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?
Some of Charles Schulz’s fans blame the cartoon dog for ruining Peanuts. Here’s why they’re wrong.
It really was a dark and stormy night. On February 12, 2000, Charles Schulz—who had single-handedly drawn some 18,000 Peanuts comic strips, who refused to use assistants to ink or letter his comics, who vowed that after he quit, no new Peanuts strips would be made—died, taking to the grave, it seemed, any further adventures of the gang.
Hours later, his last Sunday strip came out with a farewell: “Charlie Brown, Snoopy, Linus, Lucy … How can I ever forget them.” By then, Peanuts was carried by more than 2,600 newspapers in 75 countries and read by some 300 million people. It had been going for five decades. Robert Thompson, a scholar of popular culture, called it “arguably the longest story told by a single artist in human history.”
In a new book, the former Middle East peace negotiator Dennis Ross explores just how close Israel came to attacking Iran, and why Susan Rice accused Benjamin Netanyahu of throwing “everything but the n-word” at Barack Obama.
Updated on October 9, 2015 at 12:40 p.m.
When Israeli Prime Minister Benjamin Netanyahu arrives in Washington early next month for a meeting with President Obama, he should at least know that he is more popular in the White House than Vladimir Putin. But not by much.
This meeting will not reset the relationship between the two men in any significant way, and not only because Netanyahu has decided to troll Obama by accepting the Irving Kristol Award from the American Enterprise Institute on this same short trip. The meeting between the two leaders will most likely be businesslike and correct, but the gap between the two is essentially unbridgeable. From Netanyahu’s perspective, the hopelessly naive Obama broke a solemn promise to never allow Iran to cross the nuclear threshold. From Obama’s perspective, Netanyahu violated crucial norms of U.S.-Israel relations by publicly and bitterly criticizing an Iran deal that—from Obama’s perspective—protects Israel, and then by taking the nearly unprecedented step of organizing a partisan (and, by the way, losing and self-destructive) lobbying campaign against the deal on Capitol Hill.
A new tally of the those killed last month makes it the deadliest-ever disaster at the annual pilgrimage.
The death toll in last month’s Hajj stampede in Saudi Arabia is roughly double the number that the country first reported, the Associated Press is reporting.
The Saudi estimate of the disaster was 769, but the new estimate, based on an AP count, suggests that 1,453 people died in the stampede. This new number would make it the deadliest catastrophe in the history of the event.
The Hajj draws roughly 2 million pilgrims to Mecca each year, an observance that lends its host, Saudi Arabia, unrivaled prestige across the Muslim world. It also saddles the kingdom with billions of dollars of costs and logistical considerations. Over the course of the past 40 years, several of the pilgrimages have been marred by deaths caused from stampedes, the collapse of infrastructure, violence, and fires.
Kids who are adopted have richer, more involved parents. They also have more behavior and attention problems. Why?
Being adopted can be one of the best things to happen to a kid. People who adopt tend to be wealthier than other parents, both because of self-selection and because of the adoption screening process. Adoptive parents tend to be better-educated and put more effort into raising their kids, as measured by things like eating family meals together, providing the child with books, and getting involved in their schools.
And yet, as rated by their teachers and tests, adopted children tend to have worse behavioral and academic outcomes in kindergarten and first grade than birth children do, according to a new research brief from the Institute for Family Studies written by psychologist Nicholas Zill.
The leaderless GOP begins its search for a speaker anew, starting with a campaign to draft Paul Ryan.
First Eric Cantor. Then John Boehner. Now Kevin McCarthy.
Conservatives in and out of Congress have, within a span of 15 months, tossed aside three of the four men most instrumental in the 2010 victory that gave Republicans their majority in the House. When the leaderless and divided party gathers on Friday to begin anew its search for a speaker, the biggest question will be whether that fourth man, Paul Ryan, will take a job that for the moment, only he can win.
Ryan, the 2012 vice presidential nominee and chairman of the powerful Ways and Means Committee, has for years resisted entreaties to run for speaker, citing the demands of the job on his young family and his desire to run the tax-writing panel, which he has called his “dream job.” And he did so again on Thursday, within minutes of McCarthy’s abrupt decision to abandon a race he had been favored to win. “I will not be a candidate for speaker,” Ryan tweeted. Yet the pressure kept coming. Lawmakers brought up his name throughout the day, and there were reports that Boehner himself had personally implored him to change his mind.
Forget the Common Core, Finland’s youngsters are in charge of determining what happens in the classroom.
“The changes to kindergarten make me sick,” a veteran teacher in Arkansas recently admitted to me. “Think about what you did in first grade—that’s what my 5-year-old babies are expected to do.”
The difference between first grade and kindergarten may not seem like much, but what I remember about my first-grade experience in the mid-90s doesn’t match the kindergarten she described in her email: three and a half hours of daily literacy instruction, an hour and a half of daily math instruction, 20 minutes of daily “physical activity time” (officially banned from being called “recess”) and two 56-question standardized tests in literacy and math—on the fourth week of school.
That American friend—who teaches 20 students without an aide—has fought to integrate 30 minutes of “station time” into the literacy block, which includes “blocks, science, magnetic letters, play dough with letter stamps to practice words, books, and storytelling.” But the most controversial area of her classroom isn’t the blocks nor the stamps: Rather, it’s the “house station with dolls and toy food”—items her district tried to remove last year. The implication was clear: There’s no time for play in kindergarten anymore.
What’s the balance between preparing students for college and ensuring they aren’t killing themselves in the process?
Kids who go to elite private high schools enjoy lots of advantages. They have access to the most challenging academic classes at reputable institutions, with staffs that are well-equipped to help them prepare for college. Parents pay an average of $10,000 per year to ensure their kids this privilege.
And yet the rigor that these opportunities demand can come with an extra cost for the students themselves. A recent study surveyed and interviewed students at a handful of these high schools and found that about half of them are chronically stressed. The results aren’t surprising—between the homework required for Advanced Placement classes, sports practices, extracurricular activities like music and student government, and SAT prep, the fortunate kids who have access to these opportunities don’t have much downtime these days. These experiences can cause kids to burn out by the time they get to college, or to feel the psychological and physical effects of stress for much of their adult lives, says Marya Gwadz, a senior research scientist at the New York University College of Nursing.
A new report details a black market in nuclear materials.
On Wednesday, the Associated Press published a horrifying report about criminal networks in the former Soviet Union trying to sell “radioactive material to Middle Eastern extremists.” At the center of these cases, of which the AP learned of four in the past five years, was a “thriving black market in nuclear materials” in a “tiny and impoverished Eastern European country”: Moldova.
It’s a new iteration of an old problem with a familiar geography. The breakup of the Soviet Union left a superpower’s worth of nuclear weapons scattered across several countries without a superpower’s capacity to keep track of them. When Harvard’s Graham Allison flagged this problem in 1996, he wrote that the collapse of Russia’s “command-and-control society” left nothing secure. To wit:
It leaves people bed-bound and drives some to suicide, but there's little research money devoted to the disease. Now, change is coming, thanks to the patients themselves.
This past July, Brian Vastag, a former science reporter, placed an op-ed with his former employer, the Washington Post. It was an open letter to the National Institutes of Health director Francis Collins, a man Vastag had formerly used as a source on his beat.
“I’ve been felled by the most forlorn of orphan illnesses,” Vastag wrote. “At 43, my productive life may well be over.”
There was no cure for his disease, known by some as chronic fatigue syndrome, Vastag wrote, and little NIH funding available to search for one. Would Collins step up and change that?
“As the leader of our nation’s medical research enterprise, you have a decision to make,” he wrote. “Do you want the NIH to be part of these solutions, or will the nation’s medical research agency continue to be part of the problem?”
American politicians are now eager to disown a failed criminal-justice system that’s left the U.S. with the largest incarcerated population in the world. But they've failed to reckon with history. Fifty years after Daniel Patrick Moynihan’s report “The Negro Family” tragically helped create this system, it's time to reclaim his original intent.
By his own lights, Daniel Patrick Moynihan, ambassador, senator, sociologist, and itinerant American intellectual, was the product of a broken home and a pathological family. He was born in 1927 in Tulsa, Oklahoma, but raised mostly in New York City. When Moynihan was 10 years old, his father, John, left the family, plunging it into poverty. Moynihan’s mother, Margaret, remarried, had another child, divorced, moved to Indiana to stay with relatives, then returned to New York, where she worked as a nurse. Moynihan’s childhood—a tangle of poverty, remarriage, relocation, and single motherhood—contrasted starkly with the idyllic American family life he would later extol.