Greek military overspending

It seems to be common wisdom that government spending is the reason for the financial crisis in Greece. But overspending on what?

The graph shows military spending as a percentage of GDP using data from the World Bank [Google]. As you can see, Greece spends considerably more on its military than the other large EU countries, more than twice as much as Italy Germany or Spain and considerably more than France or the UK.

The excessive spending is even more apparent in terms of manpower. The Greek military has 177K active personnel with a population of approximately 2 million males fit for military service aged 15-49. Greece has almost the same percentage of its population engaged in military service as Israel.

I seem to see report after report castigating Greece for its allegedly profligate welfare system but no mention of military spending as waste. Meanwhile is it really a coincidence that Japan and Germany, the two industrial countries traditionally held out as economic role models have the lowest rates of military spending? Or that the Clinton boom coincided with the post cold war 'peace dividend' and the period of stagnation under Bush with two new wars? Read the rest of this post...

Fidel Castro doesn’t like the Republican presidential candidates

AP:

"The selection of a Republican candidate for the presidency of this globalized and expansive empire is — and I mean this seriously — the greatest competition of idiocy and ignorance that has ever been."

What could I possibly add to that. Read the rest of this post...

Gingrich pledges to build moon base by his second term

I'll fault Gingrich a lot of things. His love of science isn't one of them. Our country needs to start dreaming again. Planning for a future. The Republicans typically want to focus on war and tax cuts, when they're bashing gays or stopping vital stem cell research. Democrats want to help the poor, and that's fine, but it's not exactly shooting for the stars. Europe had its dream of unification. It may or may not be on the rocks with the issues surrounding the euro and the EU economy, but at least it was a vision, a dream, for the future. What's our national dream? Where do we want to be in 10, 20 years? (And "out of Afghanistan" and "out of debt" isn't a good enough answer.) Read the rest of this post...

Romney: I’m worth "between 150 and 200 some-odd million." He’s not sure?

Kind of like not knowing how many homes you own. NYT's Michael Shear:

Jorge Ramos, who interviewed Mr. Romney, pressed him on his wealth and on his taxes, and asked him directly how much money he had.

“Between 150 and 200 some-odd million,” Mr. Romney said, looking a bit uncomfortable and referring Mr. Ramos to the financial disclosure reports that his campaign has filed.

It's okay, John McCain didn't know how many homes he had (he said "at least four," in fact he had seven). Read the rest of this post...

Obama puts Schneiderman on federal investigatory task force

I'd really like to be enthusiastic about the announcement of a new federal investigatory task force looking at the foreclosure crisis.

New York Attorney General Eric Schneiderman, much like Elizabeth Warren, has done enough to show his commitment to holding Wall Street accountable for their crimes to show that his motives are good and his decisions should be trusted. Schneiderman was effectively the first statewide elected official to champion investigating foreclosure fraud, robosigning, and securities fraud in connection to the housing crisis. His leadership is largely responsible for forestalling any bad settlement outcome. That means something in my eyes and so I am willing to trust that he and his staff truly believe that the resources and power that come from working on a federal task force will allow him to do even more to hold banksters accountable for breaking the law.

All that said, there are real questions about what bringing Schneiderman into the fold will actually do. Will there be quick indictments of senior level bankers? Or will the composition of the task force prevent Schneiderman from leveraging power in a constructive way? Abigail Field was the first to note how weak the composition is, identifying major problems with Schneiderman's co-chair and beyond:

Schneiderman isn’t chairing anything. He’s Co-Chairing. That’s a huge difference. If he’s Chair he’s in charge. If he’s Co-Chair he needs consensus. And who is he Co-Chairing with? Four people, starting with Lanny Breuer. That’s unacceptable.

The reason we want Schneiderman in charge of prosecuting is because Breuer, who heads the Justice Department’s Criminal Division, hasn’t done his job. If he had pursued these prosecutions we’d have a lot more justice in this country right now than we do. Why has Breuer failed to go after the people who committed “misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis”? Is it because he’s an ex- (and likely future) Covington & Burling partner? Doesn’t matter. His track record speaks for itself. There is only one reason to have him co-chair with Schneiderman, and that’s to rein Schneiderman in.

Schneiderman’s also got to contend with Robert Khuzami, the SEC’s top law enforcer. Khuzami’s SEC can be called aggressive only when measured against Breuer’s Criminal Division. Having Khuzami on the committee gives the weak-enforcement lawyers two people to Schneiderman’s one. And Khuzami is deeply conflicted because he was Deutsche Bank’s CDO lawyer in 2006 and 2007, peak shadiness times.

David Dayen points out another complication relating to another member of the task force, Tony West, assistant attorney general in the DOJ's Civil Division: he's the brother-in-law of California AG Kamala Harris. Harris is currently sitting on the outside of the bank settlement talks and is the subject to a full-court press by the Obama administration to get back on board. Given that West has no real experience with financial fraud, it's hard to view his appointment to this task force as anything other than a cynical vehicle to put even greater pressure on Harris.

There's a petition on Whitehouse.gov to get Breuer, Khuzami and West removed from the task force. For what it's worth, if the administration wanted to strengthen their commitment to this investigation even more, they would replace those three with people like Nevada AG Catherine Cortez Masto, former SIGTARP Neil Barofsky, or even a prosecutor like Patrick Fitzgerald. These are people who, like Schneiderman, have shown real commitments to investigation and accountability in their jobs.
The whole point of raising these concerns is to help set the table to enable Schneiderman to succeed. If this committee ends up being a paper tiger, its creation will have served to disempower one of the few advocates for real investigations and accountability out there.

David Dayen raises another important and problematic consequence of the President putting Schneiderman on this task force:

More important, this announcement has collapsed the unified wall of objection on the left to a settlement. And I mean COLLAPSED. Just a day ago, activists were getting in the face of their AGs, warning them of the dangers of a weak settlement that provides little in the way of relief to homeowners. Now I have dozens of press releases in my inbox from liberal groups offering huzzahs to the President for this wonderful investigatory panel.
...
Only this isn’t a victory at all, at least not yet. Schneiderman may be trying to work from within, but he’s saddled with a panel full of co-chairs tied to banks with a history of obstructing accountability. The united front of Justice Democrats has been nicked. Kamala Harris, facing enormous pressure to go along with the settlement (she remains opposed at this point), now must contend with being the main big-state holdout AND having a family member co-chairing the investigation panel!

This is a classic Obama move, putting a threat or a rival inside the tent. It happened with Elizabeth Warren and David Petraeus and Jon Huntsman, and it’s happening again. It divides the coalition against a weak settlement, which will at the least shut down state and federal prosecutions on foreclosure fraud and servicing issues. It puts hopes in yet another investigation, one with little chance for success.

There is a real chance that Dayen is right. Of course, the best way to be proven wrong will be if this task force has teeth and starts producing indictments quickly. A good place to start, as Field notes, would be the 18 violations of the Servicemembers' Civil Relief Act which JP Morgan Chase admitted to in congressional testimony - each violation representing a wrongful foreclosure of a service member. These are criminal misdemeanors with up to a year in jail per offense which have never been prosecuted. It's a softball, but speedy indictments for these crimes would be a sign that the task force is going to, at long last, serious about investigating bankster criminality. Read the rest of this post...

China's real estate bubble more overvalued than US in 2006

How do you say "tiiiiimber" in Mandarin?

The story of the real estate bubble in China isn't that much different than the bubble in the US during the Bush years. The government in both cases helped feed the bubble. What should be troubling for China is that the real estate market is now a critical chunk of the overall rise in GDP. (Again, not unlike the US before the bubble burst.) China's economy and to an even greater extent its stability is relying heavily on the high GDP growth rates. Those numbers are never sustainable but the consequences of a hard crash in China are much different than in the west.

The ruling government of China certainly knows that China has never in its long history had a peaceful transition, so this will be a very tense time once it starts. Americans gripe, Europeans march and in China, they revolt. Ten thousand years of history can teach us a few lessons and give us an idea what is ahead. CNNMoney on one analysis of the giant real estate bubble in China:

What amazed Aliber was the chasm between the prices of the apartments and the rents they fetched. A typical $600,000 unit brought a landlord less than $1000 a month in rent after expenses (assuming no mortgage). It wasn't the rental yields that attracted investors, it was the huge price appreciation, averaging from 20% to 30% from 2008 until last year. Rents -- the cost of living in the unit -- exercise a sort of gravitational pull on prices. That's because people won't pay far more to own a home than to rent a similar one, unless they think prices will keep soaring -- a view that's a sure sign of casino mentality, and never lasts. In China, prices in the frothiest markets are fifty or sixty time rents. That's the case with the example we discussed above, where the price is $600,000, and the rent is $12000, a ratio of 50-to-1. The 50 to 60 multiple is far above the level in most U.S. markets at the height of the bubble in 2006; in those heady days, a multiple of 40 was considered giant. So how far do China's prices need to fall so that the cost of owning is reasonably close to the level of rents? Aliber reckons that the rental yield on apartments will eventually go from less than 2% to 5%, or even a bit higher.

Read the rest of this post...

Was MegaUpload shut down because it challenged the RIAA music business model?

The headline asks one of those questions that really is a question. Sometimes criminals are put out of business because they are criminals. Sometimes one criminal is chosen over other criminals because his sister wouldn't date the cop on the beat.

Here's the "RIAA wants me dead" part of the MegaUpload story, told first-person by MegaUpload founder Kim Dotcom (yes, that does seem to be the name). His article is wandery, and includes info about Kim's supposed wicked past, his explanations, and some background on the production of his song "Megasong".

Do read, but for me, that part's in the weeds, at least at my present level of understanding. What woke me up was this (my emphasis):

UMG [Universal Music Group, the former MCA Records] knows that we are going to compete with them via our own music venture called Megabox.com, a site that will soon allow artists to sell their creations direct to consumers and allowing artists to keep 90% of earnings.

We have a solution called the Megakey that will allow artists to earn income from users who download music for free. Yes that’s right, we will pay artists even for free downloads. The Megakey business model has been tested with over a million users and it works. You can expect several Megabox announcements next year including exclusive deals with artists who are eager to depart from outdated business models.

You need to understand that some labels are run by arrogant and outdated dinosaurs who have been in business for 1000 years. These guys think an iPad is a facial treatment, the Internet is the devil, and wired phones are still hip. They are in denial about the new realities and opportunities. They don’t understand that the rip-off days are over. Artists are more educated than ever about how they are getting ripped off and how the big labels only look after themselves.

Dinosaur labels don’t have the answers to today’s new realities. UMG chose to willfully sabotage our campaign instead of analyzing the situation and seeing that the answers to all their problems are right in front of them.

In parallel UMG were calling up all the artists who endorsed us telling them that they are endorsing piracy. That they are working with a convicted felon. That they are losing money because of us. They are trying to force the artists to issue statements against their endorsements and agreements. They are burning their own talents. And I wouldn’t be surprised if some of them fold under this enormous pressure.

Read that a couple of times. There's much there, but the assertion is clear: UMG is trying to kill a new business model for music ownership and delivery that challenges their revenue stream and that of their industry.

(More on MegaBox here.)

How different is this, if true, from the MPAA (Motion Picture Assn of America) trying to outlaw all VCR sales in the U.S. to kill a delivery system that could cut into their revenue stream? The takedown argument in both cases is (gasp) there are thieves in the world.

The story needs leg-work to verify all the threads, but this thread is certainly one of them. The head of MegaUpload, right or wrong, is a primary source and deserves to have his story told for its own sake.

Some background:

    ▪ Read about UMG here: they're the biggest music company in the world. Their trade association (mega-lobbyist) is the RIAA (more here). The relationship between the RIAA and UMG is the same as the relationship between the MPAA and Sony Pictures.

    ▪ The big enchilada. "Music publishing" rights are the real pot of gold in the music business. Owning the publishing rights to a song means owning the song itself, not just a version of it. When record labels used to sign new artists, they got them to sign away the publishing rights to their own songs as part of the deal. Most new artists had no clue what they were giving up and signed. (Talk about theft!)

To perform a song publicly, you need permission from the "owner" first, and you must pay him or her. When your four-year-old daughter sings "Yesterday" with feeling but without permission, and you post that to YouTube, you're a thief.

How does this relate to UMG? If a new artist doesn't have to go to people like UMG to make recordings, they aren't meat for the simultaneous "theft" (ignorant signing away) of their publishing rights in the same contract. A lose-lose for UMG.

Is the MegaBox model part of the story? Most of the story? Any of it? Time and research will tell.

But keep in eye on the money. Artists who bypass the predators and go directly to digital markets threaten the dollars these dinosaurs devour every day of their lives. And like all monomaniacs, corporate persons want only one thing — money. No other thing in the world matters to them; it's the law.

GP Read the rest of this post...

Yves Smith: More evidence JP Morgan stuck the knife in MF Global

I've been reading a lot of Naked Capitalism lately; a good source for articles about the economy and inside-the-boardroom doings.

This is an inside-the-boardroom piece about how Jamie Dimon and his personal money machine, JPMorgan Chase, put themselves first in line to skim back their personal piece of troubled MF Global in the days just before its bankruptcy.

Hint: It helps if you already have their money and won't give it up. It helps if you're Jamie Dimon and can act like the "law" is in your pocket.

Yves Smith begins (my emphasis and some reparagraphing):

The death of MF Global and JP Morgan’s role in its demise is starting to look like a beauty contest between Cinderalla’s ugly sisters. As much as most market savvy observers are convinced that there is no explanation for how MF Global made $1.2 billion in customer funds go poof that could exculpate the firm, JP Morgan’s conduct isn’t looking too pretty either.

Reader Michael C sent a link to a Reuters investigative piece on the MF Global collapse, and it’s a doozy. While in proper journalistic form it is careful about reaching firm conclusions on a post mortem that is still underway, the pattern it has uncovered is not surprising to those of us who are onto JP Morgan.

As many, including this blogger, have pointed out, it was JP Morgan that did in the doomed Lehman by withhold $7 billion of cash and collateral. And we’ve written how it used one of its best private clients, billionaire investor and industrialist Len Blavatnik, as a stuffee for toxic subprime debt in summer 2007, when every financial firm was desperate to offload US housing dreck.

The short form of the Reuters story is that JP Morgan, by virtue of being both a lender to MF Global as well as clearing its trades, has a big information advantage and could see how distressed the firm was. MF Global drew down the full amount of a newly-syndicated $1.3 billion credit facility, a huge warning sign. The Reuters story makes clear that JP Morgan went into “possession is 9/10ths of the law” mode ...

Get that? Because JPMorgan was an MF Global clearing house and also an intermediary in MF Global deals, it had (1) inside info about the state of the company (desperate for cash); and (2) was in position to hold onto that cash a little longer than normal. That had two effects — it protected JP Morgan's exposure in case MF Global went bankrupt, and it hastened that bankruptcy.

That's what Ms. Smith means by "stuck the knife" into MF Global. But note the side effect as well — lots of MF Global money was parked at JPMorgan. This automatically put JPM "first in line" (via the "possession" rule) when the bankruptcy clean-up crew started sorting out how to pay off MF Global's debts and whom to reimburse first.

It's always been a battle between the bondholders (the bigs), the investors (more bigs) — and customers (us schlubs), whose money MF Global was using to give itself a bridge loan, as the above makes clear.

Do read the rest; it's not long and there are lots of nuts and bolts observations.

I'll leave you with two more of Ms. Smith's comments:

■ "JP Morgan hanging on the money had ... everything to do with it trying to lower its credit exposure [to MF Global]."

■ "It’s ... pretty clear that a lot of customer money is sitting at JP Morgan, but JP Morgan will argue ... that it should not have to disgorge it[.]"

Tales of the Top .01%. Guys like ex-FBI director Louis Freeh, who now represents those who invested in this corpse, are just well paid errand boys, doing the bidding of the Dimon's and Corzine's of the world.

Who else, do you imagine, are errand runners and retainers of the very very rich? I have my suspicions.

Will Jon Corzine ever be indicted? Not on this planet, it seems.

Will MF Global customers ever see their money? From what I hear, they're up to 72% reimbursed. Feeling safe? Me neither. Dimon sleeps well though; funny that.

GP Read the rest of this post...

Elizabeth Warren on The Daily Show - Pt 1

There's a second part that's about seven more minutes, but worth watching. Except for liking the Patriots and Tom Brady, she sounds great and has a lot to say about the key issues of the day. We really need more people in Washington like her. Read the rest of this post...

2011 was another bumper crop for CEO pay and golden parachutes

Of course the earnings were great. We are in one of the worst economic periods since the 1930's so should we expect anything else? Wait, what?

Among other big paydays: Apple's Tim Cook — $378 million, including $376 million in restricted stock after replacing the late Steve Jobs. Qualcomm's Paul Jacobs — $50.6 million, including $28.9 million from stock options. Tyco International's Ed Breen — $68.9 million, including stock and option gains worth $52.4 million. J.C. Penney's Ron Johnson — $51.5 million, including $50 million in restricted shares after signing on in November. Exit packages are even more lucrative. Nabors Industries will pay Chairman Gene Isenberg $126 million when he steps down, while Motorola Mobility CEO Sanjay Jha and Temple-Inlad CEO Doyle Simons are due more than $60 million once merger deals are finalized.

As a society, why do we continue to glorify these people and tolerate this garbage? It's not sustainable to keep squeezing everyone in the middle while a few - often underachievers in terms of actual corporate value - cash in like this. What's especially wrong is that companies like Apple, JC Penney and Motorola are selling to consumers, who are being squeezed. Apple makes no bones about abandoning US production and focusing on profit, but who will they sell to when there's no middle class left? Everyone gets that businesses are there to make a profit, but at the same time, if you are too focused on profit alone while killing your target market, don't be surprised when that catches up with your hunt for profits. There are limits to everything. Read the rest of this post...

David Corn: "The 2012 race is shaping up as a titanic face-off"

David Corn in Mother Jones:

In the past year, Obama has moved from a compromiser-in-chief looking to cut deals with the Republicans (to avoid such negative consequences as the end of the Bush tax cuts for middle-income earners, a government shutdown, and a default of on US government debt) to a semi-populist battler for the middle class who is eager to defy Republicans over issues of economic fairness and the role of government. Once the president was free of the debt-ceiling tar pit—and the Republicans were no longer holding the economy hostage—he launched a campaign for a jobs bill that emphasized confrontation, not negotiation. He and his aides had concluded that few, if any, worthwhile deals could be reached with House Speaker John Boehner, who was essentially held captive by the Tea Party wing of his party.

Consequently, Obama could leave behind the failed attempt to reach a grand bargain on deficit reduction and initiate a grand debate over national values.

Due to this shift, the 2012 race is shaping up as a titanic face-off between a president who advocates using government to bolster the economy and address inequities and Republicans who have one answer to everything: smother government and let the markets run free. In his speech, Obama called for "great projects." Republicans call for no projects—that is, nothing outside the private sector. This is a damn clear contrast.

Read the rest of this post...

"Where have you been these last three years, Mr. President? Welcome back."

From Gloria Feldt, the former head of Planned Parenthood:

As I mentioned in my previous post, I’ve been a harsh critic of Obama’s leadership or lack of it since he took office, not because I supported Clinton (which I did but I got over it), but as someone who understands the responsibilities of a chief executive to create meaning, articulate a vision, and put forth an agenda for people to work from. From the time he was elected until now, his vision kept shrinking rather than expanding and his penchant for appeasing even the unappeasable has been nothing short of maddening.

That unwillingness to put a stake in the agenda ground left the Democrats in Congress adrift. The result has been that even when Obama scored accomplishments such as heath reform, it never felt like a victory. Because it was never clean cut, never a righteous fight.

But I have to say he knocked it out of the ballpark tonight in his State of the Union Address (full text here). His energetic delivery, piquant story telling, and frequent appeals to the highest American values made me remember the Obama I voted for in 2008 and thought had disappeared entirely.

It was brilliant to start and end with foreign policy and homage to the military, whose selflessness and teamwork contrast so sharply with the circular firing squad that is Congress. “Imagine what we could achieve if we all had the selflessness of the troops.”

Best line of the speech IMHO: **Fight obstruction with action.**

Where have you been these last three years, Mr. President? Welcome back.

Read the rest of this post...

More cracks found in wing of Airbus A380

Airbus is now clarifying that the cracks that have recently been discovered in the wing of the superjumbo A380 are in fact different from the cracks in the wing discovered (but not widely published) two years ago. As if that should comfort anyone. More cracks have been found in this latest discovery but Airbus and the the European Aviation Safety Agency claim there is nothing to be worry about. Maybe I'm old fashioned, but I'm siding with the Australian aircraft engineer's union who called for grounding all of the A380s until they have been inspected and cleared. Inspecting a relatively new plane that has cracks in the wing is not drastic. Planes falling from the sky because there was too much political pressure to inspect them is drastic. Reuters:The European planemaker insists the world's largest passenger jet remains safe to fly, but the disclosure of further cracks on even a handful of wing components could delay efforts to end a sequence of niggling concerns over its performance. European safety authorities ordered urgent inspections on just under a third of the superjumbo fleet last week after two types of cracks were discovered within weeks of each of other on the same type of part, an L-shaped bracket inside the wing. Since then, similar cracks have been found inside the 9,100-square-foot wing of at least one of the superjumbos examined under the directive, industry sources told Reuters. Read the rest of this post...

IMF warns of 'decelerating' economies

The part that's worse is that this view is based on Europe stepping up to resolve the economic crisis. As in the same Europe that keeps kicking the can down the road with Greece. The IMF report also warns against austerity, which will only make matters worse. It's challenging to imagine the problems being addressed in an effective and timely manner but anything could happen. The Guardian:

The International Monetary Fund has slashed its growth forecasts for most major countries in 2012 and urged governments to adjust the "rhythm" of their austerity measures to avoid derailing economic recovery. In an update of the forecasts in its autumn World Economic Outlook, the IMF said output in most major economies were, "decelerating but not collapsing". It pinned much of the blame on the debt crisis in the eurozone, where it expects GDP to shrink by 0.5% during this year. On the IMF's central projection, "most advanced economies avoid falling back into a recession, while economic activity in emerging and developing economies slows from a high pace." It is now expecting world GDP growth of 3.3% in 2012, down from the 4.1% it forecast in September.

Read the rest of this post...