07:34 – Front page article in the newspaper this morning about a young local couple that are in the running for Parents of the Year. They’re both 20 years old. He was playing video games at 5:00 a.m. when their 2-week-old baby disturbed him. So he did what any father would do; picked her up by the neck and punched her to death. The woman, like all mothers, paid close attention to her new baby. Around 2:00 in the afternoon, she finally got around to checking on the baby and found her dead. Before calling 911, the two of them discussed their options. Among those were hiding the body, claiming the baby had been kidnapped, and fleeing to the mountains. He’s charged with first-degree murder; she with accessory after the fact. No word on what’s happened to their 15-month-old son, who presumably is in the care of social services.
Work continues on the new science kits.
11:20 – It seems that the Bank of England has finally realized that the Big Four UK banks are sitting on a boatload of PIIGS sovereign, bank, and corporate debt, something like $250 billion total. Because they don’t mark to market, these banks are carrying that $250 billion at book value on their P&L statements, when in reality it’s worth significantly less. Sir Mervyn King, the outgoing Governor of the BoE suggests that these four banks require recapitalization to the tune of $50 billion or so. I don’t think that’s going to be enough. In the long run, $250 billion is closer to the correct number.
And, speaking of the long run, the BoE has an interesting graphic in its latest Financial Stability Report. Based on CDS premiums, they estimate a 5-year probability of default for various EU countries. Greece, of course, has a 5-year probability of default of > 100% (I know, but that’s what the numbers say…), so it isn’t even present on the graphic. Portugal is currently around 60%, Ireland and Spain about 40%, Italy around 30%, and France 15%. I think these numbers are low, because they don’t take into account the domino effect; when Greece finally collapses, investors’ attention immediately shifts to the next weakest country, causing it to collapse, and then on and on until the whole row of dominoes falls. My gut reaction is that the probability of France defaulting within five years is probably in the 80% to 90% range, with the others correspondingly higher. There’s only so long that the inevitable collapse of the euro can be staved off with smoke and mirrors. I have to admit that Merkel is doing a good job of that so far, but the tools she has available are about used up.
15:45 – As I knew it would when the latest Greek deal was announced a couple of days ago, it’s falling apart already. The IMF is really getting tired of empty promises and bogus economic forecasts. As should be obvious to anyone, Greece has absolutely zero chance of ever paying back that $400 billion mountain of debt. If the EC/IMF/ECB were using sane accounting practices, they’d already have written off all of it. As things stand now, all of the Greek debt held by the EC/ECB is effectively uncollectable. The IMF, recognizing that even as senior creditor, it is unlikely to be able to collect more than a small fraction of what is owed to it, even if the eurozone debt-holders get nothing, the IMF is determined not to throw good money after bad. And Holland and Finland feel pretty much the same way. They know that the money they previously lent is lost, and they’re not about to take any more of a hit by lending still more.