Monthly Archives: January 2012

Quote of the Day: 20120131

Once a government is committed to the principle of silencing the voice of opposition, it has only one way to go, and that is down the path of increasingly repressive measures, until it becomes a source of terror to all its citizens and creates a country where everyone lives in fear.

– President Harry S. Truman as reported in goodreads.

Stratfor: 20120131

STRATFOR

Germany’s Role in Europe and the European Debt Crisis

By George Friedman | January 31, 2012

The German government proposed last week that a European commissioner be appointed to supplant the Greek government. While phrasing the German proposal this way might seem extreme, it is not unreasonable. Under the German proposal, this commissioner would hold power over the Greek national budget and taxation. Since the European Central Bank already controls the Greek currency, the euro, this would effectively transfer control of the Greek government to the European Union, since whoever controls a country’s government expenditures, tax rates and monetary policy effectively controls that country. The German proposal therefore would suspend Greek sovereignty and the democratic process as the price of financial aid to Greece.

Though the European Commission rejected the proposal, the concept is far from dead, as it flows directly from the logic of the situation. The Greeks are in the midst of a financial crisis that has made Greece unable to repay money Athens borrowed. Their options are to default on the debt or to negotiate a settlement with their creditors. The International Monetary Fund and European Union are managing these negotiations.

Quote of the Day: 20120130

My choice early in life was either to be a piano-player in a whorehouse or a politician. And to tell the truth, there’s hardly any difference.

— President Harry S. Truman as reported in: brainyquote.com

Tracking the Next Recession

It’s a little late in the game to start this tracking series since we have been reading recession forecasts for months. However, the equity markets are skating happily on and the mainstream media is still, after 4 years seeing green shoots.

We have added this graphic for interest (updated 20130517).

Chronologically listed, the reports are:

Stratfor: 20120124

STRATFOR

Considering a U.S.-Iranian Deal

By George Friedman | January 24, 2012

Last week, I wrote on the strategic challenge Iran faces in its bid to shape a sphere of influence stretching from western Afghanistan to Beirut on the eastern Mediterranean coast. I also pointed out the limited options available to the United States and other Western powers to counter Iran.

One was increased efforts to block Iranian influence in Syria. The other was to consider a strategy of negotiation with Iran. In the past few days, we have seen hints of both.

Copyright, Reproduction, Commentary, News and ‘Fair Use’: Our Policy

This is a young site; our first post went up Nov. 15, 2011. We’re 11 weeks old! It feels like 111 weeks. In this time, we have experimented with content while being cognizant of the fact we are dependent on others for much of it, if not for actual reproduction or citation, at least for ideas and themes to explore. We have always made direct attribution to the work of others with links where possible.

Recently we decided to republish works that we felt our readers might not have ready access to. In the two cases so far, Stratfor and Things That Make You Go Hmmm… we obtained permission in writing. Another email publication, Reality Check by Gary North, we asked for permission but received no response. So although we enjoy reading it ourselves, we will not attempt to republish it.

The issue of partial reproduction turns out to be a thornier matter. Read on if you want our thoughts and experiences on the issue and our policy on foreign content.

Debt Deleveraging: Where We’re At

The problem that the world finds itself in is widely acknowledged to be a problem of debt and insolvency. Until now, most of the solutions attempted have been to fix problems of liquidity arising from the debt problem without attacking the underlying debt problem. Indeed as we write, we watch the ongoing futile European attempt to fix over-indebtedness and insolvency by exerting ever effort to prevent capital loss as a means of deleveraging.

McKinsey & Company published a report this week titled “Working out of debt“. Their report acknowledges that deleveraging is necessary, shows where we are in the debt deleveraging cycle and discusses what is necessary for the world to try and grow its way out of debt.

What follows is a presentation of their key points with our comments. The reader is referred to our many other posts, on debt, particularly our 4-part series on money starting with “Understanding Money: Part 1 – Introduction” and our post “Has the Thief Been Caught?” in which we posit that excessive debt reduces future growth, an effect that is already well underway.

Quote of the Day: 20120119

gold … has been and continues to remain the only currency equivalent that isolates devaluation risk, and excludes counterparty risk while being an implicit bet on the stupidity of those in charge

— Zero Hedge, “A Longer-Term Perspective On Gold” And More, From Nomura

The Case for a Genuine Gold Dollar by Murray N. Rothbard – Commentary

When we recently encountered “The Case for a Genuine Gold Dollar” by Murray Rothbard, we decided it deserved a critical read and commentary, especially in the context of our post: “Gold: Always a Store of Value but Never a Currency“. Since the issue of gold or gold-backed currency will never die, any informed input to the debate is important. Ours follows:

Stratfor: 20120117

STRATFOR

Iran, the U.S. and the Strait of Hormuz Crisis

By George Friedman | January 17, 2012

The United States reportedly sent a letter to Iran via multiple intermediaries last week warning Tehran that any attempt to close the Strait of Hormuz constituted a red line for Washington. The same week, a chemist associated with Iran’s nuclear program was killed in Tehran. In Ankara, Iranian Parliament Speaker Ali Larijani met with Turkish officials and has been floating hints of flexibility in negotiations over Iran’s nuclear program.

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