There have been some rumbles about Italy for a while. Italy's budget deficits are relatively modest compared to, say, Ireland, but their debt is about 120% of GDP. The government has passed a plan that will balance the budget by 2014, but as with most such plans, most of the cutting comes later, while the current cuts are small. This may well be sensible fiscal policy, given the current economic climate, but it is not reassuring to the markets. Mike Shedlock estimates that Italy needs to borrow about €356 billion ($500 billion) in 2011 to cover its deficit, and roll over outstanding debt. Their 10-years are now trading at something north of 5%. Most of the estimates I've seen say that a debt death spiral becomes likely when rates hit somewhere between 6-7%, because the debt service costs start blowing up the budget deficits.
If Italy goes, it's not clear that the rest of Europe can save them. In the FT, Neil Dennis says people are talking about doubling the euro bailout fund to €1.5 trillion--or about three times the size of TARP. And you may have noticed that the bailout fund has not actually stopped Greece's descent into debt madness. Italy's public debt is not much smaller than Germany's, even though the latter obviously has a much bigger (and richer) economy. In the event that things really go south on the Italian peninsula, I don't think there's enough money in the rest of Europe to provide a rescue package.
Meanwhile, conditions in the other PIIGSs are worsening. European leaders seem to be giving up on the notion of some sort of voluntary debt swap after the ratings agencies noted that they would be forced to call this what it is: a default. Since the Greek debt load does not seem to be in any way sustainable, they're going to have to do something. Riots in Athens seem to be making it increasingly clear that over the long term, "something" is not going to be indefinitely decreasing their government consumption in order to make debt service payments. That leaves making bondholders take some sort of a haircut, aka default. It sounds as if the continent's financial leaders are starting to decide that if Greece's only option is some kind of default, they might as well bite the bullet and do the thing.
This will not be pretty. For starters, if they default, but stay in the euro, then unless really considerable aid is forthcoming from the rest of Europe, they're going to lose most of the advantages of the euro (low debt premium) while retaining the disadvantages (excessively tight monetary policy for a country that is going to be experiencing capital flight and even deeper recession). Countries like Argentina got at least some tourism and export boost from very cheap prices after they defaulted and went off their currency peg; Greece won't even get that if the euro remains at an ouchy 1.4 to the dollar. (If it doesn't remain there, but instead sinks . . . well, that means the euro zone will be having all sorts of other problems. More on which in a minute.)
Of course, even defaulting and going off the peg is hardly a gateway to paradise. It is true that after an initial period of horrifying double-digit contraction, Argentina boomed . . . but Argentina was an agricultural commodity exporter in an era when soaring Chinese demand was causing rapidly rising prices in many commodity markets. And after playing hardball with their foreign investors, Argentina has had limited access to global capital markets, which means they've had to resort to some desperate measures, like seizing the Argentinian equivalent of 401ks, and running the printing presses, to keep the government's finances in balance. This weekend, the Wall Street Journal informed me that Argentina has now resorted to filing criminal charges against economic consulting firms whose reports indicate that actual inflation exceeds the officially reported numbers by a factor of two to three.
Either way, what Greece does will have implications for the rest of Europe--and for us. As NPR's Jacob Goldstein says, interbank lending between various European nations, and the US, "looks like a web made by an insane spider".
Once Greece defaults, the immediate outcome is crisis, not calm. Within Greece, they'll need to find some way to close their primary deficit, and stem capital flight, while the economy craters. Outside of Greece, Portugal, Ireland, Spain and Italy will face growing pressure on their debt. The euro may plummet--good for German exports, not so good for attracting the kind of capital needed to keep the banking system solvent. And the rest of us will be scrambling to keep the contagion from taking down our banking systems, or our economies. No one wants another Credit-Anstalt. But I'm not sure anyone feels quite confident we can prevent it. As I tweeted yesterday, if the drama continues on both sides of the Atlantic, we may soon get to witness a paradox: where does a capital "flight to safety" go if America defaults while the euro implodes?
With Donald Trump its presumptive nominee after his win in the Indiana primary, the GOP will never be the same.
NEW YORK—Where were you the night Donald Trump killed the Republican Party as we knew it? Trump was right where he belonged: in the gilt-draped skyscraper with his name on it, Trump Tower in Manhattan, basking in the glory of his final, definitive victory.
“I have to tell you, I’ve competed all my life,” Trump said, his golden face somber, his gravity-defying pouf of hair seeming to hover above his brow. “All my life I’ve been in different competitions—in sports, or in business, or now, for 10 months, in politics. I have met some of the most incredible competitors that I’ve ever competed against right here in the Republican Party.”
The combined might of the Republican Party’s best and brightest—16 of them at the outset—proved, in the end, helpless against Trump’s unorthodox, muscular appeal to the party’s voting base. With his sweeping, 16-point victory in Tuesday’s Indiana primary, and the surrender of his major remaining rival, Ted Cruz, Trump was pronounced the presumptive nominee by the chair of the Republican National Committee. The primary was over—but for the GOP, the reckoning was only beginning.
It’s a paradox: Shouldn’t the most accomplished be well equipped to make choices that maximize life satisfaction?
There are three things, once one’s basic needs are satisfied, that academic literature points to as the ingredients for happiness: having meaningful social relationships, being good at whatever it is one spends one’s days doing, and having the freedom to make life decisions independently.
But research into happiness has also yielded something a little less obvious: Being better educated, richer, or more accomplished doesn’t do much to predict whether someone will be happy. In fact, it might mean someone is less likely to be satisfied with life.
That second finding is the puzzle that Raj Raghunathan, a professor of marketing at The University of Texas at Austin’s McCombs School of Business, tries to make sense of in his recent book, If You’re So Smart, Why Aren’t You Happy?Raghunathan’s writing does fall under the category of self-help (with all of the pep talks and progress worksheets that that entails), but his commitment to scientific research serves as ballast for the genre’s more glib tendencies.
Given her general election opponent, she has a historic opportunity to unite a grand, cross-party coalition.
The Republicans have made their choice. Now the Democrats’ likely nominee faces a dilemma of her own: Run as a centrist and try to pile up a huge majority—at risk of enraging Sanders voters? Or continue the left turn she’s executed through these primaries, preserve Democratic party unity—at the risk of pushing Trump-averse Republicans back to The Donald as the lesser evil?
The imminent Trump nomination threatens to rip the Republican party into three parts. Trump repels both the most conservative Republicans and the most moderate: both socially conservative regular church attenders and pro-Kasich affluent suburbanites, especially women. The most conservative Republicans won’t ever vote for Hillary Clinton of course. But they might be induced to stay home—if Clinton does not scare them into rallying to Trump. The most moderate Republicans might well cast a cross party line vote—if Clinton can convince them that she’s the more responsible steward and manager.
By handcuffing a new seriesto its online-only service, the network is trying to catch the next wave of the television industry.
What’s the easiest way to tell that we’re in the midst of a television programming revolution? Just look at what the networks, the dinosaurs of the industry, are doing to keep up. On Tuesday, CBS detailed its plans for its prospective Netflix competitor “CBS All Access,” a monthly subscription-based online service that will use a new Star Trek show to try and reel in viewers. But where Netflix’s strategy is to become a vast repository of original content, dumping whole seasons of original shows at a time for people to sample at their leisure, CBS is trying to hold onto the weekly model that has defined broadcast strategy for decades. That compromise is currently untested, but it could be the future of the medium.
What jargon says about armies, and the societies they serve
JERUSALEM—“We have two flowers and one oleander. We need a thistle.” Listening to the Israeli military frequencies when I was an infantryman nearly two decades ago, it was (and still is) possible to hear sentences like these, the bewildering cousins of sentences familiar to anyone following America’s present-day wars. “Vegas is in a TIC,” says a U.S. infantryman in Afghanistan in Sebastian Junger’s book War. What does it all mean?
Anyone seeking to understand the world needs to understand soldiers, but the language of soldiers tends to be bizarre and opaque, an apt symbol for the impossibility of communicating their experiences to people safe at home. The language isn’t nonsense—it means something to the soldiers, of course, but it also has something to say about the army and society to which they belong, and about the shared experience of military service anywhere. The soldiers’ vernacular must provide words for things that civilians don’t need to describe, like grades of officers and kinds of weapons. But it has deeper purposes too.
The odds of defeating the billionaire depend in part on whether Americans who oppose him do what’s effective—or what feels emotionally satisfying.
Tens of millions of Americans want to deny Donald Trump the presidency. How best to do it? Many who oppose the billionaire will be tempted to echo Bret Stephens: “If by now you don’t find Donald Trump appalling,” the Wall Street Journal columnist told the Republican frontrunner’s supporters, “you’re appalling.”
Some will be tempted to respond like anti-Trump protesters in Costa Mesa, California. Violent elements in that crowd threw rocks at a passing pickup truck, smashed the window of a police cruiser, and bloodied at least one Trump supporter. Others in the crowd waved Mexican flags. “I knew this was going to happen,” a 19-year-old told the L.A. Times. “It was going to be a riot. He deserves what he gets.”
Nearly half of Americans would have trouble finding $400 to pay for an emergency. I’m one of them.
Since 2013,the Federal Reserve Board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
A professor of cognitive science argues that the world is nothing like the one we experience through our senses.
As we go about our daily lives, we tend to assume that our perceptions—sights, sounds, textures, tastes—are an accurate portrayal of the real world. Sure, when we stop and think about it—or when we find ourselves fooled by a perceptual illusion—we realize with a jolt that what we perceive is never the world directly, but rather our brain’s best guess at what that world is like, a kind of internal simulation of an external reality. Still, we bank on the fact that our simulation is a reasonably decent one. If it wasn’t, wouldn’t evolution have weeded us out by now? The true reality might be forever beyond our reach, but surely our senses give us at least an inkling of what it’s really like.
Sadiq Khan, the Labour Party candidate, is poised to make history.
Britain is holding local elections this week on what some have dubbed “Super Thursday,” but only one contest is worthy of the moniker: the race to succeed Boris Johnson as London’s mayor.
Mayoral elections rarely draw international attention. But the British capital is no ordinary city and its mayoralty is no ordinary office. London holds tremendous sway within Britain itself, both as an economic powerhouse and a population center. Roughly one in 10 members of Parliament come from the city’s constituencies—more than hail from Scotland, Wales, or Northern Ireland.
The office itself is also something of an anomaly. British governance tends to favor councils of local officials and collective government by cabinets of ministers. London’s mayor, by comparison, is elected by millions of voters from the city and its surrounding suburbs. Because most of Britain does not directly vote for the ministers in Parliament, let alone the House of Lords or the queen, the mayor can claim a stronger democratic mandate than perhaps any British politician other than the prime minister (who herself is not directly elected to that post, but assumes it as leader of the largest party in Parliament).
The U.S. president talks through his hardest decisions about America’s role in the world.
Friday, August 30, 2013, the day the feckless Barack Obama brought to a premature end America’s reign as the world’s sole indispensable superpower—or, alternatively, the day the sagacious Barack Obama peered into the Middle Eastern abyss and stepped back from the consuming void—began with a thundering speech given on Obama’s behalf by his secretary of state, John Kerry, in Washington, D.C. The subject of Kerry’s uncharacteristically Churchillian remarks, delivered in the Treaty Room at the State Department, was the gassing of civilians by the president of Syria, Bashar al-Assad.