Tuesday, February 9, 2010

Barker's Newsbites: Tuesday, Feb. 9, 2010


Well...

(*SMILE*)

...another day, another batch of "newsbites."

(*WINK*)

ENJOY...!
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13 comments:

William R. Barker said...

http://online.wsj.com/article/SB10001424052748703615904575053664017840360.html?mod=WSJ_hps_MIDDLESecondNews

Sen. Robert Menendez of New Jersey urged the Federal Reserve last July to approve an acquisition to save a struggling bank in his state. He didn't mention that the bank's chairman and vice chairman were big contributors to his political campaign.

While lawmakers routinely forward requests from constituents to government agencies, it is rare for them to make specific requests along the lines of this letter asking specific actions, bank attorneys and congressional aides said. One reason is to avoid any appearance of trying to influence the regulatory process for political ends.

The chairman of First BankAmericano at the time of the letter, Joseph Ginarte, is a high-profile attorney with offices in New York and New Jersey. He has given a total of about $30,000 to Mr. Menendez and his political-action committee since 1999, according to federal records.

The vice chairman of the bank was Raymond Lesniak, a New Jersey state senator and local political heavyweight. He also has given generously to Mr. Menendez's campaign coffers. In 2006, Mr. Lesniak held a fund-raiser at his home for the senator featuring former President Bill Clinton, according to news reports at the time.

William Black, a federal bank regulator during the savings-and-loan crisis two decades ago, and like Mr. Menendez a Democrat, called the senator's letter "grotesquely inappropriate," given his ties to the two directors. Mr. Black, now a law professor at the University of Missouri-Kansas City, said the letter crossed an unofficial line by asking regulators to approve an application instead of simply asking that it be given consideration.

An aide to the senator said the political contributions didn't influence the decision to write the letter. The aide called its language a mistake, saying it should have stopped short of asking the Fed to take specific action.

Mr. Ginarte, the bank's former chairman, didn't return a series of messages. Mr. Lesniak's office agreed to an interview but then canceled it.

The senator's aide and Ms. Bakke said the request to write the letter didn't come from the two directors but from FinPro Inc., a New Jersey consulting firm that was trying to help the bank complete its sale. FinPro officials didn't return calls seeking comment.

Mr. Menendez is a member of the Senate Banking Committee and also runs Democrats' Senate re-election efforts for this year's voting.

February 9, 2010 at 9:56 AM
William R. Barker said...

http://online.wsj.com/article/SB10001424052748704362004575001042824028862.html?mod=WSJ_hps_LEFTWhatsNews

When Charles E. Haldeman Jr. became Freddie Mac's chief executive officer in August, the ailing housing-finance giant had already consumed $51 billion of government money to stay afloat. It's likely to need even more.

Freddie's federal overseers nevertheless have instructed Mr. Haldeman to focus on something that isn't likely to make the bleak balance sheet look any better: carrying out the Obama administration plan to allow defaulted borrowers to hang onto their homes.

Fannie and Freddie remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government. Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven't yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions. Derivatives contracts of the kind that crippled American International Group Inc. still trade in the shadows. And investors remain heavily reliant on the same credit-ratings firms that gave AAA ratings to lousy mortgage securities. Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble.

On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion. [T]he companies are a convenient tool for the administration to use in its campaign to clean up the housing mess. "We're making decisions on loan modifications and other issues, without being guided solely by profitability, that no purely private bank ever could," Mr. Haldeman said in late January in a speech to the Detroit Economic Club.

By using Fannie and Freddie for such initiatives, the White House doesn't have to go to Congress for funding. The Treasury and White House can simply issue instructions to Fannie and Freddie via their federal regulator, the Federal Housing Finance Agency, or FHFA. The government is "running Fannie and Freddie as an instrument of national economic policy, not as a business," says Daniel Mudd, who was forced out as Fannie Mae's chief executive in September 2008 when the government took control.

* To be continued...

February 9, 2010 at 10:12 AM
William R. Barker said...

* Continuing from the previous posting...

http://online.wsj.com/article/SB10001424052748704362004575001042824028862.html?

The government's decision to absorb unlimited losses followed the Treasury's approval of multimillion-dollar pay packages for senior executives at each company. Republican critics have blasted those decisions, demanding investigations and pay cuts. ... The Obama administration had said it would weigh in on how to revamp the companies when it released its proposed budget earlier this month. Instead, the budget contained only a single line about the companies' future, promising to "monitor the situation" and to "provide updates…as appropriate." ... Some Republicans have said the government should play no role whatsoever in the companies in the future, meaning no implied debt guarantee and no government directives to support affordable housing. The other end of the spectrum would be to turn the companies into government agencies. Some housing experts contend that prolonged government intervention will make it more difficult and costly to eventually wean the companies off government support. "The more aggressively we continue kicking the can down the road, the larger the losses become and the harder it becomes" to address the companies' future, says Joshua Rosner, managing director at investment-research firm Graham Fisher & Co.

As mortgage delinquencies rise, Fannie and Freddie are required to set aside more capital to cover anticipated losses. Each quarter, if their revenues are insufficient to meet those financial needs, the Treasury has to kick in more money.

With delinquencies still rising, the outlook is grim. At Freddie, 3.87% of single-family mortgages were at least 90 days past due at the end of December, up from 1.72% a year earlier. Fannie is worse: 5.29% were 90 days past due in November, up from 2.13% a year earlier.

The Mortgage Bankers Association estimates that mortgage delinquencies won't peak any sooner than the middle of this year. At the current pace, around 6% of Fannie's loans and 4.9% of Freddie's are expected to go into default over the next 18 to 24 months, producing losses that would raise the price tag on Treasury's bailout to $175 billion, according to October estimates by investment bank Keefe, Bruyette & Woods Inc. The bank has since said that even that dire forecast is too optimistic.

Former FHFA head James Lockhart, the companies' top regulator until last August, says the U.S. is unlikely to ever fully recoup its investment in the two companies.

February 9, 2010 at 10:13 AM
William R. Barker said...

http://www.nypost.com/p/news/opinion/opedcolumnists/miranda_wrongs_egxhnVBB6OBzXUN9DJuvTJ

[Ralph Peters]

In a breathtakingly cynical example of playing politics, the White House just accused Republicans of playing politics over its Miranda-rights Christmas gift to the crotch bomber.

With fumbling terrorism czar John Brennan walking point, administration spokesmen attacked those who believe that treating would-be suicide-bomber Umar Abdulmutallab the way we handle shoplifters harms our national security.

The White House position is a PR blend of lies, half-truths and ignorance. Let's strip out the politics and lay out the facts from an intelligence professional's perspective:

1) The administration claims Abdulmutallab is now cooperating. That's either dishonest or idiotic - or both. If he is cooperating, jeez, you don't tell the terrorists. Why on earth leak it that the guy's blabbing, thus warning the enemy? Could the administration - just possibly - be playing politics?

2) Even if he's talking now, Abdulmutallab won't provide actionable intelligence. It's too late: His contacts had time to vacate the premises and alter their modes of operation. The best information that a low-level operative like the Jockey-shorts jerk possesses is highly perishable - the captive isn't privy to long-term plans, just the immediate details of his mission and a few basic contacts. Information that might have been valuable on Dec. 26 may be worthless by Jan. 26. Yet, in that critical early window we convinced Abdulmutallab to clam up thanks to the folly of treating him to a lawyer.

3) What plea bargain did we have to grant Abdulmutallab to get him to talk? Why should we ever have to plea-bargain with terrorists? Can any serious lawyer show us where in the laws of land warfare (which include the Geneva Convention) or in the broader sphere of international law it specifies that [non-U.S. citizen] terrorists must be read their Miranda rights upon capture?

Both sides of the aisle seek political gains from the terrorism issue - too often forgetting the essential goal of protecting the United States. This time, though, the White House is unquestionably in the wrong - trying to deceive the American people on an issue of life and death.

In the end, there is no reason - legal, moral or practical - to treat foreign terrorists bent on massacre as if they were citizens of the country they dream of destroying.

February 9, 2010 at 11:32 AM
William R. Barker said...

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=520519

The administration asked for public comments on a plan to expand offshore drilling. When they came in 2-to-1 in favor, the Interior Department sat on the news.

When you ask for public comment on a major policy issue, at some point you should make the results public, not hide them until you can figure out a way to spin the public reaction to support a conclusion you've already drawn.

On its last business day in office, the Bush administration published a proposed draft of a five-year plan to lease areas in the Atlantic and Pacific waters for oil and natural gas drilling. The plan authorized 31 energy exploration lease sales between 2010 and 2015 for tracts along the East Coast and off the coasts of Alaska and California.

Hopes that America would soon develop vast untapped energy reserves were dashed when the incoming Obama administration ordered all federal agencies and departments to halt all such pending regulations until they could be reviewed by incoming staff. Incoming Interior Secretary Ken Salazar extended the public comment period by 180 days.

Last April, Salazar said President Obama told him regarding the comment period "to make sure that we have an open and transparent government" and to make sure that DOI was "maximizing the opportunity for the public to give us guidance on what it is they want us to do" about expanding domestic energy exploration and development.

Well, the public provided no small amount of guidance. The Interior Department announced in September it had received more than 530,000 comments. It did not say, however, how many supported or opposed expanded drilling. It's now four months after the close of this extended comment period, so where are the results? What happened to the open and transparent process?

Instead, on Jan. 6 Salazar announced plans, as the energy news service Greenwire put it, that "will require more detailed environmental reviews, more public input and less use of a provision to streamline leasing." In other words, we were being promised more stalling, not more drilling.

Former House Speaker Newt Gingrich's group, American Solutions, wanted to know and filed a Freedom of Information Act request on the comment period tabulation on Oct. 26, 2009. After weeks of delay and a second FOIA request, some 500 pages of e-mails were received from the DOI's Minerals Management Service (MMS).

Gingrich's group had heard from sources that the result of the tabulation was a 2-to-1 lopsided victory for expanded drilling. An e-mail dated Oct. 27, 2009 from MMS Director Liz Birnbaum to other senior MMS and DOI officials, including Salazar's chief of staff, confirmed the result and discussed ways of hiding it from the American people.

The e-mail reads, in part: "We do have a preliminary tabulation of the comments, (but) it has not yet gone to the Secretary. So the Secretary can honestly say in response to any questions that he's not yet seen any analysis of the comments — staff is still working on it. I did, however, confirm to him the 2-1 split these guys (American Solutions) are emphasizing."

A recent Congressional Research Service Report says that if all our energy resources are added up and converted to a barrels-of-oil equivalent, the U.S. has the largest energy reserves in the world. "Our overwhelming coal, natural gas and oil resources represent tens of trillions of dollars in wealth and millions of American jobs," said Sen. James Inhofe, R-Okla., who, along with Sen. Lisa Murkowski, R-Alaska, released the report last fall.

The American people support increased domestic energy development by the same numbers and with the same fervor as they opposed the nationalization of health care. Certainly we need the domestic energy. Yet in both cases the administration dismisses the will of the people.

In this case, it's sitting not only on vast stores of energy, but on the truth about what the people want.

February 9, 2010 at 11:33 AM
William R. Barker said...

http://www.miamiherald.com/opinion/editorials/story/1468724.html

What little is left of Venezuela's democracy has taken a literal beating from President Hugo Chávez's uniformed goon squads - again.

Police used a variety of weapons, from water cannons to plastic bullets, last week to disperse hundreds of student protesters who refuse to knuckle under to an increasingly desperate and unpopular president determined to remain in power at all costs. [T]he frustration level inside the country is rising as Venezuela's political and economic situation goes from bad to worse. Rolling blackouts, currency devaluation and price inflation (the worst in Latin America), water shortages and scarce commodities - this is what 11 years of a Chávez presidency have produced.

As the streets of Caracas were in turmoil, the U.S. director of national intelligence, former Admiral Dennis Blair, was giving Congress an unvarnished assessment of Mr. Chávez's presidency that underlines the danger he represents to the entire region: [Chávez] has cultivated friendships in all the wrong places, beginning with Iran, spent $6 billion to buy weapons from Russia, and provided covert support to the terrorist Revolutionary Armed Forces of Colombia (FARC).

February 9, 2010 at 1:47 PM
William R. Barker said...

http://blogs.usatoday.com/oped/2010/02/debate-on-war-on-terror-our-view-national-security-team-fails-to-inspire-confidence.html

Ever since the botched Christmas Day plot to blow up a Detroit-bound airliner, the Obama administration's national security officials have struggled to assure the public that they know exactly what they're doing.

So far, they're achieving the opposite, and they're needlessly adding some jitters in the process:

CIA Director Leon Panetta and other top officials agreed last week that an attack by al-Qaeda is likely in the next three to six months. The warning is bound to frighten the public, with no obvious benefit beyond the ability to say "I told you so."

Top administration officials revealed last week that bombing suspect Umar Farouk Abdulmutallab was again cooperating with authorities. Great. But the news pretty much negates earlier claims that no intelligence was lost when Abdulmutallab was prematurely read his rights.

In Senate testimony, National Intelligence Director Dennis Blair had a "Duh!" moment as he hit his forehead and acknowledged that authorities fumbled the initial questioning of Abdulmutallab by failing to call in the high-value interrogation group, which was created to question terrorism suspects. Refreshingly candid, yes, but not a statement that inspires confidence. Especially when the same day, at another Senate hearing, FBI Director Robert Mueller testified that the high-value unit was still in its "formation stages" and that "there was no time" to get it to Detroit.

All of this follows the string of blunders that allowed Abdulmutallab to carry explosives onto a U.S.- bound plane in the first place. The chaos that followed his arrest now looks just as bad.

According to news accounts, Abdulmutallab was questioned by, and cooperated with, the FBI for a grand total of 50 minutes before going into surgery. When he emerged, he became combative, asked for a lawyer and was read his rights. (At the time, remember, no one knew whether other bombers had been dispatched simultaneously.)

A decision of such magnitude should have involved the top brass in intelligence and law enforcement. But Blair, Mueller and Homeland Security Secretary Janet Napolitano have all testified they were not consulted. Mueller said the decision to read the suspect his Miranda rights was made by agents in the field.

Some problems, such as the post-arrest misjudgments, are of the Obama administration's making. Others, such as the intelligence failures preceding the incident, are institutional. There is, however, a common denominator: slipshod coordination leading to bad judgment.

If Panetta is right about another attack, there's not much time for national security officials to get their act together.

February 9, 2010 at 1:48 PM
William R. Barker said...

http://reason.com/archives/2010/02/08/back-to-the-drawing-board

In just about every speech at their 2008 convention, Democrats promised voters that a change in the White House would, in Barack Obama’s formulation, restore “our moral standing” in the world. Replace the unilateralist cowboy at the top with a humbler multilateralist, and the path would finally be cleared to fix vexing international issues such as curbing carbon emissions and dealing with the mullahs in Iran. Like many of the party faithful’s long-nurtured beliefs, this hope has disintegrated on contact with reality.

“America is losing the free world,” said a January headline in the Financial Times. While that statement is exaggerated, the sentiment behind it has been gaining traction around the globe, especially in the wake of the climate conference debacle in Copenhagen. It’s not just that the less confrontational American president has been unable to deliver results. He can’t even get his phone calls returned.

“On the last day of the [Copenhagen] talks, the Americans tried to fix up one-to-one meetings between Mr Obama and the leaders of South Africa, Brazil and India—but failed each time,” Gideon Rachman wrote in the Financial Times piece. “The Indians even said that their prime minister, Manmohan Singh, had already left for the airport. So Mr Obama must have felt something of a chump when he arrived for a last-minute meeting with Wen Jiabao, the Chinese prime minister, only to find him already deep in negotiations with the leaders of none other than Brazil, South Africa and India.”

Obama’s approach was supposed to produce a more cooperative Tehran and Moscow, fewer terrorists in the Muslim world, and vast new initiatives to fight global poverty. Instead, Iran has murdered dissenters while speeding up its nuclear program, Russia hasn’t discernibly budged even after the U.S. abandoned its missile shield in the Czech Republic and Poland, a Muslim suicide bomber was stopped at the last minute from blowing up a plane over Detroit on Christmas, and global gatherings have produced even less concrete action than usual.

These developments illustrate a phenomenon that has been playing out across a variety of public policy areas: Progressive Democrats, after being outfoxed by Ronald Reagan, triangulated to the policy margins by Bill Clinton, then routed under the first six years of George W. Bush, are having many of the nostrums they championed during the wilderness years tested in the real world for the first time in decades. The initial results of this long-delayed peer review have been a shock to the progressive system.

The Copenhagen crackup was a dream killer in more ways than one. Not only did the breakdown give the lie to the notion that a cranky Texas oilman was the single greatest impediment to international cooperation and enlightened environmental policy; it laid waste to the argument that yoking the developing world to a “do as we say, not as we did” policy of energy consumption will somehow prove to be an economic and environmental “win-win.” If that’s true, the leaders of India and China - the latter of which has been serially praised for its green-energy initiatives by the likes of New York Times columnist Thomas Friedman - certainly don’t believe it. No amount of international do-goodism is going to prevent countries from acting in what they perceive to be their own self-interest.

* To be continued...

February 9, 2010 at 1:48 PM
William R. Barker said...

* Continuing from the previous post...

http://reason.com/archives/2010/02/08/back-to-the-drawing-board

Obama and the Democrats have been peddling a similar win-win line about the creation of up to 5 million “green jobs” in America, through a combination of cap-and-trade carbon permits, home weatherization, clean coal, higher gas mileage standards, environmental regulation, and various renewable-energy mandates. The “green jobs” political juggernaut has been credited to Van Jones, who was obliged to resign as Obama’s “Green Czar” last summer after reports surfaced that he’d signed a petition supporting an investigation of Bush’s involvement in 9/11. What’s interesting about Jones’ beautiful-sounding concept is that even its chief supporters admit there’s no evidence the theory is true. Which is hardly surprising, since most of Obama’s proposed environmental policies involve making energy more expensive while using more tax dollars to subsidize expensive clean energy sources. As The New Yorker put it in a long, flattering profile of Jones in January 2009, “the mechanics of creating green jobs - or even what jobs should qualify for the title - have yet to be worked out.”

The debate over these phantom jobs, against a backdrop of double-digit unemployment, will likely suck up the political oxygen in Washington after the protracted health care debate finally wheezes to a close. But Americans already have found empty pots at the end of other Democratic rainbows.

The $789 billion stimulus package of February 2009, thanks to a theoretical “multiplier” that would convert federal dollars into more than their worth in job creation, was supposed to (according to administration economists) “create or save” 3.5 million jobs and prevent unemployment from reaching as high as 9 percent by the end of 2010. Instead, joblessness shot through the 10 percent barrier before the end of 2009, and the government’s own tracking of the jobs allegedly created or saved has become a laughingstock with its double counting and imaginary ZIP codes.

What about the lobbying scourge that Democrats (like all good opposition parties) opposed so vociferously in 2008? Progressive theory holds that regulation of K Street, as opposed to a cutback in overall regulation, is the key to “change the culture of corruption” in Washington, as candidate Obama repeatedly promised to do. How’d that work out in practice? In December Politico reported that “Washington’s influence industry is on track to shatter last year’s record $3.3 billion spent to lobby Congress and the rest of the federal government - and that’s with a down economy and about 1,500 fewer registered lobbyists in town.”

February 9, 2010 at 1:48 PM
William R. Barker said...

http://www.nypost.com/p/news/business/bronx_cheer_for_the_unemployment_6C1GdORHoKjsvdrlffu7SN

Whoopee! There was a big drop in the unemployment rate for January.

But if you look at the numbers closely the sound you'd hear is more Whoopee Cushion than cheering.

According to the official Labor Department numbers, the jobless rate in the US dipped impressively from 10% percent in December to 9.7% in January.

Since I have kids who need jobs, there is nobody in this country who'd be more happy to leave it just like that - the recession is over, employment is on the way up.

But I'll share with you some discoveries that a few inquisitive skeptics and I came across without much effort.

Most analysts think the jobless rate fell because people are leaving the labor force. And if you aren't looking for a job, you aren't unemployed - at least that's the way the Labor Department sees it.

That's only a small part of the story.

[G]o to www.bls.gov and open the press release issued last Friday. Click on Economic Release, Employment Situation.

At the bottom of the release, you'll see Table A-1. Click on that.

The top of the A-1 table will be titled "Household Data." In case you are not familiar with the way the Labor Department does things, this is the phone survey from which the government calculates the monthly unemployment rate - in this case, the heralded 9.7%.

Now scroll down the left and look for the heading "Men, 20 Years and Over." Then four lines under that will be the heading "employed." The second and third column on the right will show you the not-seasonally-adjusted number of men, over 20 years old, who claimed to have had jobs in both months.

This line shows that when the Labor Department called people's homes for its January survey, it determined through actual calls and estimates that those 70.251 million guys had jobs in December 2009 but only 69.337 million were working last month.

When you do the math, that means 914,000 fewer men said they had jobs.

So, shouldn't that have made the unemployment rate rise? Silly you! You probably haven't heard of the magic of seasonal adjustments.

Follow that line all the way to the right of the page and you'll see that after adjusting for what the computers think ought to have happened in December and January (that's what a seasonal adjustment is, if you don't already know), the government decided that male employment only went down from 70.391 million in December to 70.390 million in January.

That's a drop of only 1,000, not the 914,000 that it would have been if the figure hadn't been fiddled with. In fact, when you get right down to it, the government confesses that without factoring in the effects of the seasons the unemployment rate would have actually [grown to] 10.6% in January, not [shrunk] to 9.7% after seasonal adjustments.

February 9, 2010 at 6:30 PM
William R. Barker said...

http://articles.moneycentral.msn.com/Investing/JubaksJournal/growth-wont-dig-us-out-of-this-hole.aspx

The federal budget deficit for fiscal 2010, including a proposed $100 billion in new spending...is expected to hit $1.6 trillion. This would beat the record (set in the distant past of fiscal 2009) by $150 billion and be equivalent to 11% of U.S. gross domestic product. For reference, the budget deficit that has pushed Greece into crisis is equal to 12.7% of Greek GDP.

[The good news is] the new budget proposed by the Obama administration for fiscal 2011 (which starts in October 2010) says the annual deficit will shrink to 4% of GDP by fiscal 2014.

And now for the bad news: It ain't gonna happen. At least not if we follow the spending and taxing policies laid out in the administration's budget.

That budget assumes 2.7% GDP growth in fiscal 2010. That's reasonable. It's certainly close to the consensus among economists for this year. But looking out toward fiscal 2014, the budget quickly arrives in fantasyland. The budget projections assume GDP growth of 3.2% to 4.3% for six consecutive years. And this comes at a time when most economists - even the optimists at the Federal Reserve - are worried that this recovery will be weaker than most recoveries after recessions and that the long-term speed limit for growth in the U.S. economy is headed lower. From 1975 to 1995, full trend economic growth in the United States was about 3%. The Fed now estimates the speed limit to growth at 2.5%. Other economists, including those at the Congressional Budget Office, think it's even lower - 2.3% annually or so. A slower economic growth rate caused by high debt levels makes it even harder to grow your way out of the hole. In other words, the U.S. can't grow itself out of this hole nearly as easily as the Obama administration wishes. Under the current trend, the United States will show a debt-to-GDP ratio above 100% by 2012.

Slower growth after the recession is one thing arguing against an easy solution, but it's by no means the only thing. The interest rate the U.S. pays on its debt is rising - just when the amount of debt has soared.

And then, of course, there's the long-term demographic trend. The United States is an aging country. A country that is aging in absolute terms...can look forward to a slower rate of economic growth.

February 9, 2010 at 6:31 PM
William R. Barker said...

http://www.humanevents.com/article.php?id=35552

[By Patrick J. Buchanan]

They are called the PIGS - Portugal, Ireland, Greece, Spain. What they have in common is that all are facing deficits and debts that could bring on national defaults and break up the European Union.

What brought the PIGS to the edge of the abyss?

All are neo-socialist states that provide welfare for poor people, generous unemployment, universal health care, early retirement and comfortable pensions. Most consume 40 percent to 50 percent of their gross domestic product annually, a crushing burden on the private sector.

Dying populations is a second cause. After two world wars, the Europeans lost their faith and embraced hedonism and materialism, la dolce vita. Large families fell out of favor. Women put off marriage and babies, and went to work. Birth control and abortion were made readily available in every country and, if not, just across the border.

For 30 years, the fertility rate of Europe has been below the 2.1 children per woman necessary to replace a population. In Russia and Ukraine, a million people disappear yearly. In Western Europe, the passing of the native-born goes on quietly, as Third World peoples come to fill the empty spaces left by the aborted and unconceived.

Turks are in Germany. Pakistanis, Indians, Arabs and Caribbean peoples are in Britain. Algerians, Tunisians and Moroccans occupy the southern coast of France and the banlieues around Paris.

These newcomers have neither the education nor skills of the Europeans. Hence, they earn less and contribute less in taxes, but consume more per capita in social benefits.

As the number of young entering the European labor forces shrinks, the number of seniors and aged grows. And thanks to advances in medicine, these retirees live lengthening lives. Thus the burden of pensions and health care grows steadily and the need for higher taxes and larger worker contributions increases.

Then there is globalization. In Europe, wages and taxes are high, regulations heavy, unions strong, and lawyers ubiquitous. Manufacturers, to cut costs, have been outsourcing production to where the labor is cheap and abundant, the unions are nonexistent or weak, and health, safety and environmental regulations are lax. Welcome to China.

* To be continued...

February 9, 2010 at 6:48 PM
William R. Barker said...

Continuing from the previous post...

http://www.humanevents.com/article.php?id=35552

Greece is the first European nation to hit the wall. As an EU member state, she is obligated to keep her deficit to 3 percent of GDP. But this year's is 12.7 percent, and Athens needs to issue $75 billion in bonds alone to finance the deficit and roll over debt.

The markets, however, are rating Greek bonds as risky bonds. To borrow, Athens must pay more than twice the interest rate Germany pays. Faced with strikes by public employees and students, Athens appears to lack the political will to make the cuts necessary to bring the budget back toward balance.

As Portugal, Ireland and Spain gaze on, Greece approaches a moment of truth. Should she default, their bonds, too, will plunge in value out of fear of a copycat default, and the interest rate they pay would also rise. They, too, might then take the Argentine road.

The EU's crisis would then be like a crisis in the United States should California default on its state bonds and interest rates on other municipal bonds surged to double digits.

Is there a way out?

One option is for the EU to bail out Greece with a huge loan. But if Greece cannot meet her debt obligations now, how could she pay back the loan? And if the EU cannot compel Greece to make deep budget cuts today, what leverage would the EU have after bailing out Athens and removing today's pressure on the government?

A second option is to call in the International Monetary Fund, which imposes tough conditions on nations receiving IMF loans - the Third World therapy. But problems would arise here, too.

First, it would be an admission that the EU cannot manage its own household. Second, the largest contributor to the IMF is Uncle Sam.

Why should America bail out Greece, when the EU is larger and richer and did not help bail out California in 2009? The stimulus bill did that in 2009, to which Europe contributed nothing.

Where Greece is at today, however, we shall all arrive tomorrow.

In every Western nation, government is growing beyond the capacity of taxpayers to bear. Deficits and debt are surging. Not enough children are being born to replace parents. The immigrant poor who consume more than they contribute are coming to take the empty places. Seniors and elderly are growing as a share of the population. Companies are saying goodbye to the West and moving offshore to low-wage lands.

The West begins to look like yesterday, while the East begins to look like tomorrow.

The West is approaching a crisis of solvency and of democracy. We shall see if democracy, which grew popular lavishing benefits upon all, is strong enough to start clawing them away. Or will democracy try to keep piling the burden on the producers until they rebel or depart?

February 9, 2010 at 6:49 PM

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