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?
New research confirms what they say about nice guys.
Smile at the customer. Bake cookies for your colleagues. Sing your subordinates’ praises. Share credit. Listen. Empathize. Don’t drive the last dollar out of a deal. Leave the last doughnut for someone else.
Sneer at the customer. Keep your colleagues on edge. Claim credit. Speak first. Put your feet on the table. Withhold approval. Instill fear. Interrupt. Ask for more. And by all means, take that last doughnut. You deserve it.
Follow one of those paths, the success literature tells us, and you’ll go far. Follow the other, and you’ll die powerless and broke. The only question is, which is which?
Of all the issues that preoccupy the modern mind—Nature or nurture? Is there life in outer space? Why can’t America field a decent soccer team?—it’s hard to think of one that has attracted so much water-cooler philosophizing yet so little scientific inquiry. Does it pay to be nice? Or is there an advantage to being a jerk?
In an interview, the U.S. president ties his legacy to a pact with Tehran, argues ISIS is not winning, warns Saudi Arabia not to pursue a nuclear-weapons program, and anguishes about Israel.
On Tuesday afternoon, as President Obama was bringing an occasionally contentious but often illuminating hour-long conversation about the Middle East to an end, I brought up a persistent worry. “A majority of American Jews want to support the Iran deal,” I said, “but a lot of people are anxiety-ridden about this, as am I.” Like many Jews—and also, by the way, many non-Jews—I believe that it is prudent to keep nuclear weapons out of the hands of anti-Semitic regimes. Obama, who earlier in the discussion had explicitly labeled the supreme leader of Iran, Ayatollah Ali Khamenei, an anti-Semite, responded with an argument I had not heard him make before.
“Look, 20 years from now, I’m still going to be around, God willing. If Iran has a nuclear weapon, it’s my name on this,” he said, referring to the apparently almost-finished nuclear agreement between Iran and a group of world powers led by the United States. “I think it’s fair to say that in addition to our profound national-security interests, I have a personal interest in locking this down.”
19 Kids and Counting built its reputation on preaching family values, but the mass-media platforms that made the family famous might also be their undoing.
On Thursday, news broke that Josh Duggar, the oldest son of the Duggar family's 19 children, had, as a teenager, allegedly molested five underage girls. Four of them, allegedly, were his sisters.
The information came to light because, in 2006—two years before 17 Kids and Counting first aired on TLC, and thus two years before the Duggars became reality-TV celebrities—the family recorded an appearance on TheOprah Winfrey Show. Before the taping, an anonymous source sent an email to Harpo warning the production company Josh’s alleged molestation. Harpo forwarded the email to authorities, triggering a police investigation (the Oprah appearance never aired). The news was reported this week by In Touch Weekly—after the magazine filed a Freedom of Information Act request to see the police report on the case—and then confirmed by the Duggars in a statement posted on Facebook.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
A scholar’s analysis of American culture presumes too much.
Last week, Gawkerinterviewed Robin DiAngelo, a professor of multicultural education at Westfield State University. She discussed aspects of her thinking on whiteness, which are set forth at length in her book, What Does it Mean to be White? I’ve ordered the book.
Meanwhile, her remarks on police brutality piqued my interest. Some of what Professor DiAngelo said is grounded in solid empirical evidence: blacks and Hispanics are disproportionately victimized by misbehaving police officers; there are neighborhoods where police help maintain racial and class boundaries. And if our culture, which she calls “the water we swim in,” contained fewer parts racism per million, I suspect that police brutality would be less common.
The common theme is the harassment of people without probable cause to think that they are doing anything illegal.
Two recent articles about the Drug Enforcement Administration harassing Amtrak passengers have elicited like responses from a number of Atlantic readers. “Hey,” they’ve more or less written, “I’ve been harassed aboard Amtrak, too!”
The DEA is mentioned again in what follows, though other stories concern different law-enforcement organizations. The common theme is the harassment of innocent people without probable cause to think that they are doing anything illegal. As Brian Doherty noted at Reason, the gendarme bothering innocent travelers on trains was a stock trope of movies and books about malign European regimes. And now it is a regular feature of train travel in the United States of America.
In any case, people have probably heard the phrase in reference to something gone awry at work or in life. In either setting, when the shit does hit the fan, people will tend to look to the most competent person in the room to take over.
And too bad for that person. A new paper by a team of researchers from Duke University, University of Georgia, and University of Colorado looks at not only how extremely competent people are treated by their co-workers and peers, but how those people feel when, at crucial moments, everyone turns to them. They find that responsible employees are not terribly pleased about this dynamic either.
This weekwe have photos of an 80-foot-high tire in Michigan, dozens of Siberian students smashed into a car, two volcanic eruptions, yet another nail house in China, synchronized swimmers in a pond at the Chelsea Flower Show, a view from the top of the 104-story One World Trade Center, cows on the beach along the Mediterranean, a solar halo above Mexico, and much more.
Why agriculture may someday take place in towers, not fields
A couple of Octobers ago, I found myself standing on a 5,000-acre cotton crop in the outskirts of Lubbock, Texas, shoulder-to-shoulder with a third-generation cotton farmer. He swept his arm across the flat, brown horizon of his field, which was at that moment being plowed by an industrial-sized picker—a toothy machine as tall as a house and operated by one man. The picker’s yields were being dropped into a giant pod to be delivered late that night to the local gin. And far beneath our feet, the Ogallala aquifer dwindled away at its frighteningly swift pace. When asked about this, the farmer spoke of reverse osmosis—the process of desalinating water—which he seemed to put his faith in, and which kept him unafraid of famine and permanent drought.