Syria is rebuilding its chemical weapons capability, according to satellite images analysed by Jane’s Intelligence Review.
Any suggestion that Syria is enhancing the offensive potential of its chemical munitions threatens to provoke a new round of hostilities with Israel as it will be treated as an additional threat to Israel’s existence.
Germany and France may be forced to contemplate the bailout of entire nations rather than just individual banks as European government budgets buckle under the weight of recession.
German Finance Minister Peer Steinbrueck became the first senior policy maker to broach the topic this week, saying some of the 16 euro nations are “getting into difficulties” and may need help. French officials are also concerned about market tensions as the cost of insuring Irish, Greek and Spanish debt against default rises to records and bond spreads widen.
Of course, if political leaders are talking in vague terms about bailing a few countries out, you know that the problems are much wider then that. As Edward Hugh correctly notes…
Well basically, because I think that Europe’s leaders are still in general denial on the scope of this problem. We are not talking simply of little cases, like Greece and Ireland, we are talking about potentially much harder chestnuts to crack, like Spain, and Italy, the UK, and even Germany itself. Remember Germany’s economic is now contracting at an almost astonishing pace, and German bonds are getting harder to sell all the time.
The full extent of the problems in the German banking system, as defaults mount in Spain and Eastern Europe, is yet to be measured.
I strongly disagree with the overall reasoning of Mr. Hugh’s post even though I think the above point is excellent. He takes it as a given that Europe must hang together or they will hang separately. I feel that tying everybody together is a good way of ensuring that everyone drowns.
People have taken all the wrong lessons from the failure of Lehman’s. People have noted how much pain that event caused and have sworn that it must never happen again. But it does not follow that because the collapse of Lehman’s caused a lot of pain that the alternative must somehow have been better. Has letting the zombies stay afloat at all costs really been less costly in dollar terms?
Just consider the fix that Europe is in. Spain is like California expect that Spain’s economy is even more dependent on housing then California was. Sarkozy is throwing huge amounts of money (for a nation the size of France) around in an attempt to keep the French unions off the street. Eastern Europe is so horrible it does not bear thinking about. Not only are they highly indebted and facing huge demographic problems, they also face currency risk on a large scale. This from the Times…..
All this means that doubts over whether the governments and companies of Central and Eastern Europe will be able to service their debts are very much to the fore. Much of the borrowing in these countries during the bubble was not done in their own currencies but in others, such as the euro and the Swiss franc, which means that there will almost certainly be defaults.
The zloty, for example, has lost a third of its value against the euro since last summer, with Hungary’s forint down 23 per cent and the Czech crown down by about 17 per cent in the same period.
I could go on and on. The economic news is horrible everywhere you look. But it is really, really horrible in large swathes in Europe. To the extent that Mr. Hugh and others who are arguing that Europe needs to hang together have a point, it is that there are very real questions about whether any of the parties can separate their economic fortunes from each other in any practical way.
But there is no way that Europe can keep the existing edifice intact. At the very least, they need to cut Eastern Europe lose. Possibly the richer Western Europe might be able to keep itself afloat for a while longer in that case. Working under the assumption that every government in Europe can be prevented from defaulting is simply not realistic. It may be that they will all effectively default. But trying to ensure that no one defaults will ensure that they all fail in the end.
Edit: Having written this while I should have been going to bed and with the aid of the head cold, it leaves a lot to be desired. Crucially, I failed to really articulate why Mr. Hugh’s reasoning is flawed. Perhaps I shall improve on this later. But for now I leave you with this thought: One of the reasons that Germany is in such a pickle is that it fell into an economic model where it had to lend money to others (Spain, Eastern Europe, and others) in order to create enough of an export market to fuel German economic growth. How is lending more money to preserve its export markets (and hence its economic growth) going to help matters?
In recent years, the photogenic mother of seven has pushed through a number of measures making child-bearing less of a financial burden, such as generous income support for both men and women taking parental leave.
The policies appear to be working. Germany’s birth rate, which had been in decline for years, rose slightly in both 2007 and, as recently released statistics suggest, 2008.
Lets put this success in context. From later on in the article…..
Von der Leyen pointed to the increase in the fertility rate in Germany, which rose to 1.37 children per woman in 2007 from 1.33 in 2004.
I am not trying to knock the Spiegel article. It is mostly about how economic problems endanger the recent “success” that Germany has had in raising its birth rate. But even if this “success” had continued on its current course, Germany still would not have any hope. The birth rate simply was not increasing fast enough even in good times to stave off disaster. And as everyone knows, good times do not last forever.
I don’t see how a company that can do all this (or train people to do all this) can be called a mere security company.
It is interesting to speculate what this vast increase in the number of people who are skilled in close quarters combat means for the future. Heck, there are plenty of places that will teach civilians a lot of these skills even if they have no connection to the government.
Close quarters combat is the true martial art of our age (in the original meaning of the term) and it is worth remembering that most martial arts were perfected in times of utter chaos that followed the breakdown of authority.
Worries about the deteriorating financial situation in countries like Romania and Hungary led to a huge sell-off on Tuesday that began overseas and crashed ashore on Wall Street.
Every sector sank, with financial stocks leading the way and energy companies falling on tumbling oil prices. Rattled investors rushed to buy safer investments like gold and Treasury debt.
The losses on Wall Street were part of a global wave of selling that dragged down stock markets from Tokyo to London and Frankfurt to Brazil, highlighting fears about how banks, automakers — entire countries — will fare in a deepening global downturn.
The news helped send the Dow Jones industrial average to nearly the same low that it hit amid the credit crisis last fall. The Dow fell 297.81 points, or 3.8 percent, to 7,552.60, which was almost the same as the 7,552.29 close for the Dow on Nov. 20.
I will post more after I read through the stories that are swirling around today. Sufficient to note that what I said a while ago is coming true. We are done with major private failures and we are now entering into the era of sovereign failures.
I have to say I like the look of Obama’s housing-bailout plan. It’s quite elegant, and makes full use of the fact that Fannie and Freddie are now owned by the US government — which means they can be forced to offer 105% loan-to-value mortgages even when the borrower isn’t creditworthy at all.
This would be a great use of irony if Mr. Salmon had said this with his tongue firmly planted in his cheek. Unfortunately, he is being entirely serious. He really thinks that lending money to people who are not creditworthy is a good idea.
This one is artistic….
This one is just plan scary.
You can read more about the biggest bomb ever built here. The scary thing is that they did not even come close to pushing the limits of what was possible.
California’s legislature adjourned from a marathon budget debate after falling one vote short of a $40 billion package of tax increases, spending cuts and borrowing aimed at reducing a record deficit.
Lawmakers went home at 9 p.m. yesterday after spending 28 hours in session while Republican Governor Arnold Schwarzenegger and Senate leaders worked to secure an additional Republican vote for the package of 27 bills. Schwarzenegger made rare appearances at closed-door party caucuses and urged a quick solution to the impasse.
“We are just searching for that one more vote that we need in order to get that budget done,” Schwarzenegger told reporters after the meeting.
Failure of the package would prolong a four-month stalemate over how to counter a record $42 billion deficit that drained California of cash, left it with the lowest credit rating among U.S. states, forced officials to delay paying bills totaling $3.7 billion and halted $3.8 billion of bond-financed construction on schools, roads and other public works.
The LA Times has more details on the fun and games that are going on.
Edit: This is just to good to pass up….
“I think I’ve already taken more financial risk than would be prudent, but I’ve been operating on the theory that we’re going to get this budget done,” California Department of Finance Director Mike Genest said in an interview. “I’ve probably been too hopeful and too optimistic for too long.”
Ya think?