08:52 – Barbara and I put together four dozen of the test tube sets yesterday while she watched golf. We would have done more, but we ran out of test tubes. Each set is half a dozen glass test tubes, each in a 30x120mm polypropylene tube with a screw cap, with half a dozen more 16x120mm polypropylene capped tubes, all in a one-quart zip-lock bag. We’ll use these in the chemistry kits, the biology kits, and (eventually) the forensics kits, so we’ll just build a bunch periodically and keep them on hand for assembling kits.
More details about the EU “shock-and-awe” campaign are becoming available, and they’re not encouraging. One of the big problems the EU has is that the current bailout fund, at €440 billion, is much too small to backstop Spanish and Italian bonds. The FANG nations are unwilling to commit to more funding because their taxpayers/voters are already near revolt. So, the EU instead plans to use the accounting trick I referred to yesterday, which is called leveraging. (Actually, it’s less an accounting trick than a massive fraud, but we’re not allowed to say that.)
Most economists agree that €440 billion is much, much too little, and that the bailout fund needs at least five times that much to present a credible backstop to Spanish and Italian debt. So, the new plan is to leverage the existing €440 billion at 20%, which magically (and fraudulently) increases the size of the bailout fund to about €2 trillion. With such a massive warchest, the EU hopes to stop runs on Spanish and Italian bonds (and banks) before they can get started. The problem is, it’s all smoke and mirrors. There’s no more money there than there ever was, and if push comes to shove that will quickly become evident. The fundamental problem is that the EU believes it can “fool” the markets. Good luck with that.
Meanwhile, it’s crunch week for Greece. The “troika” decides this week whether to approve the next portion of bailout money for Greece. All along, the troika has insisted that Greece must meet the agreed goals for spending cuts and tax increases if that payment is to be approved. Greece has not and cannot meet those goals, so if the troika stands by their ultimatum the payment will not be approved. If that happens, it’s game over for Greece, and we find out what a disorderly default looks like.
It’s extremely likely that a disorderly Greek default would be followed immediately by Spain and Italy coming under extreme pressure. Yields on their bonds, even with ECB intervention, are now nearly as high as they were before the ECB intervened, near the utterly disastrous 6% level. If Greece topples, yields on Spanish and Italian bonds will immediately skyrocket, which will require a huge bailout to avoid an immediate collapse of the euro. The EU authorities and the IMF are as aware of this as anyone, which argues that the troika will approve the next bailout payment to Greece despite the fact that Greece hasn’t come anywhere near meeting the required goals.
If that happens, Greece could choose to default anyway, and may well do so. Greeks rightly perceive that the bailout payments aren’t for the benefit of Greeks. This next €8.5 billion bailout payment, like all of the others, is simply a transfer payment via Greece of EU money to banks that hold Greek debt. The EU doesn’t care about the suffering of the Greek people or the destruction of the Greek economy and society. They believe, with justification, that Greece brought this calamity on itself. Many Greeks understand this, which doesn’t make their suffering, now and for the foreseeable future, any the less.
I told Barbara the other night that it wouldn’t surprise me if a real, hot revolution broke out in Greece and if before long we see UN peacekeeping forces deployed there. In a country the size of North Carolina and with a population of less than 11 million, there have been about 70,000 small business failures so far this year, with many more to come. The Greek middle class is well on its way to joining the ranks of the poor, with doctors, attorneys, teachers, shopkeepers, and college professors now participating in riots (which we’re supposed to call demonstrations). Greece really is a powder keg, with the burning fuze nearing the touchhole.
Too bad the Canadian troops with experience in Cyprus are all in their 50s and 60s. Though I am loathe to send in peacekeeping troops when the war is about money. They can kill each other off. Twenty-seven Canadian soldiers died trying to keep the Turks and the Greeks from each others throats over real estate, and I don’t want one more to die trying to save either over filthy lucre.
It’s about more than money. Greece is quickly devolving into a third-world country. Well, actually, it always has been, but cheap credit allowed them to spend like they were a first-world country for so long that they started to think of themselves that way.
Homelessness in Greece is skyrocketing–this in a country that prides itself on family taking care of each other–and the suicide rate has jumped dramatically. People who until recently were solidly middle class are now literally begging in the streets and eating at soup kitchens. Many Greek hospitals are unable to provide anything even resembling real medical care. Roche has started to cut off drug shipments to Greek hospitals, many of whom haven’t paid their bills in literally several years. Things are already bad in Greece–as in Great Depression-level bad–and they’re going to get a lot worse. Greek politicians literally fear for their lives (okay, that’s one good point), and I suspect any with the wherewithal have already made arrangements to flee the country before they end up hanging from lampposts.
“So, the new plan is to leverage the existing €440 billion at 20%, which magically (and fraudulently) increases the size of the bailout fund to about €2 trillion. With such a massive warchest, the EU hopes to stop runs on Spanish and Italian bonds (and banks) before they can get started. The problem is, it’s all smoke and mirrors. There’s no more money there than there ever was, and if push comes to shove that will quickly become evident”
So, the EU will borrow money on its comparatively good credit to prop up a country that has no credit. Is that what you mean by leverageing?
I say let the banks who were greedy or stupid enough to lend money to Greece burn. It’s time that they and their shareholders started taking some of the heat rather than taxpayers.
The problem with that is the problem is so big it would hit more than just banks and their shareholders. It will hit depositors.
I objected in principle to the US TARP program, but I realized that in the real world the alternative was to do something like TARP, or deal with even worse things. Like a huge bailout of the FDIC (the US government agency that insures bank deposits) or bank runs.
The problem in the US is that after TARP, we didn’t do anything to decrease the size of the big banks, and we won’t be doing it. Dodd Frank is a 2000 page monstrosity, and the only banks with legal departments big enough to comply are the too big to fail banks.
I agree, but then I thought the same thing should have happened in the US after Lehman. Rather than giving billions upon billions of taxpayer money to banks, we should have insisted that the bank shareholders stand the entire loss.
In this case, the EU bailout fund starts with €440 billion in real money, via commitments by Germany and the other solvent eurozone nations. (Actually, they have a lot less than €440 billion now, but that’s another long story.)
Everyone knows €440 billion isn’t nearly enough. So what they plan to do is leverage that €440 billion as 20% of their newly-declared assets. Instead of €440 billion, the EU bailout fund suddenly has about €2 trillion. But, of course, they really don’t. What they have is €440 billion.
The EU authorities hope that the gigantic size of this (imaginary) warchest will be sufficient to stop runs on sovereign debt and banks in Spain, Italy, and France. The EU authorities insist on treating investors as though they’re stupid, which they’re clearly not. So, when those runs commence, the bailout facility will have to honor its promises with money that it doesn’t have. Not that that’s a problem, because the ECB is an issuing bank. It can simply print as many new euros as it needs, and it will need a lot of them. But investors are perfectly aware of the implications of the ECB grossly inflating the money supply, which will end up being a self-defeating action.
What if the losses were so big that wiping out the shareholders wouldn’t cover them? Wipe out the bondholders? Are you sure the losses weren’t so large that we wouldn’t have seen bank runs? Even if we didn’t have bank runs, what would it have cost to bail out the FDIC?
Unlike most people who claim to believe in capitalism and free markets, I actually am and do. The flip side of making a profit is risking a loss. When you remove the latter, it’s no longer capitalism. Decisions have consequences. Attempting to eliminate or even reduce those consequences has consequences all its own, as those of us who didn’t already know that are now discovering.
Yes, as equity investors, shareholders lose their money first. If that’s insufficient, the bondholders lose their money. If that’s insufficient, depositors lose their money. And we shouldn’t have the FDIC to start with.
I hope our various countries we post from pay attention to the demise of Greece. But, I have little hope here in the US. Our congress can’t even pass a resolution to keep the government open. No budget in over two years. Trillions in debt and wanting to spend more. Bullshit loans to companies like Solyndra. It is going to get very bad. Even if we do “everything right”, it is going to get very bad.
“It is going to get very bad. Even if we do “everything right”, it is going to get very bad.”
Unfortunately, I agree. And we won’t do everything right – the short-term thinking is too deeply ingrained. Everybody wants to put the disaster off “just a bit longer”, until they have their bonus, or are past the elections, or whatever. The responsibility of politicians and top-level managers to take a long-term view has seemingly been completely lost.
What’s worse, is any top manager or politician who takes the long view gets fired, or at least is very unpopular. As I recall during a strike at GM in the late ’90s the CEO rejected a union proposal because it would drive the company bankrupt. So GM fired him, and replaced him with someone who promptly agreed to the union proposal. The only politician who quickly comes to mind who takes a long view of fiscal policy is Paul Ryan. He’s rewarded for coming up with the most ideas to fix things by being criticized by just about everyone in the media for pointing out the federal government is going broke if we don’t make serious changes.
On short-sightedness, it’s a bit like the “tragedy of the commons”. Each actor is optimizing his profit, but the final result is the impoverishment of all.
Norm Augustine has some things to say on this; I first heard him talk on this probably twenty years ago when he was, I think, CEO of Martin-Marietta. Here is an extract from a online version:
Turning to industrial research, many corporations are abandoning the playing field. Eighty percent of the CFO’s responding to a recent survey said they would cut R&D in order to meet the profit projections they have given “the street.”
Debacle on Wall Street
Why would any firm take such an irrational step? Consider the following incident that occurred a few years ago at the company where I was employed. Motivated by an unusually large stable of highly promising research opportunities, the company’s management conducted a briefing for Wall Street analysts to inform them of a planned increase in investment in research and the promise this would offer for the company’s future growth and profitability. At the end of the briefing by the company’s president, most members of the audience literally ran from the room and sold our firm’s stock. The company’s share price dropped by 11 percent during the next few days, about what it typically took 180,000 of us working for a year to add.
working for a year to add.
Shortly after the “Debacle on Wall Street,” as the event became known in the company’s research laboratories and executive suite, I asked one of the attendees at the briefing what had been said that was wrong. The analyst responded impatiently, “You should know that it takes 10 or 15 years for research to pay off, if it does at all. Your average shareholder owns your stock for about 18 months, doesn’t care what happens to you 10 or 15 years from now, and certainly doesn’t want to pay for it. In fact, by that time the investor will probably own one of your competitors’ shares and would be just as happy if your firm were not competitive.” The analyst then administered the coup de grace, explaining, “Our firm does not invest in companies with such short-sighted management.”
Source: http://www.allbusiness.com/economy-economic-indicators/economic-news/13454650-1.html#ixzz1Z6a3orgy
“Bullshit loans to companies like Solyndra.”
Never heard of it. I just looked at a couple of Wikipedia articles about it. I hope some people go to jail but then I’ve always been an optimist…
Solyndra’s green is the people’s.
http://www.abc.net.au/news/2011-09-26/couples-spending-36000-on-weddings/2943024
People are spending far too much on weddings. I’ve said for over a decade that couples should just elope…
I’ve never understood the wedding thing either – thankfully, neither does my wife. A quiet event with only the closest family members is far enjoyable than some sort of stressed-out, over-the-top, competition for the most outré production. Besides, just think what else a young couple could do with $36,000!
I’ve thought for years that couples should just elope…
http://www.abc.net.au/news/2011-09-26/couples-spending-36000-on-weddings/2943024
damn, double post…
I’d happily get married in jeans and a t-shirt to a sheila in jeans and a t-shirt (or a bikini)…
Friends who married in 1988 spent every weekend for months before arranging this and that. It was a nice wedding, but I don’t know why people sign up for the stress and expense.
I don’t see the criminal element in Solyndra. Guaranteeing a loan so they can build a new plant when the old one isn’t running at capacity is incredibly stupid. Sadly, in America that isn’t a crime.
Spending $36,000 on a wedding? That’s ridiculous. For the difference between $36,000 and what our wedding cost, you could put down 20% on a house around here. Or buy two late model used cars.
Well, just be glad you’re not Italian. I’ve read that Italian men start saving for the wedding as soon as a daughter is *born*.
Saw an article on an Italian wedding a while back. The happy couple had *seven pairs* of adult attendants. Plus page boys and flower girls, IIRC.
My brother was invited to an Italian wedding once. The father told my brother to bring some of his own friends too. To the reception, not just the ceremony. Crazy.
We’ve started saving for our daughter’s college education, but not her wedding. Of course by the time she gets to college, $300 will probably cover a sandwich at Subway. If the opts for the one of the $300 foot long specials. (Subway is a sandwich shop that currently offers some $5 foot long sandwiches.)
My wife and I had four pairs of adult attendants, plus the ring bearer and flower girl. But we only invited 125 people. I’ve been to much more elaborate weddings than ours, but I’m sure a lot of weddings cost even more than the ones I’ve been to.
I grew up in a town with a large first- and second-generation Italian population, and I don’t remember there being a lot of very lavish weddings. Large ones, certainly, sometimes with the church overflowing. But the Italians were generally quite practical. There were standard wedding gifts, of course, to help the couple get a start on housekeeping, but one of the most popular gifts was an enveloped stuffed with money, which I always thought was the most practical gift of all.
People are spending far too much on weddings. I’ve said for over a decade that couples should just elope…
These same people will complain about spending $1K on a photographer. They spend thousands on a caterer, a venue, a band, and a brides dress. Most of which are gone at the end of the wedding with the dress boxed up never to be seen again. Yet the pictures will last almost forever. Yet that is where they want to skimp.
Lost a couple weddings this summer because the bride had an uncle that took good pictures of road kill and he was buying a new camera and he will photograph their wedding as a “gift”. Yeh, right. Odd poses, couples with Marty Feldman eyes, body parts amputated, odd color casts, etc. And you cannot explain this to the prospective clients.
Even had one couple that I met with that decided on their uncle come back to me with the horrible pictures. They asked if I could fix them. I said it would cost $3K as I was starting with a really inferior product if I could even do the fixing. I also stated that legally I cannot fix someone elses images because I don’t own the copyrights. They would have to secure a copyright release from their uncle. Never heard from them again.
125 invitees is fairly large by my standards. Most of the ones I’ve been to have been around 80. I think my sister had around 135 guests in 1972.
I’m pretty ambivalent about gifts of money. I’d rather know what the happy couple need and get them something.
Ray, my sister went professional in 1972. But the bimbo on the desk at the photography agency wrote down B&W when my sister ordered colour. When she got the prints all hell broke loose. She considered getting everyone back together for more photographs, but eventually didn’t. My photos, taken with an inexpensive Kodak Instamatic on slide film were confiscated, never to be seen again.
I was convinced that bodies would be found floating in the Torrens over this, but as far as I’m aware she didn’t actually kill anyone.
Or she is much better at hiding bodies, than you appreciate.
My wedding was done on a budget of $600. With that we had to buy rings, rent a tux, buy a dress (just a normal “dress” not a wedding dress), and pay off the state and preacherman. My mom donated her place for the reception and provided champagne and cake, my wife’s mom was a caterer at the time and made the obvious donation. The reception was BYOB and we invited only 50 people.
Spending thousands on a wedding is simply selfish behavior run amok, and a huge warning about future monetary decisions.
“My wedding was done on a budget of $600.”
Good for you. A bit extravagant by my standards, but to each their own.
“and pay off the … preacherman.”
The WHAT?
I’m not sure what our wedding cost, but it wasn’t much.
As to money gifts, I’ve always thought that the best gift was something that the recipient really wanted or needed. And for most young couples just starting out, what they really want and need is money.
I’ve always thought there was something a bit crass about giving money. For my sister’s wedding I knew what she needed, of course, and got that. For other weddings I made discrete inquiries and found out what was on “the list” and got something that wasn’t already taken.
For the wedding in 1988 that I mentioned above I rang the bride’s home, hoping to catch her mother so I could arrange a present without the bride’s direct knowledge. But the bride, Jane, answered the phone and started asking questions when I asked to speak to her mother, so I told her. I would have preferred to maintain the fiction that I’d just stumbled onto exactly the right present for them, but that was overtaken by events. It was one of the best weddings I’ve been to. I wore a suit, of course, but at least one guest couple wore jeans and t-shirt. Good on them.
If I thought money was what they’d needed I’d have given the appropriate amount without blinking, but I’d rather give them something they want rather than the dough for them to buy it.
“and pay off the … preacherman.”
The WHAT?
What can I say? I was young and Anne wanted to get married in a church. Who was I to argue?