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I Read the News Today, Oh Boy

In the financial world, no news is good news.  By that measure, boy are things bad.

That’s not to say it’s the end of financial life as we know it, but reading the news out of Europe you might come to that conclusion.  What’s astonishing is the growing feeling that the public cannot and should not take on socialized risk any longer, meaning that banks are going to have to fend for themselves.  The same medicine appears to be popular for nations that have run up huge tabs.

This is no longer about Occupy Wall Street or even Occupy Main Street.  This is turning into a worldwide rebellion.

Of all the news today the most important is Greek Prime Minister Papandreou’s announcement that the brokered deal made up of a 50% default with a 50% bailout of Greek debt would be put up to a referendum.  This deal is extremely unpopular at home because it also requires serious belt tightening as Greece moves towards a balanced budget.  While most of Europe was talking about how to rescue Greece almost no one got around to asking the Greeks if they even want to be “rescued” in the first place.  Papandreou, a wily old politician, apparently decided he was not going to shove this down his nation’s throat – probably more to save his own hide than out of any noble instinct.  The result is even more delay for the years-long crisis and rising chaos in Greece itself as the government first has to survive parliamentary procedures.

That’s bad enough as it stands.  But the inability to solve the Greek situation has raised questions about what will be done with Italy, a problem on the order of €3.5 trillion as a worst-case.  Wanna talk about “too big to fail”?

The G20, or 20 largest economies, are meeting in Cannes and this will be on the top of the agenda. Europe will probably ask the US and the developing world to pitch in.  Yes, there is a good chance that Brasil might help bail out Europe.  That’s how strange it’s gotten.

Caught up in all this is MF Global, a horribly named investment house gone horribly wrong.  They bought up a lot of Euro debt that looked like it might default very cheap, a play that would have paid off if the Euro crisis had been solved with a big bailout.  It has to be the worst bet in the history of making very bad bets.   They were financed by JP Morgan, which has been remarkably public about protecting its rights in bankruptcy court.  This story has a “where the is smoke there could be fire” feel to it that could play out badly.  At the very least, we may yet get out of this story why Big Boyz like John Corzine, partner at MF Global, have been willing to throw the dice so hard for an expected bailout.  Stay tuned.

While the leadership crises of various kinds play out, there is some good news here in the US.  Jobs are being created – not at a rapid enough clip to end unemployment, but upwards of 100k per month.  We saw this same result in September and had to wonder if it was a fluke after a flat August, but the pace apparently continued in October. Leading the charge are smaller companies, which appear to be hiring faster than large ones right now.  Big companies have fewer planned layoffs through the end of the year as well, meaning that the “churn” of restructuring may be moving towards general growth.  It’s still slow, but it’s going the right direction.

But any turnaround is happening without leadership of any kind.  Politicians are stuck bailing out big institutions of various kinds while the people of this nation are getting on with the business of ending the Depression on their own.  It’s enough to make a Libertarian out of anyone.

Small companies hiring a few people to expand and keep up never make much in the way of news.  What gets the media’s attention is what happens to big companies and nations, which is to say that the news is likely to be lousy for a long time.  We got through October with remarkably little news and a few decent days on Wall Street.  November?  Not been a good one so far.  Perhaps its best to not stay tuned after all.

18 thoughts on “I Read the News Today, Oh Boy

    • Interesting theory, and it makes some sense. i was chalking it up to cowardice, but sometimes a cowardly act needs a bit of cover. 🙂 Thing is that the system has become vulnerable to so many little players (like Greece) holding everyone hostage – we can expect a lot more of this in the future.

  1. It’s totally unclear to me what happens if everything really did collapse. If everything fell apart and no one had any money wouldn’t we all be in the same boat and work it out?

    • Well, eventually we would, but all the gizmos and gadgets bought on credit would see their sales plummet, meaning that nearly everyone working retail would be out of a job. Same for restaurants. In the last Depression we didn’t have the reliance on credit that we do today so this time it could actually be a lot worse.
      Other than that, we do reach a point where default doesn’t sound so bad after all. Beats the constant crisis of the day.

    • The efforts in Europe are really heating up – it’s not just Greece that is resisting the bailouts, it’s everyone. I have to say that as much as I decry socialized risk for private profit in the US, the Europeans have been way ahead of us on this scale for a long time – and people are really sick of it.

  2. Occupy Wall Street should have started in September 1, 2008. We need a strong left to make the arguments for reform. That way we know where the center is.
    So long as Germany supports the Euro, I think they are doing fine. We don’t want a Germany that thinks it can go its own way and not help those who can be helped out. I’m proud when I see Sarkozy and Merkel standing together because Germany didn’t know how to work out its German-ness in the first half of the twentieth century, plunging the world into its expansionist chaos, which Japan copied.

    • When I was in Burghausen, Bavaria, they had “French Week”. People came over from their sister city in France and the whole town went Franch- menus were substituted, people spoke French to each other, and so on. It was fun! I asked the owner of the Hotel Post where I was staying, Herr Mitterer, about the whole event. He was very enthusiastic. So I asked about the whole EU thing, if that had a future.

      “It has to,” he told me, “We’ve seen the alternative.”

  3. There has to be some way that if a bank gets money in the form of a bailout it is taken over and everyone above manager level is 100% GONE. If it is too big to fail the bank can continue on but the people that wrecked it can still be taken out and have no benefit at all.

    • Dale, people could also go to jail and, I would think, be sued for past pay when they were running something into the ground. I don’t see any reason why the institution can remain but everyone is gone and perhaps facing serious penalties. It would make me feel a lot better about bailing out an institution.

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