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?
His convention speech re-introducing his wife to the country was an uneven, but ultimately effective, performance.
Just before Bill Clinton strode onstage to be his wife’s character witness, his wife’s convention planners played a video tribute to him. “When he said stuff, you believed it,” a man dressed in union gear said of Bill Clinton, “because you lived it.”
This was no accident: An overwhelming number of voters don’t trust Hillary Clinton. That credibility and character gap is the one thing that might stop Americans from electing a second President Clinton. And so the master of persuasion bragged on and on about his wife: career highlights, familiar anecdotes, and enough warm and cheesy sentiments to launch a thousand wedding toasts.
“If you were sitting where I am sitting and you heard what I heard at every dinner conversation and … on every long walk, you would say this woman has never been satisfied with the status quo about anything,” Bill Clinton said. Having been the candidate of change in 1992, Bill Clinton knows his wife faces headwinds against Donald Trump’s promise of radical, unruly change. “She always wants to move the ball forward,” Bill Clinton said. “That just who she is.”
This week, the co-author of Donald Trump’s autobiography said in The New Yorker that if he were writing The Art of the Deal today, it would be a very different book with a very different title: The Sociopath.
To title a person’s life story with that label is a serious accusation, and one worth considering. The stakes are high. Tony Schwartz, the writer of the best-selling book, said that he “genuinely believe[s] that if Trump wins and gets the nuclear codes, there is an excellent possibility it will lead to the end of civilization.” In that light, Schwartz said he feels “deep remorse” at having “put lipstick on a pig.”
That seemed to me to be something of a contradiction to the charge of sociopathy, as pigs have been found to show signs of empathy. If you call a pig by name, it will come and play with you, reciprocating affection like a dog. So which is it, pig or sociopath?
In his convention speech, he suggested that Muslims need to earn the rights that all other Americans enjoy.
I love Bill Clinton. But I didn’t love his speech Tuesday night in Philadelphia. Given the job of humanizing his wife, he came across as genuinely smitten. But he failed to do what he’s done in every convention speech he’s delivered since 1992: tell a story about where America is today and what can be done to move it forward. He called his wife a great “change maker” but didn’t define the change America needs right now.
But the worst moment of the speech came near its end, when Clinton began to riff about the different kinds of people who should join Hillary’s effort. “If you love this country, you’re working hard, you’re paying taxes, you’re obeying the law and you’d like to become a citizen, you should choose immigration reform over someone that wants to send you back,” he said. Fair enough. Under any conceivable immigration overhaul, only those undocumented immigrants who have obeyed the law once in the United States—which includes paying taxes—will qualify for citizenship. Two sentences later, Clinton said that, “If you’re a young African American disillusioned and afraid … help us build a future where no one’s afraid to walk outside, including the people that wear blue to protect our future.” No problem there. Of course African Americans should be safe from abusive police, and of course, police should be safe from the murderers who threaten them.
Four decades after he asked his wife to set aside her own ambitions, he asked Americans to return her to the White House in her own right.
On Tuesday night, Bill Clinton spoke before thousands of delegates at the Democratic National Convention, and did his best to repay a debt he’d incurred 45 years before. He met Hillary in 1971, and she married him four years later. “I really hope,” he said, “that her choosing me and rejecting my advice to pursue her own career was a decision she would never regret.”
Now, as she pursues the presidency in her own right, he took the opportunity to reintroduce her to the public, spending most of his time on stage rehearsing the years before she became a national figure. “Cartoons are two-dimensional,” Clinton said, and did his best to render his wife vivid, human, and real.
It was a speech that aimed to move past some of the central paradoxes of Clinton’s candidacy. She sacrificed her ambitions to advance her husband’s career, but his success has now enabled her own rise. Most Americans view her unfavorably, and yet she has just become the first woman to be a major-party nominee for the president.
The First Lady took to the stage at the Democratic National Convention, and united a divided hall.
Most convention speeches are forgotten almost before they’re finished. But tonight in Philadelphia, Michelle Obama delivered a speech that will be replayed, quoted, and anthologized for years. It was as pure a piece of political oratory as this campaign has offered, and instantly entered the pantheon of great convention speeches.
Obama stepped out onto a stage in front of a divided party, including delegates who had booed almost every mention of the presumptive nominee. And she delivered a speech that united the hall, bringing it to its feet.
She did it, moreover, her own way—forming a striking contrast with the night’s other speakers. She did it without shouting at the crowd. Without overtly slamming Republicans. Without turning explicitly negative. Her speech was laden with sharp barbs, but she delivered them calmly, sometimes wryly, biting her lower lip, hitting her cadence. It was a masterful performance.
The Democratic chairwoman had few supporters—but clung to her post for years, abetted by the indifference of the White House.
PHILADELPHIA—As Debbie Wasserman Schultz made her unceremonious exit as chairwoman of the Democratic National Committee, what was most remarkable was what you didn’t hear: practically anybody coming to her defense.
The Florida congresswoman did not go quietly. She reportedly resisted stepping down, and blamed subordinates for the content of the leaked emails that were released Friday, which clearly showed the committee’s posture of neutrality in the Democratic primary to have been a hollow pretense, just as Bernie Sanders and his supporters long contended. She finally relinquished the convention gavel only after receiving three days of strong-arming, a ceremonial position in the Clinton campaign, and a raucous round of boos at a convention breakfast.
The pressures of national academic standards have pushed character education out of the classroom.
A few months ago, I presented the following scenario to my junior English students: Your boyfriend or girlfriend has committed a felony, during which other people were badly harmed. Should you or should you not turn him or her into the police?
The class immediately erupted with commentary. It was obvious, they said, that loyalty was paramount—not a single student said they’d “snitch.” They were unequivocally unconcerned about who was harmed in this hypothetical scenario. This troubled me.
This discussion was part of an introduction to an essay assignment about whether Americans should pay more for ethically produced food. We continued discussing other dilemmas, and the kids were more engaged that they’d been in weeks, grappling with big questions about values, character, and right versus wrong as I attempted to expand their thinking about who and what is affected—and why it matters—by their caloric choices.
Why Donald Trump’s recent comments on the alliance caused such an uproar
Donald Trump shocked foreign-policy professionals and observers when he remarked to The New York Times that if he were president, the United States might not come to the defense of an attacked NATO ally that hadn’t fulfilled its “obligation to make payments.” The remark broke with decades of bipartisan commitment to the alliance and, as Jeffrey Goldberg wrote in The Atlantic, aligned well with the interests of Russia, whose ambitions NATO was founded largely to contain. One Republican in Congress openly wondered whether his party’s nominee could be “seemingly so pro-Russia” because of “connections and contracts and things from the past or whatever.”
It’s not unlike Trump to make shocking statements. But these ones stokedparticularalarm, not least among America’s allies, about the candidate’s suitability for the United States presidency. So what’s the big deal? What does NATO actually do?
Hillary Clinton made history on Tuesday night—and her husband reintroduced the first woman to secure a major-party nomination to America.
In a historic moment, the Democratic Party formally nominated Hillary Clinton for president Tuesday, making her the first female nominee for the nation’s highest office in 240 years.
The vote was merely a formality, despite the noisy protestations of some diehard supporters of Senator Bernie Sanders. Sanders himself made a powerful gesture toward party unity, requesting that Vermont cast its votes last so that he could step to the microphone and deliver Clinton the nomination he had fought so hard to wrest from her. “I move that all votes cast by delegates be reflected in the official record, and I move that Hillary Clinton be selected as the nominee of the Democratic Party for president of the United States,” Sanders said. And that was that: Clinton crashed through at least one of the “highest, hardest” glass ceilings that, as she put it eight years ago, she had only managed to imprint with 18 million cracks.
When something goes wrong, I start with blunder, confusion, and miscalculation as the likely explanations. Planned-out wrongdoing is harder to pull off, more likely to backfire, and thus less probable.
But it is getting more difficult to dismiss the apparent Russian role in the DNC hack as blunder and confusion rather than plan.
“Real-world” authorities, from the former U.S. Ambassador to Russia to FBI sources to international security experts, say that the forensic evidence indicates the Russians. No independent authority strongly suggests otherwise. (Update the veteran reporters Shane Harris and Nancy Youssef cite evidence that the original hacker was “an agent of the Russian government.”)
The timing and precision of the leaks, on the day before the Democratic convention and on a topic intended to maximize divisions at that convention, is unlikely to be pure coincidence. If it were coincidence, why exactly now, with evidence drawn from hacks over previous months? Why mail only from the DNC, among all the organizations that have doubtless been hacked?
The foreign country most enthusiastic about Trump’s rise appears to be Russia, which would also be the foreign country most benefited by his policy changes, from his sowing doubts about NATO and the EU to his weakening of the RNC platform language about Ukraine.