek tidbits:

  • Tsipras “thinks Greek voters, by making delusional promises to themselves, obligate other European taxpayers to fund them.” More: “Since joining the Eurozone in 2001, Greece has borrowed a sum 1.7 times its 2013 GDP. Its 25 percent unemployment (50 percent among young workers) results from a 25 percent shrinkage of GDP.” Gee, you can’t borrow your way to prosperity? Who knew?
  • Greece actually needs €275 billion to pay its debts between now and 2057.
  • Argentina went through economic hell after defaulting, then recovered. Greece would likely go through the same cycle…minus the recovery part.
  • Europe suspends Greek bond trading.
  • Greece Slides Toward Default

    Monday, June 29th, 2015

    Looks like that optimism over Greece caving in to reality was a bit premature, since Alexis Tsipras is back to his old tricks again, proclaiming loudly that he won’t be “blackmailed.” Because we all know that agreeing to cuts in your bloated welfare state to pay for the loans you already agreed to is “blackmail.”

    He’s called for a national referendum on bailout agreement terms. The problem is, that vote is July 5 while $1.7 billion payment Greece owes the IMF is due June 30, and the IMF can’t offer extensions, and Greece is too broke to make its debt payment.

    Greek banks are closed until July 7, and the “European Central Bank (ECB) said it was not increasing emergency funding to Greek banks.” ATMs are running dry and withdrawals are bveing limited to 60 euros.”

    Stocks in Europe and China are in freefall, with bank stocks in Europe particularly hard hit. Greek stocks are off 17% despite their stock market being closed.

    A few more Greek crisis tidbits:

  • Holy fark: 70% of Greek mortgages are in default.
  • Nothing says “vibrant economy” like adults forced to live with their parents.
  • “The strange thing is that neither Tsipras nor a large majority of the Greek people want to leave the euro (more than 70 per cent support keeping euro polls show). But despite the country being united on this, the government is still unwilling to make the compromises that would keep Greece in the euro zone.”
  • The bill for Greece’s profligate spending and fake austerity was always going to come due sooner or later. Tsipras’s disasterous term in office merely ensured that it would come sooner and with a maximum of economic pain for the Greek people…

    Texas vs. California Update for June 24, 2015

    Wednesday, June 24th, 2015

    It’s been a while since I did a Texas vs. California update, so this is going to be a meaty one:

  • The Texas Comptroller has released a 50 state overview of how Texas stacks up to other states. There’s a lot of information to mine there. A few nuggets”
    • Texas ranks first as the best state for business, while California ranks 50th.

    • Texas ranks as the best state for net migration; California ranks 49th.
    • There are area in need of improvement. Texas ranks 49th in states whose residents over 25 hold high school diplomas. California? 50th.
  • Texas has enjoyed 100 straight months of unemployment below the national average. (Now it’s 101 months, but I can’ find a link right at the moment.)
  • The previously mentioned California pension reform ballot initiative has been filed.
  • Can it help California voters avoid pension armageddon?
  • “Low Taxes And Economic Opportunity In Texas Lead To Youth Population Boom.”
  • I was unaware that CalPERS owns its own planned community in Mountain House, California, and which it’s invested more than $1 billion in. A community that in 2008 was the most underwater in terms of mortgages in the entire country, and which was estimated to be worth only $200 million at some point. And now their water is being cut off due to the drought. (Hat tip: Pension Tsunami.)
  • Speaking of the drought, California is running on empty:

    We suffer in California from a particular form of progressive immorality predicated on insular selfishness. The water supplies of Los Angeles and the Bay Area are still for a year longer in good shape, despite the four-year drought. Neither area is self-sufficient in water; their aquifers are marginal and only supply a fraction of their daily needs. Instead these megalopolises depend on intricate and expensive water transfer systems — from Northern California, from the Sierra Nevada Mountains, and from the Colorado River — that bring water and life to quite unnatural habitats and thereby allow a MGM or Facebook to thrive in an arid landscape that otherwise would not support such commerce and population. Without them, Atherton would look like Porterville.

    Quiet engineers in the shadows make it all work; the loud activists in the media seek to make it unwind. These transfers have sterling legal authority and first claims on mountain and northern state water. If Latinos in Lemon Cove are going without household water, Pyramid Lake on I-5 or Crystal Springs Reservoir on 280 are still full to the brim.

    Why then do those who have access to water delivered in a most unnatural way seek to curtail supplies to others? In a word, because they are either ignorant of where their own water comes from or they have not a shred of concern for others less blessed, or both. We will confirm this ethical schizophrenia should a fifth year of drought ensue. Then even the most sacrosanct rights of transferred water will not be sufficient to accommodate the San Francisco and Los Angeles basins. Mass panic and outrage will probably follow, and no one will care a bit about the delta smelt, or a few hundred salmon artificially planted into the San Joaquin River watershed, or a spotted toad that holds up construction of an urgently needed reservoir.

    The greens who pontificate about the need to return the San Joaquin watershed to its 19th-century ecosystem will become pariahs. When the taps run dry in Hillsborough and Bel-Air, very powerful people will demand water for their desert environs, which will in fact begin to return to the deserts that they always were as the thin veneer of civilization is scraped away.

    (Hat tip: Instapundit.)

  • Hey, remember how California’s are always saying “Sure, Texas has lower taxes, lower cost of living, and better job growth, but California’s awesomely moderate weather beats Texas’ summer heat hands down!”?

    Yeah, not so much this year… (Hat tip: Ace of Spades HQ.)

  • California legislature votes to reinstate Kelo-like seizure of private property for private development use. Shamefully, 12 Republicans joined Democrats to vote for eminent domain abuse.
  • “Pension payments are starving basic city services.”
  • A Marin County grand jury wants more openness about government employee salaries and pensions. (Hat tip: Pension Tsunami.)
  • Of the four “minority majority” states, minorities in Texas are doing best.
  • California farm workers are suing to get the United Farm Workers out of their lives and pockets.
  • Among cities with high prices and stagnant wage growth, California has the nine worst, including Los Angeles, San Francisco, Santa Clara and San Jose.
  • Because California homes just didn’t cost enough already, new energy regulations are going to make them even more expensive.
  • The San Bernardino sheriff’s department has used a “stingray” to capture cell phone communication over 300 times in the past year or so without a warrant.
  • Apple continues expanding in Austin.
  • Texas is one of the states General Electric might leave Connecticut for.
  • California-based retailer Anna’s Linens files for Chapter 11.
  • California holding company Premier Ventures uses yet another bankruptcy filing to prevent an Akron, Ohio mall from being sold at auction. (Previously.)
  • Not news: California bankruptcy filing. Still not news: From a fraud judgment. News: For a lawsuit first filed in 1989.
  • Greece Caves

    Monday, June 22nd, 2015

    At least that’s what Zero Hedge has taken away from the various news stories on Greece’s latest proposal to beat the looming end-of-month deadline for making the payment they owe to the IMF.

    From the troika’s perspective, breaking Greece and forcing PM Alexis Tsipras to concede to pension cuts and a VAT hike is paramount, and not necessarily because anyone believes these measures will put the perpetually indebted periphery country on a sustainable fiscal path, but because of the message such concessions would send to Syriza sympathizers in Spain and Portugal. In short, the troika cannot set a precedent of allowing debtor nations to obtain austerity concessions by threatening to expose the euro as dissoluble.

    But the Eurocrats are claiming there’s still work to do.

    The pension changes are evidently types of “austerity” that let Greek PM Alexis Tsipras claim he didn’t actually cut pensions:

    Under the proposal submitted to eurozone ministers, the Greek government would raise just under €2.7 billion in extra revenue this year, followed by a further €5.2 billion in 2016.

    The blueprint, which will now be assessed by Greece’s creditors ahead of a second meeting of finance ministers on Wednesday and an EU leader’s summit the following day, includes concessions that go far beyond previous offers made by the left-wing Syriza government.

    Greece’s main concession is on pensions, long regarded as the major sticking point by its creditors, where it has unveiled plans to make almost €2.5 billion in savings.

    Having vowed not to reduce state pensions during his successful election campaign in January, Tsipras’ government has proposed to raise €645 million over the next two years by increasing health contributions to 5 percent. Other savings will come from restricting early retirement and increasing state pension contributions.

    Greece has also agreed to raise the retirement age to 67 by 2025.

    The pension savings are equivalent to 0.37 percent and 1.05 percent of GDP in 2015 and 2016, moving closer to, but still below the 1 percent each year demanded by the eurozone.

    On top of these savings, a regime of government payments to the poorest pensioners – known as Ekas – will be replaced in 2020. Public spending on pensions currently amounts to 16 percent of Greece’s GDP.

    The fact that more than 2/3rds of the savings are back-loaded into 2016 suggests we’ll end up doing this same dance sometime next year. Greece may have (finally) agreed to enough reform that, if implemented (a big if) would at least keep it afloat until next year. But until they stop racking up debt to keep funding their welfare state, more economic pain inevitably lies ahead…

    Greece Introduces Capital Controls

    Monday, June 22nd, 2015

    The economic collapse of Greece is unfolding pretty much exactly as observers predicted it would: “Greek banks have imposed an unofficial ceiling of €3,000 on walk-in withdrawals, the commercial banker added.”

    More capital controls are most likely coming, especially since bank runs have meant that Greek banks “will soon exhaust eligible assets they can pledge to the Bank of Greece for cash under the Emergency Liquidity Assistance (ELA) scheme.” The ECB backstopping of Greeek banks has been extended for today only. And today’s Eurozone talks have already broken off.

    Despite that, Greece’s feckless ruling Syriza Party is still insisting on ignoring reality: “I repeat: The deal will either be compatible with the basic lines of Syriza’s election manifesto, or there will be no deal.”

    Translation: “Europe must continue to throw money down the rat-hole of our bankrupt welfare state, or else!” What the “or else” might be when the country is already too bankrupt to pay pensions and keeps the lights on remains a mystery. The problem with holding a gun to your own head is that eventually someone will call your bluff.

    Greece is finally finished with the “gradually” phase of their bankruptcy and is now in the “suddenly” phase…

    Bank Runs Start in Greece

    Saturday, June 20th, 2015

    The bank runs have started in Greece. Why the Greek peeople would even keep their money in banks, having the example of Cyprus’s bank “bail-ins” before them, would keep any but the most minimal amout of cash in a Greek bank is a mystery.

    Given that Greek banks are insolvent without the European Central Bank’s backstop, one wonders why Greek PM Alexis Tsipras thinks he can continue to bluff the EU caving on reform demands. It’s tough to bluff when you have no hole cards…

    There’s talk of a “new” Greek proposal, which could mean Tsipras and Syriza are finally coming to their senses and giving in to EU demands, or it could be just another smokescreen. I mean, we’ve only seen about a dozen “new” Greek proposals this year that didn’t offer meaningful reform. What’s one more?

    Stay tuned…