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Election year 2012: smells like Democrat doom

I do love a good omen on the eve of a presidential election year.

Yesterday a Republican candidate took a New York seat from the Democrats in the by-election caused by the resignation of Congressman Anthony Weiner in June. This is the first time the House of Representatives seat, bang in the prime Democrat territory of Queens and Brooklyn, has ever fallen to the Republicans.

You must remember Weiner: he was the seven-term Democrat Congressman who tweeted a lewd photograph -- which means, he posted a close-up shot of his y-fronted crotch on a social networking site -- to a 21-year old female student he had never met. It turned out the Congressman may actually have been trying to send the picture to a porn star...and what made the story all the more delightful was that Weiner is married to one of Hillary Clinton's aides. Whether Weiner will soon be an ex-husband, I don't know, but for sure he is an ex-politician.

And for the Republicans to take one of the most overwhelmingly-Democrat districts in America? This can mean nothing but the Democrats not only losing the independent voters who put Obama in the White House in 2008, but losing big chunks of the Democrats, too.

According to Fox News figures, Democrats in the district have a 3 to 1 ratio registration advantage in this largely white, working-class district, which is nearly 40 percent Jewish. Yet the seat was taken by Bob Turner, a 70-year old Catholic political newcomer, who ran his campaign attacking Obama's fiscal policies.

How much of an upset is this? It is like the Tories taking a Glasgow seat.

Or as one of my American conservative friends said about the NY Republican victory: 'Oh, yeah, people are just lovin' all that hope and change.'

Good things may happen in America 2012. Good things.

Greek crisis 2011: right on schedule, as predicted in 2005

This is my column from today's Irish Daily Mail:

There is no modest way to start this, so I’ll just say it: as far as Greece and the present eurozone crisis go, I told you so. In The Irish Mail on Sunday in 2005, I wrote about ‘the dangers to our economy of being in the euro.’ The dangers will lie, I said, ‘at that moment in the future when the currency union starts to break up. Repeat: when, not if.’

‘Read the reports out of London,’ I said, ‘where the reckoning is that Italy’s refusal to reform its economy means that it will be forced out of the euro within six years. After that, the betting is that Greece will be forced out. And after that? The euro will come apart like a zipper and there will be turmoil and a roller coaster ride of interest rates all over the continent.’

That was 2005. I said ‘within six years.’ Right on schedule, it’s 2011 and Italy and Greece are on the brink.

And that forecast for a rollercoaster ride on interest rates? Interest on Greek bonds yesterday was at 75 percent for two-year lending. Meanwhile, the yields for bonds for Greece’s eurozone ‘partner’ – oh, boy, some partnership -- were at ‘record lows,’ according to the Wall Street Journal: 1.72 percent for 10-year bonds.

All of which is by way of saying if you want to know what is going to happen next in this

non-stop eurozone debt crisis, maybe read this column instead of listening to the fantasists who sold euro membership to Ireland in the first place: because the coming Greek default is going to rock this country, and listening to anyone who says there will be no default, or that a Greek default won’t bother us much, is still trying to sell you a fantasy.

Which is why I was so surprised yesterday to find that the University College Dublin economist Colm McCarthy is being relaxed about the effects of a Greek default on us. Mr McCarthy was on Morning Ireland, saying, as he so often does, many sensible things. Asked, for example, whether a Greek default was a question of ‘if or when,’ he said: ‘It’s “when” at this stage.’ Dead right.

But asked if anyone here would notice the difference if there were a Greek default, Mr McCarthy replied: ‘I think not really. Irish banks, one of the few mistakes they didn’t make, was buying Greek government bonds, so if there is a Greek default, there won’t be any effect on the position of the surviving Irish banks, which have been recapitalised.’

‘But there will be consequences for banks in continental Europe and of course Greek banks which hold lots of government debt. So that’s why you’re seeing chaos in the bank share market.’

‘Chaos’ in the shares, yes, but chaos is almost too mild a word for what is going to happen across Europe and in the United States when, not if, Greece defaults on its sovereign debt. And that is what surprised me about Mr McCarthy’s relaxed attitude: the repercussions of a Greek default will reach far beyond just the banks which hold Greek bonds.

After all, just think what the 2007 crash in the American property market did to us, though

few of us held American property. The crash triggered off the sub-prime crisis, then the global credit crunch and all that followed. If you’d been very relaxed in 2007, you could have said: ‘Florida property price crash? What’s that got to do with me? I live in Tipperary.’ (And, if you ask, I did warn about that in this column in 2007.)

So, yes, it is bank share prices that are being hit now-- the ‘chaos’ Mr McCarthy mentioned -- but just on fear of a default. What follows when, not if, that default actually happens will be what rocks us here.

If you want an idea of how worried the Obama administration is about the effects of what is happening now in the eurozone, on Friday Timothy Geithner, the US Treasury Secretary, will fly to Europe for the second time in a week. This time he will go to Poland where he will meet the finance ministers of the EU member states.

When Secretary Geithner was at the G7 meeting in Marseille last weekend, he expressed anger at the inability of EU leaders to get a grip on the eurozone debt crisis: ‘It was the principal cause of the slowdown we had last summer, and it’s been a significant cause of the slowdown we’ve had this summer,’ he told journalists.

You can bet he is flying back over here to say exactly the same thing to the EU finance ministers, and because the press will be barred from the meeting, you can bet he is going to say it in even more muscular ways. He knows that if the eurozone debt crisis pushes Greece into default, it will hit the American economy as surely as the American property crash hit us.

Take for example an analysis in the Canadian Globe and Mail yesterday: ‘Greece is rapidly running out of time and money to avert a bond default that threatens to unleash a torrent of trouble for governments, banks, markets and economies across Europe, and put the fragile global recovery at risk of another crippling credit crunch.’

The paper quotes Carl Weinberg, chief economist with High Frequency Economics in New York: ‘I hate to sound like [former US defence secretary Donald] Rumsfeld, but we have very few unknowns and we have a lot of unknown unknowns.’

Among them are institutions on the hook for credit-default swaps tied to Greek debt ‘and other complex derivatives linked to them.’

And if you think you’ve heard phrases like that before, you have. Sub-prime toxic debt was hidden in ‘derivatives,’ and kept off balance-sheet. Now instead of sub-prime property loans, the banks across America and Europe are worried their assets are hiding toxic Greek debt: ‘Thus even small exposures – US banks hold only $1.5bn (€1.1bn) in Greek debt, and British banks are on the hook for $3.4bn (€2.5bn) – could be masking considerably larger off-balance sheet risks.’

If you doubt it, just ask yourself if Secretary Geithner would fly over here twice in a week if American banks were only faced with losing a chunk of $1.5bn in Greek debt.

Constantin Gurdgiev, an economist at Trinity College Dublin, gives more details of the reach of this Greek danger on trueeconomics.blogspot.com: ‘There are a number of inter-linked second-order effects, which tend to have much larger implications once propagated across the global financial system.’

Besides the American and British exposure, the direct impacts he lists include: Japanese banks hold $432m (€316m) in Greek debt, Turkey $30.4bn (€22bn) exposure, Poland $8bn (€5.8bn), Croatia, Hungary and the Czech Republic combined are exposed to some $460m (€336m) – and on through Bulgaria, Serbia, and Romania.

‘Were Greece to default, core euro area banks – Deutsche Bank (including Deutsche Post) carry circa €2.94bn exposure, Commerzbank (€2.9bn), but also SocGen, Credit Agricole, etc -- will come under severe pressure to recapitalise.’

‘Greek default can lead to a severe liquidity crunch and flight to safety of deposits from not only Greek and euro area banks, but from a number of closely inter-connected banking systems, especially those with close trading and investment links to the European Economic Community. This is bound to induce contagion across the entire euro area and spill over to euro area banks’ cross-links to Eastern and Central Europe and beyond.’

Total effects of a Greek default ‘can sum up to €340bn.’

Which is why ‘relaxed’ is the wrong attitude to take about the effects of a Greek default on this country. Remember, you read it here first.

The voice of the voters? The European Commission despises such 'populism'

Watch for this one: the European Commission propaganda machine has started pulling the levers on its latest campaign -- this one meant to smear anyone who wants to stop the transfer of fiscal powers to Brussels and Frankfurt. Anyone who fights against the so-called 'eurozone economic governance' is now to be despised as a 'populist.'

You might have caught an echo of this new EU line last week in the commisssion's house paper, the Financial Times. An FT leader denounced any resistance to a centralised eurozone government as 'populist pandering.' (So now you know how the FT views democracy: with contempt.)

Of course, the Brussels propaganda is garnishing 'populist' with other terms, too This new wide variety of smears is helped along by the taxpayers' money sucked into the £2bn a year (by Open Europe's calculations) propaganda budget run by the unelected, untouchable European Commission (no chance of any 'populism' there, then). The garnishes include the terms 'politics of fear,' frenzy, 'irrational feelings,' 'anti-immigration,' 'xenophobic' and -- just how desperate is the commission? -- 'Tea Party Movement.'

There is a 'frenzy,' all right, and it is the frenzy of the Brussels vested interests to stop the democratic movement against ever-more powers being shifted out of national parliaments and into the hands of the EU elite.

What terrifies the Brussels imperialists is that growing numbers of people in the member

countries of the EU don't want ever-more control of their national budgets passed into the hands of unelected eurocrats, unelected European Central Bankers, and politicians elected only by Germans.

Somehow this growing demand by plain people (and some pretty damned sophisticated people, too) that national taxation be controlled only by national representation is seen by the commission and its fellow-travellers as so dangerous that the smears must start.

Take a look at a paper just out today from the European Policy Centre, a Brussels think tank which announces itself as 'independent' but which in fact takes money from the European Commission and from some organisations which themselves receive money from EU institutions.

The paper is called 'The rise of anti-EU populism: why, and what to do about it.' The author is Antonio Missiroli, who works at the commission as advsor at the Bureau of European Policy Advisors.

That is what passes for 'independent' thinking in Brussels.

Anyway, Missiroli says that populism must be fought because 'it can create a dangerous mix that could potentially undermine mutual solidarity and trust inside the European Union.'

Well, one hopes.

Missiroli-of-the-commission -- though he insists that in the paper he is speaking in a purely personal capacity -- goes on: 'For its part, vintage "euro-scepticism" (originally from Britain) has shaped some core elements of the anti-EU arsenal, although Britain's political and constitutional make-up have mostly managed to contain its most destructive effects, if not its rhetoric.'

Got that? Trying protect the right of the British people to control their own laws and taxes is 'destructive.'

As for the direct democracy of referenda, Missiroli thinks letting the people have a say just

stinks: 'Referenda have often acted as powerful catalysts for speading populist sentiments and messages, regardless of the legitimate reasons for calling them. This has occurred as referenda tend to over-simplify the debate and resort to a quintessential populist theme: just saying "No" to the establishment.'

Which propaganda line, you can bet, is exactly what Nick Clegg has been feeding to David Cameron as the pressure builds in Britain for an in-or-out vote on membership of the EU, and Cameron insists he won't allow it. But then, Clegg used to work for the European Policy Centre, the EU-funded outfit publishing this stuff, so you shouldn't be surprised the deputy p.m. knows the anti-referendum line well.

Missiroli goes on: 'Since 1992 with the referenda on Maastricht, popular votes on subsequent EU Treaties have become recurrent occasions for campaigning against "Brussels" and consolidating a populist narrative. As a result, few people have dared proposing sweeping treaty reforms or launching an open debate on the need for more and better integration.'

Actually, the last 25 years have been nothing but rolling treaty changes -- indeed, just last week Wolfgang Schauble, the German finance minister, was demanding another treaty change to create eurozone economic government, and Jean Claude Juncker, prime minister of Luxembourg and head of the eurogroup, was backing him -- and a 'debate' on integration has been relentless as monsoon rain on a corregated iron roof.

Moreover, when there have been referenda on treaties that have resulted in a No vote -- the French and Dutch referenda on the European Constitution, the Irish referenda on both the Nice Treaty and the Lisbon Treaty -- the Brussels powers either just ignore the result or demand that the voters keep voting until they come up with the right answer. So what is Missiroli's grouse about referenda?

His grouse is that he is against anyone even campaigning against Brussels, even when the result of this democratic campaigning is just swept aside.

The only good thing about this latest propaganda drive, about these smears against the millions of people -- and yes, they number in millions now -- who want to resist eurozone fiscal union, is that is show just how frightened the EU elite are. They fear voters across the EU member states actually taking back control of their own countries.

So, carry on, all you 'populist' chaps. You're getting to them.

The 'fallacious and malignant policies of Merkel and Schauble' drive the euro 'into the abyss'

I've been following the analysis of the euro by Charles Dumas of Lombard Street Research for more than six years. His notes are never less than excellent -- and over the years his analysis has been proved right time and again. Today's LSR Daily Note from Dumas is another cracker, which is why I'm going to give you some long quotes from it. Mr Dumas explains how Euroland is sleep-walking into the abyss:

At the root of this are fallacious and malignant policies of Mrs Merkel and Mr Schauble

'"Render unto Caesar that which is Caesar's and unto God that which is God's" -- words of Jesus with relevance to the euro crisis. The euro-elite has confused the monetary union and the euro -- surely Caesar's department? -- with religion.'

'The euro was adopted for reasons of political ideology and is regarded as sacrosanct by its

proponents. But it is, and always has been, economically and financially indefensible, as we said from the early 1990s on, and as is now becoming clear.'

'It is not just that Euroland politicians are pig-headedly determined to avoid admitting they were and are wrong -- they also feel obliged in a quasi-religious way to defend the indefensible. But they are bound to fail.'

'In the process, policies adopted on the continent make a slump next year (if not sooner) virtually inevitable, and a prolonged depression quite likely.'

'It would be nice to compare Mrs Merkel's defiance of market forces with John Major's in 1992...but that comparison is too flattering -- hers is the stubborn folly of the sound-money men of the early 1930s. And we know where that led...'

Mr Dumas then dismembers an article by the German finance minister Schauble in this morning's Financial Times. To paraphrase Schauble, the highly indebted western democracies need to cut spending, raise taxes and liberalise 'however politically painful.' This is the austerity that the Germans are forcing on every distressed member of the eurozone.

But as Mr Dumas points out, 'the world savings rate, at an all-time high by a significant margin in 2006-07 (an underlying cause of the crisis), has risen to within a whisker of 2007's record this year.'

'Next year, the projected reduction of government deficits...will take the world savings rate into a new high ground. Yet we live in a world in which private sector savings already far exceed profitable investment opportunities in Japan and north-central Europe (Germany, Benelux, Nordics, Switzerland/Austria) -- and investment is a positively insane and unsustainable 48 percent of GDP in China.' Yet what is needed is the stimulation of consumption in the savings-glut countries.

Mr Dumas then goes on through some excellent technical stuff and shows how Greece is

doomed to see its GDP 'simply slide away from under' because of the austerity forced on it by Schauble-style policies: 'Within the euro context, there is simply no solution for Greece's debt problems that will make it solvent.'

And the conclusion? 'It follows that the subsidies will have to be large and indefinitely prolonged. And this is where the political pain will come back to visit mr Schauble. Germany will have to pay.'

'Also, because the deficit countries will be in or close to recession next year, including the US and UK, both China and Germany will suffer a major loss of income, as they did in the great recession.'

'So the long-suffering German citizens will not only have to pay for the euro-elite's unremitting pursuit of its unachievable ideal, but will have to do so out of shrinking income. If people save too much, their apparent wealth has to be destroyed.'

'As history tells us, this sort of political pain can have worse consequences than a debt crisis.'

At the risk of getting out of Caesar's department, Mr Dumas: Amen to that.

From Gaddafi to the 'Yes to Lisbon Treaty' campaign in just five steps

The Mail's news pages today have an excellent story on Sir Mark Allen, the spy who quit MI6 for BP's oil cash -- and thereby set in train Labour's love-in with the tyrant Gaddafi.

Back in early September 2009, I was scratching around in the international press watching the link between Allen and all this, and Peter Sutherland, former chairman of Goldman Sachs International and former chairman of BP, one of the rich men backing the Yes to Lisbon Treaty campaign in Ireland.

Here is what I wrote on September 7, 2009 in the Irish Daily Mail:

Stay with me for five short hops, and I will take you from Colonel Gaddafi and Abdelbaset Al Megrahi, the Lockerbie bomber, to the ‘Ireland for Europe’ campaign and questions about who is backing this Yes propaganda outfit being run by Pat Cox.

The connections will illuminate the sort of company with which the Yes campaign feels comfortable.

Start at one. The mass-murderer Megrahi has just been set free from prison in Scotland and returned to Libya.

Two, last week Jack Straw, the British foreign secretary, admitted for the first time that a Libyan oil deal with BP was an essential part of the government’s decision to included Megrahi in a prisoner transfer deal.

Three, the oil deal was worth $900m (€630m) deal and struck with BP six weeks after Megrahi was included in the prisoner transfer agreement. A report in the British press at the weekend said that BP had warned the Foreign Secretary that the failure to include Megrahi in the deal could damage BP’s interests, but BP denied actually mentioning Megrahi by name.

Four, up until last Tuesday, the chairman of BP was Peter Sutherland. In 2004, Sir Mark

Allen, a Middle East expert, resigned from the British intelligence service MI6 to join Mr Sutherland’s BP for £200,000 (€230,000) a year. Six months before joining BP, Sir Mark chaired a secret meeting with the Colonel’s spy chief in London, which included discussion of the Megrahi case. It turns out it was Mr Sutherland’s ex-spook who then lobbied the Foreign Secretary. He urged his old friend Mr Straw to speed up an agreement over prisoner transfers, which had been expected to lead to Megrahi’s return, to avoid jeopardising a trade deal with Libya worth up to £15bn (€17bn) to Mr Sutherland’s BP.

Five, Mr Sutherland is a patron of ‘Ireland for Europe,’ of which Pat Cox is campaign director. The organisation’s website does not disclose the extent or source of its funding.

Me, personally, the only way I could stay in a room with someone who worked to get a billion-deal from the release of the man who killed 270 men, women and children in a fireball over Scotland is if I were wearing the kind of kit you’d wear to unclog London sewers.

However, Mr Cox and his Yes-to-Lisbon colleagues appear not to mind the smell coming off the BP recently-ex-chairman. I suppose that since Mr Sutherland is now one of the richest bankers on the planet Mr Cox is willing to hold his nose. That is the sort of pass you can get when you are also chairman of Goldman Sachs International, part of the globally-greedy Goldman’s which has famously and accurately been denounced in America as ‘a vampire squid wrapped around the face of humanity relentlessly jabbing its blood funnel into anything that smells like money.’

Perhaps, since Mr Cox is a professional Brussels lobbyist running two lobbying firms which he has kept unregistered, maybe he doesn’t notice the smell.

Now, this Libya-Sutherland-Yes lobby connection should have been spotted long ago. I only spotted it when a No-to-Lisbon friend pointed out what the blogger CookieMonster wrote about it on politics.ie.

Until now I have been viewing Mr Sutherland just as a representative for Goldman’s and their tarnished reputation. And I do not forget his history a non-executive director and member of the remuneration committee of the Royal Bank of Scotland. You will remember Mr Sutherland’s RBS committee: it allowed Sir Fred Goodwin, the former chief executive, to walk away from the wreck of the bank with a pension of £703,000 (€837,000) a year.

It was the blogger who showed me I now have to see Mr Sutherland also as someone who is happy to cosy-up to the Libyan killer, Colonel Gaddafi, the man who provided the Provos with all that Semtex. But as CookieMonster says: ‘We won’t be seeing the Prime Time “Citizen Sutherland” programme, and we won’t be seeing any of this reported in the Irish Times, and we won’t see any Yes-siders spitting feathers about having Peter Sutherland, chairman of the prisoner release-profiting BP, on their side.’

Which is not to say that the Yes campaign isn’t fastidious in its own way about just whom they believe should be allowed to join in the Lisbon debate. Yesterday in the Irish edition of the News of the World, the Defence Minister, Willie O’Dea, told the London-based Open Europe think tank to ‘butt out’ of the Lisbon debate here.

He was reacting to a research just released by Lorraine Mullally, director of Open Europe, which showed that during negotiations on the original text of the Lisbon Treaty between 2002 and 2004, the Irish government objected to many of the treaty’s most important elements – but failed in the overwhelming majority of the amendments it tried to make to the text.

According to the research, Dick Roche, the government’s representative to the European Convention, made 149 proposed amendments, but only 36 resulted in changes to the text, meaning three out of four attempts by Ireland to get the text changed failed.

This wasn’t minor stuff that the convention ignored. Mr Roche objected to the appointment of a permanent EU president. He wanted to stick with the present rotating presidency, and who can blame him: at least under the pre-Lisbon system, Ireland was sure to take the presidency eventually.

Mr Roche also wanted to stick to the present voting arrangement, but failed. Now the new voting weights will dilute Ireland’s power to influence or block legislation.

According to Open Europe’s research, Mr Roche opposed many of the moves to abolish the national veto, including in the area of social security policy, on EU definitions of criminal offences and sanctions, on decision relating to the European Defence Agency, and much else. He failed to change the text on these and other issues. Because of Mr Roches’ failures, Lisbon will now abolish our national veto in 60 areas of policy.

Mr Roche also failed to stop the creation of a European Public Prosecutor, even though the official Irish position was that there was ‘no convincing or compelling case’ for one and that the proposed arrangements ‘do not respect the different legal traditions of the Member States.’ Mr Roche and the Government also failed in their attempt to let national parliaments have a say in the election of the Commission President.

And on and on, and you can only admire the depth of research Open Europe is willing to

put into this issue.

However, all Mr O’Dea can say to Open Europe and Miss Mullally is, ‘Butt out,’ and claim they form some part of a British tradition of underestimating the Irish people.

Note first of course that Mr O’Dea did not dispute the findings of the Open Europe research, all of which show how absurd it is for the Government to pretend we have some great influence in shaping the future of the EU. We don’t. All Mr O’Dea offered by way of reply to the research was an attempt to paint Miss Mullally and her work as ‘British’ and therefore be ignored. Yet of course Miss Mullally is Irish, with family in Dublin. And Open Europe itself is full of people from different European nationalities.

More than that, you would have though a Fianna Fail man such as Mr O’Dea would have recognised the name. Miss Mullally is the grand-daughter of the late Martin Mullally, a Drangan, Tipperary man and a founder member of An Bord Bainne.

This Irish-speaking Mullally grandfather also fought in the War of Independence as a member of the 7th Battalion of the 3rd Tipperary Brigade of the IRA. Between 1919 and 1924, he was in and out of nine jails, took part in two hunger strikes, one in the Curragh and the other alongside Terence MacSwiney in Cork.

Miss Mullally’s family is run-through with men who fought for the republic.—and indeed helped build Fianna Fail. Her great-uncle James served with republican forces in the civil war, and was later appointed first secretary of the Fianna Fail cumann in Drangan. Yet all Mr O’Dea can say to this Irishwoman is, ‘Butt out.’

He’d rather get butt in with Peter Sutherland. He may have to wait his turn, of course. Mr Sutherland is busy being butt in with Colonel Gaddafi.