Video: Bill Emmott's 'Good Italy, Bad Italy - Girlfriend in a Coma' (Full Video)

Video: The Great Euro Crisis (BBC)

A good series of interviews for understanding why many Greeks (and Germans) still prefer that Greece keep the euro rather than return to its previous currency, the drachma. 

Self-confessed Eurosceptic Michael Portillo visits debt-stricken Greece. He believes that the euro crisis must have shaken the Greeks' faith in Europe's single currency and wonders if there'll be a desire to revert to the free-floating drachma. In Athens he meets everyone from a destitute young family to the former finance minister and the outgoing Prime Minister, and is surprised by some of their answers. Meanwhile in Germany, Europe's economic powerhouse, Michael encounters the taxpayers who are paying most towards Greece's mammoth financial bailout while having to watch angry Athenians burning the German flag.

On The Problem With Postponing the Inevitable

Today's Eurogeddon must read.

Lagarde Sacrifices Herself to Help Greece's Pro-Bailout New Democracy Party?

The Eurogeddon chess game is getting desperate so don't be surprised to see a few political/PR curveballs over the next few weeks in front of the 17 June Greek election runoff.

Case in point is this weekend's snarky comment from the typically ladylike Madame Lagarde. But before we get to that, some background:

The single worst thing than can happen from the perspective of the Troika (the IMF, EU, and ECB) and Greek elites right now is for Syriza and its 37-year old leader, 'Sexy Alexis', as he's now being called, to do well in the 17 June Greek election runoff.

In the most recent May elections Greek voters turned away from the two pro-bailout/austerity parties, PASOK and New Democracy, as they were seen as tools of the Troika. This rejection by voters sent a shiver up the Troika's spine as they know that should Syriza and Alexis Tsipras prevail he will likely walk away from the terms of the bailout and thereby call the Troika's bluff to either a) cut off Greece's banking system from further ECB funding or b) terminate any further bailout money to Greece's government. Either one of these moves will likely trigger a financial panic and spoil everyone's summer vacation plans.

So the Troika are now desperate to see PASOK and or New Democracy do better in the 17 June election. So how can they help them?

Agent Provocateur: Christine Lagarde, IMF Chief

Angry Greek voters are looking for someone to blame, and as long as PASOK and New Democracy are seen as part of the problem it's unlikely that voters will put them back into power. So one strategy is to try and reshift the political blame onto the external Troika, which would have the effect of diverting negative feelings away from PASOK and New Democracy. This would help the two pro-bailout Greek parties reposition themselves as domestic victims rather than as co-conspirators with the hated foreigners.

And now you understand why the typically politie Christine Lagarde, head of the IMF, probably deliberately roiled the Aegean kettle this weekend with a comment about how it's 'payback time', and Greeks need to pay their taxes.

Queue the Greek firestorm.

And lo and behold, New Democracy, who of course along with PASOK quickly denounced Lagarde's rhetoric, is again rising in the polls.

Nice move, Troika.

And, by the way, Lagarde doesn't pay any taxes on her $551,700 in annual compensation.

Greece QOTD: "Papadreou was clueless. Papademos was complicit. Where does blame really lie?"

Atta boy, AEP.

Greece Can Physically Print Its Own Euros In Spite Of ECB 'Choke' Efforts

Euro printing press

As the long ago predicted Greek 'bank jog' accelerates there is much talk in the econoblogosphere of the Greek banking system being 'choked off' by the ECB.

If this is in fact the Brussels/Frankfurt plan to force Greece out of the euro there is a perhaps not insignificant obstacle to this strategy: as noted in this post last year, Greece has its own euro printing press. 

The ECB does not print any euro banknotes but actually assigns this task to local member country central banks, with the ECB instructing the local central bank how much of which denominations to print.

So what does this mean?

In opinion polls Greeks want two things: a) to default on their sovereign debt less fiscal austerity and b) stay in the Eurozone. However, European elites (read: Germany) are saying to Greece that you can't have both. But is Germany correct?

An important point to keep in mind here is that there is no legal mechanism to force Greece to drop the euro and readopt the drachma. Hence the idea of choking off the Greek banking system and forcing the Greeks to renounce the euro versus organizing some type of formal action, such as a vote to eject Greece from the euro, which would not be allowed under current EU law.

But in the event of a full-fledged run on Greece's banking system, where Greek banks literally have no cash on hand to give to depositors, it would seem reasonable and (crucially) perhaps legal for the Greek central bank to start printing euro notes even if the ECB disavows this action.

If this were to take place is there anything the ECB could do to stop the Greek central bank from printing euros? Probably not.

It's hard to imagine the situation reaching a stage where the Greek central bank openly revolts against the ECB and starts printing euros. However, Greece need only hint at playing this card for it to have the desired effect, which is to force the ECB to continue accepting Greek bank collateral on reasonable terms. In other words, the fact the Greeks can print their own euros nullifies the ECB's ability to choke the Greek banking system into submission and force a 'voluntary' abandonment of the euro.

Your move, Angela.

Young People CAN and ARE Making a Difference in Europe

Getting more young people (and women) into positions of political power is a good thing.

Alexis Tsipras, leader of Syriza

Whether you agree or disagree with the politics of 37-year old Alexis Tsipras, the leader of a leftist-Greek coalition which surprised in the weekend election, he has demonstrated that not every member of the next generation is politically impotent.

While this blog probably would not be characterized as far left-wing, we do celebrate seeing someone under-40 years of age achieving political success.

Bravo, Alexis!

Video: El-Erian, Buiter, Warsh, etc. on Economic Growth

This is another excellent panel from the Milken Institute Conference. It has a somewhat more investment focus than the previous one posted with discussion/predictions on the Eurozone (Greece in or out), elections, interes rates, etc.

Video: Raghuram Rajan, Niall Ferguson, etc. on The Future of Capitalism

This video from the Milken Institute Conference unfortunately appears to begin after the panel has already begun and cuts abruptly, but still features a very good discussion of economic issues in the U.S., Asia, and Europe.

Video: Debt and Redemption Documentary

At the risk of sounding trite it's often helpful to put a face and voice behind the news.

This short documentary by VPRO, which does excellent work overall btw, has some good coverage of the fallout from the dealings by both small and large Italian municipalities in derivatives like interest rate swaps. And if terms like 'derivative' turn you off but you're still interested in learning more and trying to understand the financial crisis, then video is particularly recommended.

Interviews include the Rolling Stone's Matt Tabibbi, Brooklyn based investor-blogger Reggie Middleton, and former IMF Chief Economist and Professor Simon Johnson.

The most interesting fact from the documentary for me was learning how the City of Milan agreed to be on the hook financially to a bank in the event of a debt default by Italy (the nation state).

Are there any other municipalities which have contractually guaranteed the debt of a sovereign state?

Photo of the Week: Athens On Fire

Tonight Athens burns

The German flag is burned in Athens earlier in the week

h/t Zerohedge and Guardian

Photo of the Day

Chancellor Merkel's likeness is used to advertise Portuguese spirit Beirao on a Lisbon billboard reading: 'Dear Angela, Portugal is giving its best. Seasons Greetings.'

h/t AEP

Podcast: Philip Coggan's Paper Promises - Money, Debt and the New World Order

Below is the podcast of Coggan's book talk, and here is a good review of Paper Promises.

Speaker(s): Philip Coggan

Chair: Professor Christopher Polk

Recorded on 19 January 2012 in Sheikh Zayed Theatre, New Academic Building.

The world is drowning in debt. Greece is on the verge of default. In Britain, the coalition government is pushing through an austerity programme in the face of economic weakness. The US government almost shut down in August because of a dispute over the size of government debt.

Our latest crisis may seem to have started in 2007, with the collapse of the American housing market. But as Philip Coggan shows in this new book, Paper Promises: Money, Debt and the new World Order which he will talk about in this lecture, the crisis is part of an age-old battle between creditors and borrowers. And that battle has been fought over the nature of money. Creditors always want sound money to ensure that they are paid back in full; borrowers want easy money to reduce the burden of repaying their debts. Money was once linked to gold, a commodity in limited supply; now central banks can create it with the click of a computer mouse.

Time and again, this cycle has resulted in financial and economic crises. In the 1930s, countries abandoned the gold standard in the face of the Great Depression. In the 1970s, they abandoned the system of fixed exchange rates and ushered in a period of paper money. The results have been a long series of asset bubbles, from dotcom stocks to housing, and the elevation of the financial sector to economic dominance.

The current crisis not only pits creditors against debtors, but taxpayers against public sector workers, young against old and the western world against Asia. As in the 1930s and 1970s, a new monetary system will emerge; the rules for which will likely be set by the world's rising economic power, China.

Philip Coggan was a Financial Times journalist for over twenty years, including spells as a Lex columnist, personal finance editor and investment editor, and is now the Buttonwood columnist of The Economist. In 2009, he was awarded the title of Senior Financial Journalist in the Harold Wincott awards and was voted Best Communicator at the Business Journalist of the Year Awards. Philip Coggan is the author of the business classic, The Money Machine.

Soros: Euro crisis "more serious and more threatening than the crash of 2008"

Link here.

Greece Just Publicly Threatened Its Trump Card

Greece just decided to start 2012 off by significantly upping the ante:

"The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," spokesman Pantelis Kapsis told Skai TV.

 Here's my previous piece explaining why in the European sovereign debt crisis Greece holds all the cards.

Eurozone QOTD: "You've got insolvent banks supporting insolvent sovereigns and insolvent sovereigns supporting insolvent banks"

Quote is from Bridgewater, which with an estimated $122 billion in assets under management is the world's largest hedge fund.

Previously Bridgewater founder Ray Dalio said he didn't expect the next major crisis to hit until 2013, but it appears his firm is positioned for a rocky 2012.

As the Euro Rolls Over, Why Hasn't Gold Rocketed?

In early May of this year, with the euro hovering in the $1.46-$1.48 range, I disagreed vehemently with euro bulls such as portfolio manager Axel Merk who argued that the common currency was no longer vulnerable to a sell-off (see Merk's May 11 FT article titled 'Dollar in graver danger than the euro' and my counter arguments here, here, and here). 

Merk's argument was basically that in 2010, when the euro sank to a low of $1.18, the currency served as a proxy for the sovereign debt crisis. Now, however, investors were shorting sovereign debt directly and, according to Merk, recognized that it is a lot harder for the ECB to print euros than it is for the Fed to print dollars.

For awhile, as you can see from the below chart, it appeared that Merk perhaps had made a good point. From May the euro has shown remarkable resilience; for the last six months one sovereign after another has white knuckled its way through uncertain debt auctions and ever higher interest expense. Meanwhile the ECB kept its 'bazooka' semi-holstered with purchases of sovereign debt apparently capped at €20 billion per week. While the euro did soften from mid-May onwards it was able to keep it's head above the $1.40 mark for the summer and a good chunk of autumn.

Click to enlarge

Continue reading the full article at Seeking Alpha here.

Video: Hitler Reacts to S&P's Downgrade of 15 Eurozone Countries

Video: Carmen Reinhart vs. Paul Krugman

This event occurred back in June but the video just surfaced.

Watch live streaming video from nytimesopinion at livestream.com

Video: SNL's A Closer Look at Europe

A Closer Look At Europe, SNL S37E05, Greece, Germance from Sandy Sandcake on Vimeo.