When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Wednesday, November 30, 2011

Tuesday, November 29, 2011

Why a Stimulating Job Can Improve Your IQ (video)

Why a Stimulating Job Can Improve Your IQ - Many people think of IQ as a genetic trait like eye color, something you're born with and stuck with for life. But . . . evidence is mounting that IQ can change over an individual's lifetime. WSJ.com


Germany: Going Down with the Ship

What's happening in Europe is becoming of epic proportions--and I'm sure will be studied by economists for years to come--

Germany told to act to save Europe - FT.com: ". . . the Organisation for Economic Co-operation and Development called on European leaders to provide “credible and large enough firepower” to halt the sell-off in the eurozone sovereign debt market, or risk a severe recession. The OECD’s comments came as the organisation slashed its half-yearly forecasts for growth in the world’s richest countries, warning that economic activity in Europe would grind to a near-halt. Yet their calls were met by a stubborn insistence in Berlin that only EU treaty change to forge a “stability union” in the eurozone would revive confidence in the markets.  Wolfgang Schäuble, German finance minister, rejected calls for the European Central Bank to act as a “lender of last resort” in the eurozone . . . "


Monday, November 28, 2011

The Rich get Richer (and Bigger) thanks to the Fed

I first wrote about this in August--http://www.johnmpoole.com/2011/08/federal-reserve-has-some-explaining-to.html . Now Bloomberg is reporting even more--

Secret Fed Loans Gave Banks Undisclosed $13B - Bloomberg: "The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. . . . .details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."


Sunday, November 27, 2011

Saving a dinosaur, part 2: Overhauling the Post Office for the 21st Century

Saving a Dinosaur, part 1 was here--now for part 2 (courtesy a New York Times editorial):

Overhauling the Post Office for the 21st Century - NYTimes.com: "A reasonable request from management to end Saturday mail deliveries would net savings of $3 billion a year for the service, which reported a loss of $5.1 billion in the fiscal year just ended. This gets approval in the House’s bill, but not the Senate’s. On the other hand, the Senate measure offers creative ways to finance buyouts of 100,000 workers and ease health care costs, while a draconian House provision threatens to transfer power to a control board if the service runs deficits for more than two years.

"Congress needs to produce a bill that allows the Saturday shutdown as well as the closure of up to 3,700 local post offices where service would be continued through automated outlets at neighborhood businesses. First-class use is plummeting, and annual revenues have dropped from $75 billion to $65 billion in the last four years. Postmaster General Patrick Donahoe is pleading for authority to make $20 billion in cuts by 2015 to let the service fairly compete against private mail and delivery companies."


Saturday, November 26, 2011

Saving a dinosaur: the US Postal Service (video)

The United States Postal Service is bleeding money - $10 billion just last year. It’s also bleeding business – mail volume is down 20% since 2006 and not coming back. Just as trains replaced the pony express, the Internet has become the modern Postal Service’s greatest competition. That’s not going to change.
A better USPS, however, is possible. . . . the Issa-Ross Postal Reform Act. . . . Americans deserve an efficient USPS that delivers for decades. But misguided action - or none at all - could saddle taxpayers with a multi-billion dollar bailout for the Postal Service. The clock is ticking…

What is the Postal Crisis already costing American taxpayers? At the end of Fiscal Year 2011 - October 1, 2011 at midnight - the Postal Service had exposed taxpayers to a potential loss of $15.8 billion. The FY '11 exposure is comprised of the $15 billion borrowing limit reached by the Postal Service during the fiscal year and $800 million in Federal Employee Retirement System (FERS) payments that the Postal Service chose to not pay. $15.8 billion is the starting point for the running tally of postal losses to which American taxpayers are exposed.

Over FY '12, the Postal Service is set to expose American taxpayers to an additional $14.09 billion in losses: $5.5 billion in deferred FY '11 retiree health care payments, $5.6 billion in FY '12 retiree health care payments, and $2.99 billion in FY '12 FERS payments that they may be unable to pay. Spreading these potential losses evenly over FY '12 means that every second taxpayer exposure to Postal Service losses increases by $445.57.



Friday, November 25, 2011

Yankeegroup: Facebook Falls Low on Consumers' List of Favorable Brands

Facebook Falls Low on Consumers' List of Favorable Brands - Mobile Now: snapshot from Yankeegroup--percentage of consumers having favorable impressions of brands:

Google US: 77% Europe: 75%
Sony US: 69% Europe: 69%
Disney US: 68% Europe: 52%
Apple US: 66% Europe: 58%
Amazon US: 63% Europe: 59%
Facebook US: 51% Europe: 50%

for more information, go to Yankeegroup.

Pick Your Poison: ECB as lender of last resort

Pick Your Poison: Is it going to be ECB as lender of last resort or a case of coulda, shoulda, woulda?--

Dutch back ECB as 'last resort'
Financial Times
By Matt Steinglass in Amsterdam Jan Kees de Jager, the Dutch finance minister, endorsed a more active role for the European Central Bank “as a last resort” to contain the eurozone debt crisis ahead of a meeting in Berlin with his counterparts from ...
ECB cannot be lender of last resort: Gonzalez-Paramo
OXFORD, England (Reuters) - The ECB cannot be the lender of last resort for troubled euro zone states, one of its top policymakers said on Thursday, underscoring the bank's continued resistance to fierce pressure for it to take a more active role in ...

Thursday, November 24, 2011

Eurocontagion: caveat emptor!

The Apocalypse Trade - NYTimes.com: ". . . German bonds are now being priced as a risky asset — what the FT calls the “apocalypse trade“. The interest rate on bunds, at 2.21% as I write this, is still very low by historical standards. But it’s above the rate on UK bonds (2.17%) and way above the rate on US bonds (1.88%). The way to see this is that the market is in effect pricing in a real possibility of eurozone collapse. . . ." Paul Krugman in the New York Times

How safe are the euros in your pocket or bank account?

Debt crisis: as it happened November 24, 2011 - Telegraph: "The FTSE 100 loses £107 billion during nine straight days of losses, as a meeting between French, German and Italian leaders offers little progress on resolving eurozone debt crisis."


Pimco's El-Erian Calls U.S. Economy `Terrifying' (video)

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Pimco's El-Erian Calls U.S. Economy `Terrifying' and Europe? 'There are no easy solutions.'

Wednesday, November 23, 2011

Eurozone: the confidence fairy’s not coming

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Brief Eurozone status update: “Even with unlimited political will, this would be a recipe for prolonged recession and stagnation in Europe. With political capital limited in practice — watch Spain’s new government quickly become just as unpopular as the old one! — it’s a recipe for catastrophe. No wonder eurocrats placed their faith in the confidence fairy. But she’s not coming. It would take a radical reversal of course to save this thing. And so far I see no willingness to face up to that necessity.” -- Paul Krugman in the New York Times

Tuesday, November 22, 2011

Why the U.S. desperately needs tax reform

Buffett-Ducking Billionaires Avoid Reporting Cash Gains to IRS - Business - MiamiHerald.com: "The rate at which the 400 U.S. taxpayers with the highest adjusted gross income actually paid federal income taxes --their so-called effective tax rate -- fell to about 18 percent in 2008 from almost 30 percent in 1995, IRS data show. That’s the tip of the iceberg, since much of their wealth never converts into income on a tax return, McCaffery said."

Our current tax system is unfair and highly regressive. As Mort Zuckerman has said, "Our current tax system is an abomination." Unfortunately there is no leadership from the White House nor Congress on this issue. What we need is comprehensive tax and entitlement reform.  Herman Cain, for all his faults, is the sole candidate running who has been willing to propose something (albeit imperfect) along the lines of comprehensive tax reform. In addition, the current system works hardships on the real "job creators"--self-employed persons making up to $100,000 a year who must pay income tax plus a regressive 15.3% "self-employment" tax rate on ALL of their income.

My proposal--it's simple:
a) Set the tax rate--this is the rate of tax on net income (wages, interest, dividends, capital gains, etc.) an individual or corporation ("taxpayer") earns annually above one million dollars (in other words, the rate of tax Warren Buffett would pay on all his income over the first one million annually)--my suggestion is 30% (note that the current highest marginal rate is 35%).

b) 50% of the first $100,000 in income of every taxpayer would be exempt from taxation (lowering the effective rate to 15% on the first $100,000 earned annually by every American taxpayer--individual or corporation).

c) 25% of income over $100,000 up to $1,000,000 would be exempt from taxation (resulting in an effective tax rate of 22.5% on all income over $100,000 up to $1,000,000).

d) Eliminate ALL payroll taxes (including "self-employment" taxes). Everyone would be covered by Social Security (including public employees currently exempt)--this would eliminate (eventually) the need for all public employee pensions (which are bankrupting the states, local governments, and agencies such as the Post Office). Institute "means testing" and the other reforms to entitlements recommended by Simpson Bowles. Allow everyone to have a "tax-exempt" retirement account (merging the 401k and IRAs) into retirement accounts which would be insured by the federal government and could only be held at a federally regulated institution (such as a FDIC bank or federally regulated broker).

e) Eliminate ALL loopholes and personal deductions except allow: 1) charitable donations (capped at 20% of taxable income); 2) interest payment deductions (capped at 20% of income--this gives relief to homeowners and debtors); and 3) deductions for expenses incurred as a result of business or employment.  Losses could be "carried-forward" for up to five years. Set personal and dependent exemptions of $4000 per each individual/dependent with a cap of $20,000 per household. Federal taxes would be "territorial"--only on income earned in the U.S.--but schemes to unfairly shift income overseas would be disallowed and subject to penalty.

Historically (post-war average) taxes have raised about 18.5% of GDP (federal revenues divided by gross domestic product). With our aging population and need to re-invest in infrastructure, education, etc., federal revenues probably need to be closer to 20% of GDP going forward. I do not have the access to data to "crunch" the numbers above and determine what per cent of GDP this proposal would generate. However, the "result" from that analysis could be adjusted by merely increasing or decreasing the tax rate in a) above. One problem has been that the current tax system (unfair as it is) only produced revenues of 14.9% of GDP in both 2009 and 2010 which increased our ongoing federal deficit.

Should federal spending be cut and federal entitlements reformed? Yes. But federal revenues at only 14.9% of GDP are too low, and the evidence suggests that the high income corporations and individuals are not (generally speaking), paying their "fair share" (again Warren Buffett is right.)  General Electric not paying taxes is not right.  Warren Buffett paying a smaller percentage of his income in taxes than his secretary is not right. In addition, as a long-range goal, our annual federal deficit should not exceed 3% of GDP.

Something has got to give, and we really don't have the time to continue to delay.


Monday, November 21, 2011

When Government is the Problem, Entrepreneurs will find another way

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Greg Siskind on Immigration Law and Policy: Entrepreneurs Sailing ...
By Greg Siskind
If this doesn't get the attention of those who think our business immigration system is functioning well, I don't know what will. A new venture in Silicon Valley is planning to set up a high tech incubator facility on a ship that will sit in international ...
Greg Siskind on Immigration Law...

Saturday, November 19, 2011

Yes Fiscal Policy Matters, but What Kind of Stimulus?

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"The one thing that has disillusioned me is the discussion of fiscal policy. Policymakers and far too many economists seem to be arguing from ideology rather than evidence. As I have described this evening, the evidence is stronger than it has ever been that fiscal policy matters—that fiscal stimulus helps the economy add jobs, and that reducing the budget deficit lowers growth at least in the near term. And yet, this evidence does not seem to be getting through to the legislative process."--Christina D. Romer, November 7, 2011

Fiscal stimulus, yes, but of what kind?  Federal spending that is wasteful and encourages an increasing dependency on the federal government by state and local governments, as well as individuals? Tax cuts at a time when the continuing federal deficits are threatening the long-term future of the nation? Federal spending whose objective is to create more public union jobs (federal, state, or local) when we can't afford the public union jobs we already have?

The hard truth is the only stimulus we can afford is investment in infrastructure.*  This is federal spending with a real return--in terms of economic returns, increase in employment (mostly private employment--both union and non-union jobs), can be prioritized and allocated, and doesn't lead to long-term dependency on the "federal dole."

*Warren Buffett: “in terms of stimulus, infrastructure is a very, very logical place to spend real money. I mean, if you decide you're going to run a government deficit and large one and to act as a stimulus and you've got the kind of needs we have in this country in terms of all kinds of infrastructure...” (CNBC interview, Nov. 14, 2011)

Washington, are you listening?


Money Quote of the Week

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"Commenters have been accusing me of crying wolf, because I’ve been warning about Eurogeddon for several weeks and the euro hasn’t collapsed yet. Geez. Eurozone capital markets have basically frozen; nobody is buying debt either of many governments or of many banks. This doesn’t bring the roof down overnight, but it will if this goes on for months." --Paul Krugman, New York Times November 19, 2011


Angela Merkel to Europe: "You vill obey!"

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Europe - Debt Crisis Shows Angela Merkel Is the Boss - CNBC: "Groucho Marx once said that money frees you from doing things you dislike. “Since I dislike doing nearly everything, money is handy,” said the Marx Brother. Having spent billions of euros they didn’t have, governments across Europe are now finding out the hard way that without money they have to accept things that they would rather not be doing—namely, taking orders from Angela Merkel in Berlin . . ."


Friday, November 18, 2011

Google Stands Up for Internet Freedom

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Google Stands Up for Internet Freedom - On Wednesday morning, the US House Judiciary Committee met to discuss bill H.R. 3261, better known as Rep. Lamar Smith’s Stop Online Piracy Act (SOPA). While many have voiced  concern for the act’s implications, just one SOPA opponent was invited to speak at the Congressional hearing: Katherine Oyama, Copyright Counsel for Google, warned that the bill is tantamount to censorship -- “Google has grave concerns about SOPA in its current form, and we are not alone. The technology community, venture capitalists, academia, human rights groups, computer security experts, and others have all expressed their concerns.” http://judiciary.house.gov/hearings/pdf/Oyama%2011162011.pdf


Wednesday, November 16, 2011

The 2 things you need to know about Newt Gingrich and Freddie Mac

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PIMCO's Mohamed El-Erian: politicians need to recognize we are in structural changes (not cyclical)

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Nov. 14 (Bloomberg) -- Pacific Investment Management Co. Co-Chief Investment Officer Bill Gross and Chief Executive Officer Mohamed El-Erian, talk about the European sovereign-debt crisis and its impact on the U.S. economy and the role of Germany in resolving the turmoil. Speaking with Tom Keene on Bloomberg Television's "Surveillance Midday," they also discuss Treasury yields. (Source: Bloomberg)
PIMCO's Mohamed El-Erian said (8:16) politicians need to realize we are in a period of fundamental, structural changes (not cyclical)


Monday, November 14, 2011

Warren Buffett on the deficit: spending has to come down; we overpromised; you deal with finite resources

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CNBC  Nov. 14, 2011 -- Warren Buffett on reducing the deficit  http://goo.gl/5ub5O
spending is going to have to come down. we are a very, very, very rich family. we have $120,000 of gdp per household in this country. it's fabulous. it's six times when i was born. even a rich family can promise too much. in the end, you deal with finite resources. and it's easy to promise. and can you overpromise. and we overpromised. that's why i feel terrible, frankly, for people that will find promises modified and/or broken.


Warren Buffett: Romney is strongest GOP candidate

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On CNBC this morning Warren Buffett was asked who he thought was the strongest GOP candidate against President Barack Obama. Answer: Mitt Romney. He also answered that if he had to vote for President and could only choose among the GOP candidates, he would vote for Mitt Romney.
http://video.cnbc.com/gallery/?video=3000057152  (also contains complete transcript)

Sunday, November 13, 2011

Romney leads--Republicans coming to their senses

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GOP Voters are apparently coming to their senses: newest poll numbers from NBCNews/WallStreetJournal (Nov. 10-12):
Romney 32%
Cain 27%
Gingrich 22%
everyone else less than 10%

Full report here


B&N asks DOJ to investigate Microsoft

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B&N asks DOJ to investigate Microsoft - ZDNet: ""Microsoft is attempting to raise its rivals' costs in order to drive out competition and deter innovation in mobile devices," Barnes & Noble lawyer Peter T. Barbur wrote in an October 17 letter to Gene I. Kimmelman, the Justice Department's chief counsel for competition policy in its antitrust division. "Microsoft's conduct poses serious antitrust concerns and warrants further exploration by the Department of Justice."

Barnes & Noble's Nook e-readers run on Google's Android mobile operating system, which has been under attack from Microsoft patent lawyers. Microsoft has convinced several device makers--including HTC, Wistron, and Compal--to pay it licensing fees for every device they sell that uses Android.

Barnes & Noble refused to pay the fee, leading Microsoft to sue it in March, accusing the bookseller of patent infringement. In its response a month later, Barnes & Noble countered that Microsoft was misusing patent law to slow down rivals."

Microsoft might want to "re-think" its policy of extor--err--demanding licensing fees on Android. Barnes and Noble is more than just another technology company making an Android device--B&N has more brick-and-mortar locations (with real employees) in more U.S. Congressional Districts than Microsoft does. Also B&N, unlike that "other" Seattle company in the book business, willingly pays state and local taxes in all locations where it sells books.


Friday, November 11, 2011

The euro, it turns out, was not a good idea

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These two excerpts say it all:
Roubini: Italy Is Doomed And Will Exit EMU Unless ECB, Germany Step In - Forbes: "The only way to stop the upcoming disaster, according to Roubini, is quantitative easing. The ECB would have to drop interest rates to zero, effectively helping to depreciate the currency, and begin massively buying up Italian and peripheral debt. The euro would fall to parity with the dollar, Roubini says, and Germany and other “core” countries would have to implement fiscal stimulus plans to compensate for the fall in aggregate demand caused by austerity in peripheral nations."
Krugman: The sad irony here is that the euro is, in reality, essentially an Italian creation. If you were part of the dialogue in the late 80s and early 90s, it became clear that the euro was best understood as a plot by Italian technocrats to get themselves German central bankers. This was not, it turns out, a good idea.   http://krugman.blogs.nytimes.com/2011/11/11/original-original-sin/

Thursday, November 10, 2011

Cuba Today: The Struggle Continues

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Defiant Cuban dissident Guido Sigler arrives in Miami - Miami-Dade - MiamiHerald.com: "Sigler, along with other well-known dissidents like Oscar Elías Biscet, decided to continue his political activism in Cuba while other political prisoners who had been released departed for Spain. He decided to leave for the United States in the face of continued hostility from the government and police."

3 Cubans Wash Ashore in Miami, 4 Missing After Boat Sinks | NBC Miami: "Lopez told an NBC Miami reporter in Spanish she'd come to the U.S. because she "wanted a better life" and that "things were ugly in Cuba.""


Debate wrap-up and what most media missed

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You can run the video above for the media wrap-up of last night's debate. The one thing most of the media is not talking about was Mitt Romney's refusal to be baited into getting into the "Cain/women issue"--once Mitt curtly responded by referencing the answer Cain had just given, the issue died (at least for the evening) and was not raised again--

The moderator's question about the allegations drew boos from the audience at the debate, which was focused on economic issues. Romney was cheered when he declined to answer when asked if he would hire an executive facing similar charges. "Look, Herman Cain is the person to respond to these questions. He just did," Romney said. "The people in this room and across the country can make their own assessment." http://www.reuters.com/article/2011/11/10/us-usa-campaign-cain-idUSTRE7A04CW20111110?feedType=RSS&feedName=topNews&rpc=71

As for Rick Perry's gaffe, it's really no surprise he's self-destructing.

Wednesday, November 9, 2011

Now for the Italian Job

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Italy debt crisis: what the experts said - Telegraph
"Italian bonds rise past 'unsustainable' 7pc barrier and there are fears the contagion is spreading to Spain and France, as the ECB reportedly buys Italy's debt and Germany is under pressure to act to save monetary union."

Angela Merkel, German Chancellor: Speaking at a conference in Berlin, Merkel said the situation in Europe had become "unpleasant".   Understatement of the year.

David Cameron, British Prime Minister: “If you don’t have credibility about your plans to deal with your debts and deal with your deficits . . . they won’t lend you any money.” No kidding!

Nick Clegg, Britain's Deputy Prime Minister:". . .Today I do not intend to provide further commentary on these specific events. For one thing, it would probably be out of date by the time I sat down.”  Better late than never?

Alistair Darling, former British Chancellor: “I despair of the way in which EU leaders are constantly behind events. I do not think enough people realise how serious this crisis is, and how hard it is going to hit us. This is far worse than the banking crisis of 2008 in its seriousness and, if it is not solved by Christmas, I think the whole of the euro will break up.”  Christmas?

Olli Rehn, European Commissioner for Economic and Financial Affairs: "European officials are concerned about widening Italian bond yield spreads. We are following it very closely, but I would not want to ... state that any particular level is traumatic."  Denial is a river . . . in Europe.

Jeremy Cook, Chief Economist at foreign exchange company, World First: “The markets continue to lurch from one problem to the next and we have now kicked the can as far down the road as is possible. Unfortunately there is very little more that can be done to stop this crisis. The only possible mechanism for the eurozone to haul itself out of this mess is to let the ECB print euros and print them like their life depends on it, because - and I do not mean to sound flippant - the euro’s life does depend on it.”  Unfortunately, the Germans will never allow it (printing euros).


Tuesday, November 8, 2011

ZDNet: Chrome is the best web browser

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A little tech this morning--
Which of the big five Web Browsers is the Best? (Review) | ZDNet: " if you’re open to a new browser, or you just want the best of the best, Chrome is the clear winner."

I agree, Chrome is the best--and I have used IE, Opera, and Firefox on my Windows 7 computer. 


The Giant of Redmond Is Not Sleeping--Why Microsoft Embraced Gaming

It's easy to look past Microsoft in the afterglow of Steve Jobs, the ever-evolving Google, the pervasive Facebook, and Amazon's broadening reach, yet, the giant of Redmond is not sleeping--
Why Microsoft Embraced Gaming - Technology ReviewIn 2000, Microsoft looked like an unlikely competitor to Sony and Nintendo, which had built console gaming into a billion-dollar industry.--

""Microsoft saw the writing on the wall," says David Dennis, a spokesman for Xbox. "It wanted to have a beachhead in the living room." Ten years later, the Xbox 360 is the best-selling video-game system of its generation in the United States, where more people plug it into their TVs than either Sony's PlayStation 3 or Nintendo's Wii, and it's making Microsoft a contender in the fierce battle to serve up entertainment on demand, especially from Internet video services. Analyst firm BCC Research estimates that $144 billion was spent on "digital living room" devices worldwide in 2010, and that this figure will grow to $226 billion by 2015. . . ."

"Of course, Microsoft isn't alone in combining television, movies, music, and Web content. Cable and satellite providers, television manufacturers, set-top box makers such as Roku, and Apple and Google are all now competing for a share of the digital living-room market. But thanks to the Xbox 360's start as a video-game console, Microsoft's 57 million console owners and 35 million Xbox Live members worldwide give the company a large established base of users to build on. Meanwhile, Apple and Google have struggled to sell their narrowly focused TV products . . . ."

Monday, November 7, 2011

Italy: end game time

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Unbelievably, we are quickly moving into end game time for Italy—best  report on the situation comes from The Telegraph’s Ambrose Evans-Pritchard (excerpts below).
Europe's rescue fiasco leaves Italy defenceless - Telegraph: As of late Friday, the yield spread on Italian 10-year bonds over German Bunds was a post-EMU record of 458 basis points. This is dangerously close to the point where cascade-selling begins and matters spiral out of control. . . .The ECB’s hands are tied. A German veto and EU treaty constraints stop it intervening with overwhelming force as a genuine lender of last resort.  . . .This lack of a back-stop guarantor is an unforgivable failing in the institutional structure of monetary union. As Berkeley professor Brad DeLong argues in a new paper, such “utter disregard for financial stability – much less for the welfare of the workers and businesses that make up the economy – is a radical departure from the central-banking tradition.” . . . The market has already cast its verdict . . . The(EFSF) fund suffered a failed auction last week, cutting the issue from €5bn to €3bn on lack of demand. . . . Gary Jenkins from Evolution Securities said the “frightening” development is that the EFSF is itself being shut out of the capital markets. . . . Italy’s travails have little to do with the parallel drama in Greece. This is not contagion . . . its economy is plunging back into deep recession, the predicable outcome of the EU’s 1930s fiscal and monetary contraction policies. . . . A report by Italian consultants REF Ricerche warns that Italy will remain trapped in recession through 2012 and 2013. The slump itself is causing fiscal slippage, not lack of budget rigour. “What is sapping the credibility of Italy’s public accounts over the medium term is lack of growth prospects,” it said. Indeed, yet Angela Merkel and Nicolas Sarkozy continue to order Italy to undertake further fiscal belt-tightening into the accelerating downturn, even though it is one of the few countries in the OECD club with a primary budget surplus and even though its combined public and private debt is just 250pc of GDP – well below that of Holland, France, the UK, the US, or Japan. The EU policy dictates have become unhinged.  . . .This is the elemental point. Italy is in the wrong currency. It should not be in Germany’s monetary union at all. . . .


Sunday, November 6, 2011

Denial is a river . . . in Europe, part 2

Previously I posted Denial is a river . . . in Europe (part 1); now for part 2:

Europe’s Two Years of Denials Trapped Greece - NYTimes.com: "THE warning was clear: Greece was spiraling out of control.
But the alarm, sounded in mid-2009, in a draft report from the International Monetary Fund, never reached the outside world.
Greek officials saw the draft and complained to the I.M.F. So the final report, while critical, played down the risks that Athens might one day default, with disastrous consequences for all of Europe.

What is so remarkable about this episode is that it wasn’t so remarkable at all. The reversal at the I.M.F. was just one small piece of a broad pattern of denial that helped push Greece to the brink and now threatens to pull apart the euro. Politicians, policy makers, bankers — all underestimated dangers that seem clear enough in hindsight. Time and again over the last two years, many of those in charge offered solutions that, rather than fix the problems in Greece, simply let them fester. . . . "


To the 'Occupy London Stock Exchange' protesters, camped outside St. Paul's: "In the name of God, go!"

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The Occupy protest at St Paul's Cathedral - a parable of our times - Telegraph: "The Blitz only closed St Paul’s for four days. By contrast, the Occupy London Stock Exchange protesters, camped outside Wren’s masterpiece, managed to put it out of business for a week. It has been a debacle . . . . what of the protesters themselves in this sorry story? . . . refusing to leave when asked. . . yet another blow has been struck against Christian worshippers. In this case, “anarchist” protesters threatened the freedom to worship – one of our most basic and hard-fought-for rights – by forcing the cathedral authorities to halt public access. . . .  Yet the very fact that they are prepared to continue their own protest at the expense of Christian worship in one of our greatest cathedrals surely gives the lie to the protesters’ claim that they represent 99 per cent of society. Furthermore, their determination to engage in an open-ended campaign in the churchyard is opportunistic and cynical. If their protest is truly against the tax evaders of the City and reckless banking practices, why are they not protesting at Canary Wharf, or on the thresholds of the banks themselves? . . .And what was the cause anyway? “This is what democracy looks like,” claimed Occupy’s opening statement. It explained that it was engaged in a process of public assemblies in a democratic process. But it is making up its demands as it goes along – truly rebels without a cause."

Mathew Hulbert: It's Time for the Occupy St Paul's Protesters to go Home"I believe the Occupy protesters outside St Paul's Cathedral in London have now made their point and should go home and allow the Cathedral to be able to function normally again. I have quite a bit of sympathy for their cause but, ultimately, there comes a time when such protests wear a little then and start to lose public support. I think that time has now come and that the protesters should return to the beds a number of them have been returning to overnight anyway (rather than staying in the tents) on a permanent basis. . . I've heard various people taking part being interviewed on TV and radio and very few of them have been able to clearly articulate an over-arching theme about what they'd actually like to see changed in the way we run our country and society. All you get are the same whines about capitalism you find at most far-leftwing rallies."

Or as was so deftly said in another time, in another context:
It is high time . . . to put an end to your sitting in this place, which you have dishonored by your contempt of all virtue, and defiled . . .  ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches . . .  Is there a single virtue now remaining amongst you? . . . Ye have no more religion than my horse; . . . Is there a man amongst you that has the least care for the good of the Commonwealth? Ye sordid prostitutes have you not defil'd this sacred place, . . . Ye are grown intolerably odious to the whole nation; you were deputed here by the people to get grievances redress'd, are yourselves gone! So! . . . . In the name of God, go!
(with due respects to Oliver Cromwell’s dissolution of the Long Parliament, House of Commons, 20 April 1653)


Friday, November 4, 2011

Denial is a river . . . in Europe

EUobserver.com / Economic Affairs / ECB will not become bank of last resort, Draghi says: ""What makes you think that to become the lender of last resort for governments is actually the thing that you need to keep the eurozone together?" he (European Central Bank President Mario Draghi) said in response to a question on the issue following a meeting of the eurozone bank's governing council. "No I don't think that is in the remit of the ECB. The remit of the ECB is maintaining price stability over the medium term," he added." http://euobserver.com/19/114163

Paul Krugman (Nobel prize-winning economist) in the New York Times:  "I’ve been charting this trainwreck for a couple of years . . . Let’s just say that the euro was an inherently flawed idea that can work only given a strong European economy and a significant degree of inflation, plus open-ended credit to sovereigns facing speculative attack. Yet European elites embraced the notion of economics as morality play, imposing across-the-board austerity, tightening money despite low underlying inflation, and have been too concerned with punishing sinners to notice that everything was going to blow apart without an effective lender of last resort. The question I’m trying to answer right now is how the final act will be played. . . ."


Wednesday, November 2, 2011

David Cameron: "There is a global storm in the world economy today" (video)

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David Cameron: "There is a global storm in the world economy today and it is in our interest to help confront that global storm, but it is also in our interest to keep the British economy safe."

The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects