Believe the Hype? Eurozone Collapse Fear-mongering Kicks Into Overdrive

Munchau gives the Eurozone at most 10 days to fix its problems before it implodes.

DeLong argues that "the Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash”.

But Johnson and Boone say such measures are basically pointless and have declared "The End of the Euro".

All of the above are respected thinkers with loads of experience and credibility, so clearly we are on the precipice of financial apocalypse.

But are we?

The Icy Silence

One country has taken a completely different path to the government and central bank financed bailouts urged by many of the Econoratti as the only way to save the Eurozone (and global economy) from economic catastrophe. That country is Iceland.

Iceland committed financial heresy when it decided to let its three formerly pygmy-sized banks, which rang up a remarkable $100 billion+ in losses, go bankrupt.

And how have things turned out for Iceland? So far, not too shabby.

Sound intergalactic advice

Iceland, an approximately $12 billion GDP economy, is small and none of its banks were Too Big to Fail. So it's an open question whether the example set by Iceland can be repeated by a larger country with a much more important banking system (i.e., Spain or Italy).

Having said that, one of the remarkable things about the current crisis debate is the near complete lack of contemplation of that very question. Instead an almost unanimous call is being made for the Germans to unleash the ECB money printing 'bazooka'. But that is just one of several different options.

As we contemplate Eurogeddon let's keep Iceland in mind. Contrary to what financial scaremongers would have us believe economic life does not come to an end when banks are allowed to fail and countries are allowed to go bust.

No, No, No: Erin Burnett, the Government Bank Bailouts Were Not 'Profitable'

Oh boy.

On location at Occupy Wall Street, CNN's Erin Burnett is perpetuating the myth that government bailouts for banks were profitable for taxpayers.

Here, here, here and here are my previous posts about why this is not true.

In short, it's misleading to claim that the bank, or Wall Street, portion of the government bailouts (called TARP) is profitable without referencing the trillions in other bailouts provided by the Fed, the ongoing support for Fannie Mae and Freddie Mac (which could cost taxpayers trillions), and other taxpayer support which directly and indirectly bailed out Wall Street beyond just TARP. The reason is that the recipients of the government bailouts are intricately connected. Wall Street had (still has?) vast real estate holdings, so the support provided to Fannie/Freddie and the Fed's purchase or mortgage backed securities were second and third bailouts, respectively, for Wall Street on top of TARP.

Erin, it is fallacious to promote a myopic view that the government got its money back and then some on the TARP tranche of the government bailouts.  You need to also look at where taxpayers have not yet received their money back (Fannie/Freddie) or are still exposed (Fed's nearly $3 trillion balance sheet). To do otherwise is to engage in an incomplete, inaccurate and deceptive accounting of the bailouts.

For those interested in more detail line-by-line accounting of the various government bailouts can be viewed here.

Evil on Display: Anders Brievik and Insane Acts Committed by Sane People

Perhaps it would be easier to understand the horrific Norwegian killings if they were committed by someone with a history of mental illness and/or violence.

Or perhaps we could more quickly file away this tragedy into a tidy, little mental compartment if the killing was conducted by someone with far less skill and fewer economic advantages.

And perhaps over time more details will emerge to reveal a picture of someone with a history of hate or unsound mind.

But early portraits painted by people who knew him suggest a rather disturbing alternative, which is that Anders Brievik was a seemingly 'normal' Norwegian.

From one of his classmate friends of four years:

I do not know what drove Anders. But, unfortunately, I do not think he is crazy. It would have created a comfortable distance between us if I thought he was. Nothing I know about him from our school days or what I have read in his so-called manifesto suggests that. Rather, he is cold, intelligent and calculating. The Anders I knew was not a monster. 

And as the saying goes, he was not an island. He was product of our society. He was one of us.

Sadly, There is Nothing New Here

If in fact he is a sane, even likeable person as some suggest, who also can kill without concern for those he slaughters, what are we to make of Anders Brievik?

Any student of history is well aware of the unfortunate reality that people like Brievik are nothing new. Many, particularly here in Europe, had hoped the ideologies which fuel Brievik-like personalities, capable of inflicting immense harm to a great number of people not personally known, had been buried decades ago. But the carefully orchestrated supernova of violence conducted by Brievik reminds us that this flame has not in fact gone out yet.

In the wretched corner of history occupied by the Brieviks of the world resides Nazism, which, for better or for worse, has received the lion's share of attention. I say for better or worse because the Nazi-like crimes committed under Stalin, Mao, and others often do not receive the same level of emphasis as those committed under Hitler.

Some who studied the Nazi leadership on trial at Nuremberg stated that the single most important personal quality which contributed to the ability of these humans to try and exterminate Jews (and others) was a lack of empathy. In place of a sense of caring about individuals and collective humanity, which exists in varying degrees in the vast majority of us, instead resided a bottomless black hole devoid of the ability to feel what others feel.

Harm-justifying venom can be easily poured into such minds. Rather than rejecting ideas which you and I would find unconscionable, harming others can seem logical. Seemingly sophisticated moral philosophies, justifications, and ends-means rationalizations enable such people to shoot kids "not just once, but twice, to be sure".

The Anti-Change

Brievik's bomb and gun shots were basically an attack on change. Put simply, Brievik didn't like the way things were going in Norway and decided to effectively sacrifice his freedom of movement for at least 20+ years-to-life (Norway doesn't have the death penalty) to let the world know about it.

For those who don't have the time or inclination to read his 1,000+ page 'manifesto', the change he lashed out against goes by the name of globalization. Brievik would probably prefer that we refer to it as multiculturalism, but globalization and multiculturalism are inextricably linked. Reductionist arguments which try and isolate multiculturalism from globalization are idiosyncratic and counter-productive.

The purpose of this post is not to debate the merits of globalization, but it was interesting to note the stark contrast between Brievik's hate for Norway's immigrants with a recent talk on the contribution of immigrants to Britain's intellectual history. One quarter of Britain's Nobel prize winners were born abroad, as were a large number of America's. Is freedom of movement what the Brieviks of the world would have end, or are they ok with allowing just the Albert Einsteins in?

What is Evil?

Norwegians are hurting badly from this heinous crime and asking how one of their own could commit such an act. Some would like to see the whole episode go away and also deny Brievik the publicity and attention he seeks. From the lack of headlines of late on the BBC and other respectable news agencies it would seem that some clearly understand the essential role of the media to his carefully calculated plan. Hats off to media leaders who recognize this and have taken appropriate action. But what about those who are still trying to gain more information and understand why this happened?

Outside of the religious world people often scoff at whether the imprecise, black-and-white concept of 'evil' is useful. But what other word comes close to giving this its proper name?

Leave it to the shrinks to classify and rationalize empathy-devoid personality types. For the rest of us 'normal' people the word evil will suffice.

My Dream TV Setup and the Present Nightmare

I'm not a huge TV or movie watcher, but I would like to do the following:

1. hang a flat panel HD TV on my wall
2. connect it wirelessly to broadband internet so the only cable I need is the TV power cord
3. use my smartphone or laptop as my remote
4. and (here's the hard part) watch all the world's video content (in full HD resolution when available), whenever I want for a reasonable price.

That's my seemingly simple (in terms of the necessary technology) TV dream.

Now, let me introduce you to the present state, which amounts to a nightmare of massive fragmentation.

TV Hell

Not surprisingly given the money at stake, nearly every major tech firm, media conglomerate, TV manufacturer, along with a number of innovative startups, are angling for a piece (or more often control) of the connected TV market. The result is today's dizzying array of incompatibile and walled off offerings, such as:

• Content sources: iTunes,  Bravia Internet, Hulu, SeeSaw, Plex, Netflix, Freeview, LoveFilm, etc.
• Wireless technologies: WHDI, WiDI, WirelessHD, Wireless USB, WiGig (see Wired's article for more on this topic)
• Devices: separate boxes like Apple TV, Boxee, Revue, Roku, PS3, Xbox, and TVs like LG's Smart TV and Google TV which have features built into the TV itself

The net-net of this media-tech cacophony is consumer confusion and painfully slow progress on delivering a complete wireless HDTV solution.

The failure is not for lack of effort. Google TV tried to bring it all together and promptly had the door slammed in its face by the major U.S. television networks. Scrappy startups like Boxee and Plex have developed innovative offerings, but they lack the heft at present to deliver the goods. On the content side, Hulu is great, but it engages in an extensive game of cat and mouse to keep users from outside the U.S. and Canada from accessing the site. The same is true of the BBC's iPlayer for users outside the UK. Apple has a lot to offer, but Apple TV can't do full HD and the iTunes pricing model makes it significantly more expensive than Netflix. Lovefilm doesn't stream content in HD, only standard definition at present.

It is Netflix, with its large catalogue of streaming HD content, that is perhaps the best of the lot. But it is only available in North America at present and (worse) the company is still beholden to content owners which means it can't control prices (e.g., the recent unpopular price increase).

In short, many have tried but everyone including some of the most creative and powerful companies in the world have failed to deliver wireless, on-demand HD TV.

Keeping the Dream

For now the Big Boys have all decided that, rather than sharing with other kids in the sandbox they're going to try to keep their toys to themselves. But what they fail to realise is that on demand, HD, wireless, anywhere, any device TV is coming whether content owners (Hollywood) like it or not. Hollywood can either get out in front of this tsunami and try to ride the wave of the future, or it will get crushed by it.

The future of TV will look something like Spotify or Netflix, meaning it will be:

• On demand
• HD
• With a comprehensive library of content
• And reasonably priced for all you can watch

When? The wireless and smart device technology exists right now, so it's all about content licensing. It was hoped that 2011 would be the breakthrough year for connected TV, but it's July and I don't see it happening.

Hollywood and content owners are fighting tooth-and-nail to maintain the lucrative status quo for another season. Freeview, talk of Netflix international expansion, and perhaps other important steps are in store for 2012, so here's to hoping we'll see major advances in wireless HD TV next year.

Counting Down the Return of Ambrose Evans-Pritchard

On sabbatical since March, the chronicler par excellence of the sovereign debt crisis returns in a few days, perhaps just in time for default chaos.

He can be a bit hyperbolic, but I confess to having missed his hyperbole and often (though not always) prescient calls.

Video: WikiSecrets -- Frontline's Profile of WikiLeaks, Julian Assange and Bradley Manning

, T

Watch the full episode. See more FRONTLINE.

Video: Revolution in Cairo (Frontline PBS)

Superb footage of the revolution in Cairo. If you live outside the U.S. and are unable to view this video check out this link for quick and easy way to watch it.



The Frontline website contains some additional videos, articles and links on this topic that are worth your time.

Above the Law? All Quiet in the U.S.-U.N. Spy Scandal

U.N. Secretary General Ban Ki-Moon and Hillary Clinton

Some time has passed since the disclosure that U.S. Sate department diplomats apparently engaged in illegal spying on U.N. officials. I say 'apparently' because it does not appear that any further investigation or legal charges are forthcoming.

To recap, State Department Secretaries Hillary Clinton (Democrat) and Condoleeza Rice (Republican) both instructed U.S. foreign service personnel and diplomats to obtain a wide variety of information about U.N. officials, including the following:

• DNA
• Fingerprints
• Iris scans
• Computer passwords
• Credit card numbers
• Personal encryption keys

What Precisely Constitutes 'Spying'?

While I'm not a legal expert on what constitutes 'spying' (which is banned from being performed against the U.N. under international treaty and law), the above laundry list (which once collected by State's 'diplomats' was handed over to the CIA's HUMINT department) sounds an awfully lot like 'spying' to me.

The Formers: U.S. and U.N. Secretaries Rice & Annan

Clinton and Rice signed off on orders instructing diplomats to obtain this type on information "on key UN officials, to include undersecretaries, heads of specialised agencies and their chief advisers, top SYG [secretary general] aides, heads of peace operations and political field missions, including force commanders".

Another angle here is that the U.N. human data collection project, rather than having been carried out by CIA clandestine ops, appears to have been performed by State's foreign service officers and other diplomatic personnel. One of the purported goals of U.S. diplomats is to build relations and trust among foreign nations. What impact has the disclosure that these individuals are engaged in the gathering of the DNA samples of foreign diplomats had on this important function?

Where's the Followup?

I've been waiting to hear an announcement of an investigation, or perhaps at least rumors of an internal State department review. But so far there has not been one peep of anything like this.

Is it possible that the reason behind why no further investigation is that international treaty only outlaws spying agains the U.N. and its officials on U.N. premises? In other words, all U.S. State department spying on U.N. officials took place offsite?

Or, in a perhaps somewhat more conspiratorial vein, is the lack of follow-up due to the fact that the source of the spying information is WikiLeaks? One way to limit the credence of all WikiLeaks disclosures and move the leaks out of the headlines is to not pursue any of the potentially illegal activity disclosed by WikiLeaks. This may also serve as a disincentive to future prospective leakers.

One of the most interesting elements of the the recent WikiLeaks disclosures was the near uniform international condemnation of WikiLeaks and, as far as I could tell, almost complete lack of criticism directed at the U.S. by foreign sovereigns. Perhaps this is simply a case of the pot not wanting to call the kettle black; I have little doubt that Putin's Russia, for example, engages in similar espionage.

Walking the Rule of Law Talk

There are many unanswered questions, but the bottom line for me is this: if the U.S. wants to lay claim to the moral high ground or simply preach the importance of the rule of law to countries such as Russia, China, Iran, etc., then the U.S. needs to 'walk the talk'. 

Keeping mum about whether illegal spying on U.N. officials occurred only hurts the U.S.'s international standing and credibility. Instead there should be some type of investigation so that U.S. citizens, and the world at large, can be confident that U.S. leaders and diplomatic staff respect and uphold agreed upon laws.

Guest Post: Taking Stock of WikiLeaks

By George Friedman, STRATFOR

Julian Assange has declared that geopolitics will be separated into pre-“Cablegate” and post-“Cablegate” eras. That was a bold claim. However, given the intense interest that the leaks produced, it is a claim that ought to be carefully considered. Several weeks have passed since the first of the diplomatic cables were released, and it is time now to address the following questions: First, how significant were the leaks? Second, how could they have happened? Third, was their release a crime? Fourth, what were their consequences? Finally, and most important, is the WikiLeaks premise that releasing government secrets is a healthy and appropriate act a tenable position?

Let’s begin by recalling that the U.S. State Department documents constituted the third wave of leaks. The first two consisted of battlefield reports from Iraq and Afghanistan. Looking back on those as a benchmark, it is difficult to argue that they revealed information that ran counter to informed opinion. I use the term “informed opinion” deliberately. For someone who was watching Iraq and Afghanistan with some care over the previous years, the leaks might have provided interesting details but they would not have provided any startling distinction between the reality that was known and what was revealed. If, on the other hand, you weren’t paying close attention, and WikiLeaks provided your first and only view of the battlefields in any detail, you might have been surprised.

Federal Reserve Public Relations in the YouTube Age

The Federal Reserve and its policy of quantitative easing (aka printing money) both have serious image problems. Significant controversy and disagreement has been generated recently by the Fed's QE2 program, resulting in an ongoing communications battle between the Fed's advocates and critics.

This amusing cartoon video, which 'explains' quantitative easing and the current economic situation in a rather simplified (and in some instances erroneous) fashion, has already generated nearly 3 millions views on YouTube. The video's appeal is undeniable: we were all children once upon a time and are practically hardwired to trust cute, entertaining cartoon characters.

Meanwhile the Federal Reserve is hardly sitting idly by. Its New York branch has taken a slightly more high-brow approach with this comic book, a medium typically reserved for pre-teens and up. Like the cartoon, the comic book attempts to explain how the Federal Reserve system and monetary policy work to someone unfamiliar with macroeconomics.

The comic book builds on Ben Bernanke's 60 Minutes television interview and Washington Post QE2 op-ed in that both reflect the Fed's understanding that it needs to engage in more public outreach. The historically secretive Fed correctly recognizes that business as usual won't work anymore.

The comic book also demonstrates the Fed's understanding that to get its message across it will need to employ a media strategy that goes beyond its usual menu of press releases, speeches, and well-timed leaks to news reporters like the WSJ's John Hilsenranth.

But how effective are the Fed's new openness and media strategy?And at what point does the Fed's communication cross the propaganda line?

Some, including influential Yale Professor Robert Schiller, argue that government policies should be purposely shrouded in what is effectively 'Newspeak'. For example, Schiller makes the case that "bailouts" should now be called "orderly resolutions". This framing, Schiller states, can help to ensure that the public 'gets it' when the economic going gets tough.

Perhaps more so than at any other point in its history, the Federal Reserve is under the public spotlight. Discussion of putting an end to the Fed's dual mandate of price stability and full employment is openly being considered.

Whether or not the Fed's mandate should or will change is an open question. However, it appears unlikely that Fed secrecy, as it has been historically been practiced, will survive.

Is Economic Propaganda Ethical?

Ever wondered why government officials use fancy sounding terms like 'quantitative easing' instead of the much easier to understand 'printing money' when they both effectively mean the same thing?

Yale Professor Rober Shiller, who correctly predicted the housing market crash, weighs in on this topic with a piece in this weekend's NY Times. In the article he describes how to handle the inevitable next financial crisis.

His rather surprising answer?  By using the right vocab.

In what so far as I can tell is a first by an esteemed member of the academic community, Schiller goes on public record rationalizing the use of propaganda by government officials.

Shiller states:

"in times of crisis...confidence (expressed by the government) is also vital, even if government can’t absolutely guarantee that it’s justified...for people who don’t fully understand the financial system’s complexities "

In other words, Shiller is making the argument that it's not only ok, but advisable for the government to be less than frank with voters. During a financial crisis, Shiller argues, this lack of candor is actually in the public's own good.

Putting aside the subject of the ethical responsibilities of public officials for a moment, the first question is would Shiller's recommendation even work?

To help answer that question we can turn to a recent example from early 2008, prior to the apex of the financial crisis. On March 28, 2008, Fed Chairman Ben Bernanke, testifying before Congress about the housing market, made the now infamous false assurance that the subprime real estate crisis was "contained".

There are two possibilities here: either a) the Fed Chairman honestly believed that the Fed's actions had magically put the breaks on the real estate meltdown; or b) he was consciously using propaganda to reassure people, as Shiller advocates.

Regardless of which of these two possibilites is correct, what we do know is that his reassurances did absolutely nothing to prevent the financial crisis, which hit full force later that year in September. Perhaps Bernanke's comment postponed the crisis, but postponement may in fact have made it worse by allowing the problem to further fester under a blanket of false Fed confidence.

Are 'bailouts' and 'printing money' hopelessly beyond the general public's understanding, as Shiller believes? And instead of coming up with the proper vocab, shouldn't officials and financial experts be working on how to prevent the next financial crisis?