Europe Must Burn the Bridges and Create the Eurobond. US, UK Must Stop Myopic Opposition to Financial Transaction Tax

There is popular support for further European integration, as the Irish vote shows. Furthermore, that may be the only opportunity for the survival of the common currency in the form we know it today. Nonetheless the ECB must be given the authority, if it does not have it already, to devalue the euro and make the economies of the common currency more competitive.

Above all, they all must act fast. There must be a calculated decisiveness in their actions. Actually I tend to think that the two steps – eurobond and devaluation – must be taken together.

Irish Vote Yes in Fiscal Pact Referendum – SPIEGEL ONLINE.

The main stumbling block toward the eurobond is of course Germany although several other countries bordering the Baltic and North Seas are also opposed to the idea for obvious reasons: The eurobond would make borrowing to them more costly than with the national notes is today. But that is what unity is all about. Germany and the others can more than recoup their loses by keeping the huge common, duty free market to their products. The latter will most likely change very rapidly if the euro disappears in which case we may see intra-Europe commerce plummet.

This is actually the great opportunity for Germany to redress the wrongs of two world wars. Yes, Germany has paid huge reparations in the past but this would be a voluntary act, saving the continent’s economy, perhaps the world economy. It would be a reversal of roles: Germany saving the world economy that we screwed up; the opposite from 1939-45.

The exit of Greece from the eurozone is almost inevitable now, due to the country’s political atmosphere. The question now is whether damage control by the ECB, IMF, will be effective enough in dealing with the separation.

ECB chief calls euro ‘unsustainable,’ slams Spanish bank response – The Washington Post.

ECB President Mario Draghi said on Thursday that he believed the euro zone’s current structure  is unsustainable, and added that the region’s governments must surrender far more budget and regulatory power to a central authority if the currency union is to be saved.

As he spoke, the Irish did their part.

The eurozone crisis is affecting the U.S. tremendously but the greatest contribution we could offer to help, instead of sermonizing, is to cease the opposition to the financial transaction tax (FTT) – intended to diminish wild speculation in the financial markets. We triggered this global crisis and it is it the least we could do. But we do not support the (continental) European proposal because of Wall Street’s influence in Washington. I do believe the republican candidate Romney is also clueless in this regard and will cave in to the same forces. We, with the UK, stand alone on the rock of idiocy.

Regarding the FTT, the UK (that is the conservative government) is just being the little selfish twerp that it has been since taking office. UK’s GDP is much more dependent on The City than their continental neighbors are on their respective financial markets. And PM Cameron’s policies reflect that fact.

Our economic sluggishness today is in part caused by Europe’s crisis and Europe’s crisis is caused, in part, by our political surrender to the influence of money. Everybody will lose unless we have the courage to change.

Egyptian Presidential Election Today, French, Greek Legislative Elections in June – All Critical

The Egyptian candidates, 13 in all, range from islamists to former ministers of the Mubarak regime. The outcome of this election, the first free election in Egyptian history, may have profound consequences in the Middle East. Unfortunately, women have been marginalized in this historic event. Not a single presidential candidate is female. Egyptian women were very active during the revolution which led to the election.

The French will go to the polls to elect a new National Assembly and its composition will be paramount in determining whether President Hollande will be able to carry out his program or instead adopt a more centrist approach.

With the arrival of Hollande, huge differences have surfaced between Germany and France in how to deal with the crisis. Hollande’s call for the creation of the euro-bond has been rejected by Germany, The Netherlands, and Finland.

With the euro bond, the borrowing cost for these 3 nations would increase while others, debt strapped nations, would find borrowing cheaper. The euro bond would homogenize their credit ratings.

All continental members of the EU want to impose a tax on financial transactions which would benefit fiscally in two ways: By generating revenue and by reducing speculation. Only the U.S and Britain oppose the move. But by opposing this tax, and the reduction of speculation, both the U.S. and Britain may be shooting themselves in the foot. If the EU breaks apart, they will feel the pain too. Britain is part of the EU but not of the eurozone.

The Greeks are forming a new government in June and the composition of this government may be the key on whether Greece stays in the euro zone. Further international fiscal support for Greece hinges on whether the new Greek government swallows the bitter pill of austerity reforms. French President Hollande however favors reducing the size of the pill and instituting growth measures simultaneously.

If Greece leaves the euro zone, all bets are off. There is really no precedent in this area so the consequences are difficult to predict. Greece leaving the common currency zone may trigger a contagion effect in both Italy and Spain.

I do not understand why the ECB does not devaluate the euro more to make European-made products more competitive. I believe decisive action in that area should be taken rapidly but it is not happening and the exchange rate is being left to the currency markets where the euro has lost some ground but not enough to really make a difference.

What we all can count on is that all these events will affect us profoundly here in the U.S. The only thing certain is uncertainty.

In Drugs, Cuba Topics, the U.S. Is Isolated at Summit of the Americas

Drug war, including legalization, hot topic at Summit of the Americas – CNN.com.

“Obama voiced his view that legalizing drugs isn’t a valid option in the United States twice on Saturday — first during a meeting of business leaders alongside Brazilian President Dilma Rousseff and Santos and later during the event’s opening day session.”

I ask: Why? We are not winning the drug war. In fact, we are not winning any war but we kept on getting  in trouble because it is good business – for some; not necessarily for the county. And also because our leaders are not the ones doing the fighting nor are their kids. No wonder Milton Friedman, the economic adviser and ideologist of the Reagan administration, considered ending the military draft his greatest achievement.  The voluntary army makes war less disturbing among the high circles at tea time.

I digressed a bit. Back to the drug issue: With less than 5% of the world population, we have 25% of the prisoners of the world – that is counting all the bad guys such as North Korea, Burma, Cuba, etc. Does the lyric “the land of the free” in our National Anthem still apply?

From a Ron Paul website:

# 1 United States: 2,019,234 prisoners
# 2 China: 1,549,000 prisoners
# 3 Russia: 846,967 prisoners
# 4 India: 313,635 prisoners
# 5 Brazil: 308,304 prisoners
# 6 Thailand: 213,815 prisoners
# 7 Ukraine: 198,386 prisoners

And per capita:

# 1 United States: 715 per 100,000 people
# 2 Russia: 584 per 100,000 people
# 3 Belarus: 554 per 100,000 people
# 4 Palau: 523 per 100,000 people
# 5 Belize: 459 per 100,000 people
# 6 Suriname: 437 per 100,000 people
# 7 Dominica: 420 per 100,000 people

Drug legalization has gained traction in Central America, which is being squeezed between the suppliers to the south and the consumers to the north. Mexico is in a virtual state of civil war, notably in the northern region near the U.S. border. The cartels get their arms from across the Rio Grande. Even peaceful Costa Rica is beginning to feel the effect of the drug traffic and its president recently called for the legalization of pot.

President Obama’s best reason to oppose legalization (of anything) is that we have prohibited those substances for such a long time that is almost a tradition now. The man who promised “Change you can Believe in” has brought very little of it. And his likely opponent, Romney, is not any better; possibly worse.

If elected governor  in 2013, I intend to propose the decriminalization of marijuana sale and use in New Jersey – with the exception of the established radius around schools. However, under federal law, it will still be a crime. The N.J. Police will not chase you but the US DEA will if my proposal is adopted. I also intend to pardon a number of non-violent drug prisoners, notably those arrested because of possession of pot, now in N.J. jails.

I don’t think New Jersey is ready for more than that at the moment.

As for admitting Cuba back in the OAS and the entire US policy toward Cuba, I will just say this: It has become another traditional policy that does not take us anywhere but we have no imagination or courage to change it. The US embargo was a big problem for us in the opposition inside. We had no supply lines because of it. We were abandoned. Castro, on the other hand, has used it for propaganda purposes with great success for 52 years.

Greek Debt Deal Passes: Europe Must Focus on Growth – U.S. Adds 227,000 Jobs – Governor Christie Throws Environment Under the Bus

BBC News – Greek debt swap ‘success’ welcomed by European leaders.

Probably not many Americans realise how much was at stake here and although the respite gained by Greece is temporary and comes at a cost, it provides time for Europe to energize the euro zone economies.

The first step toward that goal, in my opinion, is to devaluate the common currency, probably to reach parity with the US dollar. This would make imports more expensive and euro-zone exports cheaper abroad. Tourism, one of the industries where Greece can show rapid growth, would greatly benefit from a cheaper €. The Greek economy contracted 7.5% in the last 3 months of 2011 under the weight of austerity measures.

One other factor is to control the price of oil and Europe must make an effort in muffling the war drums in the Middle East. The E.U must take the high ground of reason and diplomacy. High oil prices will make growth more difficult for everyone but the weaker economies will suffer the most.

The prudence in foreign policy that I advocate above applies to the United States as well. We should not be playing firemen elsewhere when our house is smoldering.

The Greek swap deal was welcomed by numerous private sector lenders to Greece, who said it paved the way for agreement on the EU bailout.

“The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the  €  area’s ability to create an economic environment of stability and growth,” said Josef Ackermann, chairman of the International Institute of Finance, which represents private lenders.

U.S. Extends Its Run of Strong Job Growth Another Month – NYTimes.com.

It is the third consecutive month above 200,000 nationally. Unemployment however remains at 8.3. Nonetheless, the absence of bad news is good news. If this continues, it will help President Obama in November.

Christie administration adopts rule allowing businesses to bypass N.J. environmental regulations | NJ.com.

This was expected because the governor had proposed it in 2011. New Jersey is the most polluted state in the nation, with the possible exception of Louisiana. It is an act of desperation of an administration bent on creating some economic growth on faulty foundations. Growth that comes at the expense of the environment is not sustainable but what does he care? The governor is constantly flirting with higher offices which would involve moving to Maryland or Virginia. It really does not matter (to him) if he leaves a mess behind.

If elected governor in 2013, my policies will aim at sustainable growth with most consideration for maintaining the environmental integrity of New Jersey. Will I be an environmental zealot? Certainly not. But I will not exchange public health and quality of life for the mighty dollar either.

Lessons for New Jersey Found in Greece

Greece’s debt swap looks like it might work – Mar. 7, 2012.

The deadline for private investors accepting a haircut of their Greek holdings is tonight. If a sufficient number of investors approve the deal, which involves losing up to 75% of their investment, Greece will then enforce what is called Collective Action Clauses (CAC) – essentially forcing the investors reneging of the deal to accept the same terms.

The CAC are terms Greece and many other bond issuers insert in their prospectus at the time of offering. It is a contract point.

If not enough private investors agree on the Private Sector Involvement agreement (PSI), – the haircut – then Greece would not be able to apply the CAC and a disorganized default would take place, at worse terms for investors.

A disorganized default could cost over €1 trillion and send shock waves throughout the world economy.

Private institutional investors own about 41% of the €206 billion Greece owns to private investors. That includes banks, insurance companies, pension systems, hedge and mutual funds, etc.

Some Investors who own Credit Default Swaps (CDS) – a sort of insurance policy against default – may be reluctant to accept the haircut offered by Greece.

The Lessons for New Jersey: Unlike Greece, New Jersey can not officially default but can default de facto – as a matter of fact – by missing payments on its outstanding debt. All the current proposals for tax reduction or tax credits made by both the Governor and the Legislature lack solid fiscal footing, are based on wishful thinking, and are too small to have the intended economic effect – if there was any intention other than a political stunt preparing for the 2013 election.

I like tax cuts like everyone else but not when I will have to pay back the money with interest in a few years or my sons will have to if New Jersey’s liquidity outlives me. The current proposals are nothing but irresponsible.

The New Jersey Government, both sides of the aisle, are placing New Jersey on the same path Greece followed, exactly for the same reasons Greek politicians did: To perpetuate themselves in power.

War with Iran Unjustifiable and Would Be Disastruous for the United States Economy

There is no way that an attack on Iran will be limited to a few air strikes and then the conflict will fizzle out. If israel or the United States – or both – attack Iran, we will be opening the Pandora’s Box of war in the entire Middle East. In such a conflict, it is more than likely that the bulk of our allies will stay neutral. Many Iranians who oppose their current tyrannical regime will rally to defend their country from Israeli and U.S. attack.

Among the steps that Iran may take to respond to our attack are stirring up the secession of Shiite southern Iraq thus cutting off access of the rest of the country to the Persian Gulf, disrupting Iraqi oil production, sinking ships in the relatively narrow and shallow Strait of Hormuz to block Kuwaiti, Bahraini, Qatari and Saudi oil exports, mine-laying in the Persian Gulf and even in the adjacent Gulf of Oman, unleashing Hezbollah on the northern border of Israel, opening a front on the western border of Afghanistan which is relatively quiet now, etc

Disruption of the commercial traffic through the Strait of Hormuz will send the price of oil sky high. Needless to say what effect that would have on New Jersey’s economy and the entire country.

Notice that in the data below there is no box indicating how many times the two nations have been attacked: Israel was attacked in 1948 – right after declaring independence – and in 1973 – the Yom Kippur War – but Iran was not among the aggressors in either conflict.

Iran, on the other hand, was occupied by the Soviet Union and Great Britain during WWII, saw a coup d’etat engineered by the CIA and MI6 in 1953, and was invaded by Iraq in 1980.

From Globalfirepower.com.

Population Israel: 7.2 Million Iran: 70 Million
Wars launched on neighbors: Israel: 1956, 1967, 1982, 2006, 2008-9 Iran: 0
Nuclear Warheads Israel: ~200 Iran: 0
Military Budgets: Israel: $13.4 Billion * Iran: $7.4 Billion
Per capita military expenditure: Israel: $1,805 Iran: $105
Total Aircraft Israel: 1,220 Iran: 84***
Active Military and Reserve Personnel Israel: ~600,000 Iran: 875,000
Total land-based weapons: Israel: 14,200 ** Iran: 5,499 **

* Includes $2 Billion in U.S aid.

** May include tanks, pieces of artillery, rocket launchers. etc

*** Most Iranian aircraft are pre-revolution models, such as the Phantom-4 of the Vietnam War era.

The AIPAC (American Israeli Political Affairs Committee), which is essentially a super PAC, has strong influence in Washington and is pushing the U.S. closer toward the Israeli position of taking military action this year. We should be committed to Israel’s defense; not to Israel’s aggression. I have zero sympathy for the tyrannical regime of Iran. But that is not the point here. The President of the United States should never subordinate the interests of this nation to those of others.

War with Iran is not in the interest of the United States even if Iran develops a nuclear weapon. We are living with countries such as Pakistan and North Korea with nuclear arms. That is why the United States (and Israel) have a nuclear deterrent for.