The International Monetary Fund stands ready to help Ireland if needed, its managing director said, as market concern about the country's debt crisis continues.
"Everybody knows that the situation with Ireland, it's a difficult situation," IMF Managing Director Dominique Strauss-Kahn told reporters today in Yokohama, Japan. "So far I haven't received any kind of request. I think they can manage well. If at one point in time, tomorrow, in two months or two years, the Irish want support from the IMF, we will be ready."
Bailing out Ireland's financial system could cost as much as 50 billion euros under a "stress case" scenario compiled by the Finance Ministry and central bank. The country's gross funding need for 2011 will be 23.5 billion euros, falling to 18.6 billion euros in 2014, the nation's debt agency said yesterday.
Can the IMF "Help" Anyone?
Inquiring minds are asking "Can the IMF Help Anyone?"
That's a good question. Mish readers may be shocked by my answer: "Yes It Can!"
The irony is no country in its right mind should ever accept "help" from the IMF.
This apparent paradox can be explained by the fact that "help" from the IMF is akin to tossing an anchor to a struggling swimmer.
Help does not go to the country accepting the offer of help. Rather "help" goes to the creditor nations who would otherwise bear the risk of a default by the debtors.
In this case, the IMF will not help Ireland. Instead, the IMF would screw the citizens of Ireland while bailing out the bondholders. Who are those bondholders?
The answer of course is banks in Britain, Germany, the United States and France.
Shares in Ireland's banks hit record lows and national borrowing costs reached new euro-era highs Monday as the government presented its latest plans for financial survival to the European Union's economic commissioner, who has the power to order changes.
The interest rates charged on the treasuries of Ireland, as well as fellow indebted euro-zone members Portugal and Spain, have been rising ever since German Chancellor Angela Merkel last month said she expected any future EU bailouts to come with new rules requiring bondholders to absorb some losses.
But Ireland is experiencing by far the greatest skepticism from would-be lenders, who look with horror at Ireland's projected deficit of 32 percent of GDP, a modern European record.
Bank of Ireland and Allied Irish have received billions in state aid to cover their dud loans to bankrupt construction tycoons, while Irish Life & Permanent has received no bailout help but is most exposed to Ireland's depressed market for residential property.
Traders said a widely read article in the Irish Times by University College Dublin economics Professor Morgan Kelly - known in Ireland as "Dr. Doom" because of his accurate forecasts of the death of the Celtic Tiger economy - added to the gloom.
Kelly forecast that state support for banks would cost taxpayers an extra euro30 billion beyond the euro45 billion to euro50 billion declared last month by Lenihan. He accused the government of maintaining "a dreary and mendacious charade" on the true scale of property-based losses in the pipeline.
Kelly called the current deficit-fighting push "an exercise in futility" and rated Ireland's financial fate alongside that of the Titanic. He said there was no point trying to cut billions from the budget "when the iceberg of bank losses is going to sink us anyway."
"We are no longer a sovereign nation in any meaningful sense of that term. From here on, for better or worse, we can only rely on the kindness of strangers," Kelly concluded.
As the traditional owners of Irish treasuries - chiefly banks in Britain, Germany, the United States and France - seek to dump them because of their falling value and increased perceived risk, new sellers can be attracted only by offering higher yields.
Traders say the main buyer of Irish bonds in recent weeks has been the European Central Bank.
Reject Phony Offer of Help
Irish voters, if they have a chance, should reject this phony offer of "help" from the IMF, the EU or whoever. Merkel has it ALMOST correct when she said "any future EU bailouts to come with new rules requiring bondholders to absorb some losses."
I say "almost" because the future is now. In addition, I say "almost" because "some of the losses" is inadequate. Bondholders should suffer losses down to the last penny. If they are wiped out, so be it.
The citizens of Ireland should not be responsible for those losses. In short, they should tell the IMF to "Go to Hell". The simple way to do that is default.
To get its economy functioning again, Ireland will still need austerity measures, public sector reforms, bank reforms and other initiatives, but it certainly does not need any anchors from the IMF. Ireland has enough problems already.
Greece's prime minister said in an interview that the possibility of extending repayment of its EU/IMF loan was on the table, but an ECB policymaker said any talk of renegotiation could harm the country's credibility.
Greece has cut public wages and pensions and raised taxes to help plug its budget shortfall as part of a 110 billion euro EU/IMF bailout that saved it from bankruptcy in May.
But officials say it will miss this year's deficit target because of a revision of 2009 fiscal data and weak revenue growth, and the government has said it is ready to make extra spending cuts if necessary.
"The issue of extending the repayment of the support mechanism loan has already been put on the table," Prime Minister George Papandreou said in an interview to be published by the Greek newspaper Proto Thema on Sunday.
Analysts have said Greece is likely to need additional help eventually because of a jump in 2014/2015 gross borrowing needs when the 3-year bailout deal expires.
The International Monetary Fund has also said extending repayments is an option, but last month Germany strongly opposed it and the European Commission said no talks were taking place.
If 2014-2015 is not the target date, pray tell what is?
Here is an entertaining video that helps explain what Quantitative Easing is, and who in general benefits from it. I especially like the part about Bernanke being so dumb as to want to raise prices in a recession.
Quote: “We recall acts of uncommon bravery and selflessness. But we also remember that honoring those who’ve served is about more than the words we say on Veterans Day or Memorial Day. It’s about how we treat our Veterans every single day of the year.” – The President on veterans Day at Yongsan Army Garrison in Seoul, South Korea with base personnel, families and Korean vets: http://wh.gov/3Jj
Serve: Learn more about how you can support our Veterans, military families and active duty service members: http://bit.ly/94urqK
Your West Wing Week: “OCUNUS, Outside the Continental United States”: http://wh.gov/3Sp
Inside the White House: Go on an interactive tour of the White House featuring behind-the-scenes photos and videos: http://wh.gov/3ML
On the White Board: Video: The newest installment of White Board series featuring Austan Goolsbee on the Administration’s goals to expand the American export market: http://wh.gov/3z6
Our Newest Citizens: 75 members of the US Military who have risked their lives across the globe become citizens: http://wh.gov/3J2
More Women on Wall Street: iVillage, a site dedicated to women’s interests and issues, sits down with Elizabeth Warren about how the new Consumer Financial Protection Bureau will help American families. VIDEO: http://bit.ly/csOOAU
Ending the Tobacco Epidemic: Secretary Sebelius writes about the new dramatic graphic labels that are being proposed for every pack of cigarettes: http://wh.gov/3u3
Chu on The Onion: Secretary Chu shares some important “news” from The Onion: http://on.fb.me/cnQ4cy
Recovery through Retrofit: The Vice President introduces a plan to set standards and spur growth for the energy-efficiency industry: http://wh.gov/3e1
“Example to the World”: The President gives a speech in Jakarta, Indonesia extending a hand of friendship to the Muslim world: http://wh.gov/3tE
2010 Save Award: The Save Award opens the floor to federal employees to come up with ideas to make Government more transparent and efficient. Tune in Monday to find out who won the 2010 Save Award, and in the meantime, check out the four finalists: http://wh.gov/3Fw
Every Marine Shares a Birthday: Video: Happy 235th Birthday he Marine Corps’: http://bit.ly/cLmWNA
Every time I listen to NJ Chris Christie I want to stand up and salute. Today is no different.
Please watch this 4 minute video where Chris Christie blasts LeRoy Seitz, Superintendent of Schools for the Parsippany School District about Seitz's threat to leave the state if his salary is reduced to $175,000.
Last week the Parsippany-Troy Hills Board of Education voted 6-2 to renew Superintendent LeRoy Seitz's contract, which included a 2 percent per year salary increase.
What made the contract noteworthy, aside from the dozens of people that spoke out against it and the tongue lashing the Board and the Superintendent received from Gov. Chris Christie was that the contract Seitz is currently working under doesn't expire until July 1, 2011.
The Board began contract negotiations during the summer, at about the same time the Christie administration released information about a plan to cap chief administrator's salaries and tying the numbers to the enrollment in the district.
By finalizing the contract now the Board effectively agreed to give Seitz a salary well above the governor's proposed cap for almost five years.
At the Board meeting Mark Tabakin, the Board attorney, told the gathering of about 90 people that the cap is still in the proposal form, that the contract was approved by the County Executive Superintendent Kathleen Serafino and that it is a legal action. "People are upset," he acknowledged, "but it's up to the will of the Board."
The controversial contract drew township residents and protesters from as far away as Clifton and Hackettstown, who were outraged over the Board's end run around the proposed cap.
At times the dissenters were so vocal Board President Anthony Mancuso, who remained calm and in control throughout the proceedings, had to call for a 10-minute recess to let the outbursts subside. The police were also called during one of the breaks though they never had the need to take action.
When the public was allowed to speak the floodgates opened. Taking a sarcastic tact the first speaker Roman Hoshovsky said, "How can anyone be expected to live on $200,000?" Then he produced an empty canister and proposed using it as a collection jar in businesses around town to raise money for Seitz.
Barbara Hackling pointed out the Board had laid off teachers and refused to negotiate with the paraprofessionals, "but found money for him."
Karen Blunt, a 36-year Parsippany resident and a paraprofessional in the district said, "He [Seitz] is looking out for his future. I haven't had a raise in 4 years who is looking out for my future?"
The day before the meeting Seitz is quoted in the Daily Record as saying, "Because of the proposed salary caps, I have to look at my future and the financial welfare of my family. I certainly would have options if I didn't feel the compensation in this district, or New Jersey, is appropriate."
The governor reacted to Seitz's veiled threats to leave New Jersey and go to a nearby state where there is no state salary. "I will say in response to Mr. Seitz, 'Let me help you pack.' We have real problems in our state that we have to fix and we don't have the time, nor the money, nor the patience any longer for people who put themselves before our citizens," Christie railed.
I Applaud LeRoy Seitz
A tip of the hat goes to LeRoy Seitz for being such an arrogant SOB that that the meeting to discuss the new contract overflowed with citizens fed up with school board greed.
It is not easy standing up to thugs who want nothing more but to raise your taxes. But the voters did. That's how riled up they were.
I recommend voters in the Parsippany School District send a message to the ignoramuses who agreed to give LeRoy Seitz a new contract. Vote them off the school board.
Fortunately it takes approval from another level to agree to that raise, so the raise is not a done deal yet.
New Jersey taxpayers are fed up, and rightfully so. If LeRoy Seitz thinks he can get $212,000 elsewhere, more power to him. The same holds true for every public "servant". If you can get more in the private sector, shut up and do it.
Refined-sugar prices plunged by a record in London, and raw-sugar futures in New York tumbled the most in 22 years as speculation that China will boost borrowing costs roiled commodity markets.
China may increase interest rates soon in a bid to cool inflation, according to Bloomberg News survey. Raw materials tumbled on concern that demand for crops will ease in the Asian nation, the biggest consumer of many commodities. Prices also fell after ICE Futures U.S. raised margins on contracts by 65 percent. Europe announced plans to increase sugar exports.
Refined-sugar futures for March delivery fell $91.50, or 12 percent, to close at $677.10 a metric ton, marking the biggest drop ever. The price fell 2.8 percent yesterday after the EU said it also plans to lift import duties.
Raw-sugar futures plunged 3.45 cents or 12 percent, to settle at 26.21 cents on ICE. The single-day drop and this week's slide of 17 percent were the most since July 1988.
The margin requirement, or amount of money traders must keep on deposit, rose to $4,970 per speculative contract from $3,010, ICE said.
Raw Sugar Daily
Raw Sugar Weekly
I see no reason why sugar couldn't or even shouldn't fall back to the 14-18 area, wiping out the entire runup.
Soybeans and corn fell the most allowed by the Chicago Board of Trade on speculation that China will raise interest rates soon, cubing demand for commodities.
Equities in China tumbled the most since August 2009 after a report yesterday showed that consumer prices in October rose 4.4 percent from a year earlier, the fastest pace since 2008. China is the world's biggest consumer of soybeans and second- largest user of corn. The Thomson Reuters/Jefferies CRB Index of 19 raw materials fell 3.6 percent, the most since April 2009.
"The risk of rising Chinese rates increases the chances for demand to slow," said Dale Durchholz, the senior market analyst at AgriVisor LLC in Bloomington, Illinois. "The message is, China is taking a more aggressive stance to cool inflation and push speculative money out of commodities."
Corn futures for March delivery dropped 30 cents, or 5.2 percent, to close at $5.48 a bushel, the biggest drop since Oct. 1. The price has gained 46 percent since the end of June, reaching a 26-month high of $6.175 on Nov. 9, after adverse weather reduced the size of the U.S. crop.
Soybeans also fell on speculation that China will reduce imports because the government may sell supplies to damp inflation, said Greg Grow, the director of Agribusiness for Archer Financial Services Inc. in Chicago.
The country may begin selling from inventories next week to limit gains in food prices, said Cao Huimin, an analyst at China Cereals & Oils Business Net, a researcher in Beijing. The sales may total as much as 2.6 million tons, she said after discussions with cash traders.
"Chinese release of soybean stocks next week cast a negative shadow over the market," Grow of Archer Financial said. "Most of today's weakness in commodities was an exodus of funds and speculators."
Soybeans Weekly
Soybeans did not hit the speculative peak they did in summer of 2008, but there is virtually nothing to like about this price action technically or fundamentally. Technically I would expect a pullback to the 1000 area.
Bear in mind I am a long-term commodity bull. However, this love-fest with QE II has gotten more than a little bit out of hand. To make matters worse, China is clearly overheating, something I have warned about all year.
Signs in the yield curve, municipal bonds, junk bonds, and commodities suggest the one-way "sure thing" QE II bet has started to unravel.
Curve Watchers Anonymous is particularly interested in the yield curve.
Yield Curve 2010-11-12
click on any chart in this post to see a sharper image
A representative of Curve Watchers Anonymous said "I have never seen action like this before. The middle part of the curve is blowing up even as the long bond rallies. The action indicates that everyone who front-ran the Fed purchases is now unloading to the Fed. "
The 5-year is off 14 basis points while the 30-year is up 8. This is quite unusual to say the least.
Since so many of you have asked: These funds are getting mangled on expectations of — All Aboard! Munis and California joining Ireland on the default train. Even the general Muni funds have lots of California Exposure
PCK PIMCO California Municipal Income Fund II
PML PIMCO Municipal Bond Fund II
click on chart for sharper image
JNK Lehman High Yield Bond Fund
Metals
Grains
It remains to be seen if this is the start of a serious correction or just another dip-buying opportunity (in literally everything), but with sentiment sky-high and nearly everyone believing QE II is a one-way bet, I am more inclined to believe the former.
As far as gold goes, I do not expect the shellacking we saw in 2008. In fact there might not be much of a pullback at all. However, I can easily be wrong.
As far as equities go, action in junk bonds will be particularly important. If and when the corporate bond market cracks, it will be all over for equities.
Thing's don't matter until they do. Ireland finally matters. So does Portugal. The big event happens when Spain and/or Italy matters, and that is just a matter of time.
In the meantime, a huge feud is developing between European Central Bank President Jean-Claude Trichet, Bundesbank President Axel Weber (the likely successor to Trichet), and German Chancellor Angela Merkel.
European Central Bank President Jean-Claude Trichet is the buyer of only resort as the euro area's bond market melts down.
Just six months after he threw out his rule book to prevent Greece's debt crisis from splintering the euro area, the 67-year old Frenchman may again be the only policy maker able to prevent the collapse in Irish and Portuguese bonds from spreading. That may require him to ignore opposition from Bundesbank President Axel Weber to the ECB's bond-buying program and expand purchases of sovereign assets, according to Citigroup Inc. and Royal Bank of Scotland Group Plc.
"The ECB's lack of action is puzzling to say the least and begs the question as to whether it's fulfilling its financial- stability mandate," said Jacques Cailloux, chief European economist at Royal Bank of Scotland in London. "The more the ECB waits, the bigger the purchase program will have to be."
With Greece, Ireland and Portugal "now having virtually lost access to capital markets," Cailloux said the ECB must "extend dramatically" its bond purchases. He called on it to buy Spanish assets to limit contagion and spend an additional 100 billion euros by the beginning of next year. So far, the ECB has spent a total of 64 billion euros.
One potential obstacle is Weber, a contender to replace Trichet as ECB president next year, who said last month that the central bank should terminate its purchase program.
Weber is not the only German publicly disagreeing with Trichet. Chancellor Angela Merkel has quarreled with the central bank chief, whose tenure runs out on Oct. 31, 2011, over the terms of a permanent rescue facility now being debated by the European Union.
Trichet says Merkel's demand that bondholders be forced to share the cost of a future bailout risks undermining investor confidence. It was Merkel's push for burden-sharing at a European Union summit last month that triggered this month's sell-off, according to David Mackie, [chief European economist at JPMorgan Chase & Co.]
Spain's economy stalled in the third quarter, the Bank of Spain estimated, as the deepest austerity measures in three decades undermined the recovery.
Gross domestic product was unchanged from the previous three months and expanded 0.2 percent from a year earlier, the central bank in Madrid estimated in its monthly bulletin today. The economy grew 0.2 percent from April to June, as consumers brought forward purchases ahead of a sales-tax increase in July.
Industrial production fell the most in seven months in September, a separate report showed today. Output contracted an annual 1.4 percent, compounding an annual decline of 12.7 percent in the same month last year, the National Statistics Institute said.
"This was an exceedingly poor outcome given that industrial output had fallen by 12.7 percent year-on-year in September 2009," Raj Badiani, an economist at IHS Global Insight in London, said in a note. It "suggests the sector is struggling to regain its pre-crisis levels."
Spain's government, which expects GDP to fall 0.3 percent in 2010 in a second year of contraction, slashed public workers' pay by 5 percent in June and raised value-added tax to 18 percent from 16 percent in July. The measures, passed as contagion from Greece's debt crisis swept through the southern euro region in May, aim to cut the deficit to 6 percent of GDP in 2011 from 11.1 percent last year.
Efforts to contain the shortfall and restore growth may come under renewed pressure as the extra yield investors demand to hold Spanish debt rather than German equivalents climbs. As Irish borrowing costs rose to a euro-era high, the Spanish spread widened to a four-month high of 203 basis points from 194 basis points yesterday. It reached a euro-era high of 221 basis points on June 16.
Finance Minister Elena Salgado has repeatedly ruled out any contraction in quarterly GDP this year after the economy emerged from a recession in the first quarter. The government forecasts unemployment, at 19.8 percent in the third quarter, will fall to 19.3 percent in 2011.
Spain's finance minister can rule out whatever the hell he wants, but that does not make it so. With rising taxes, austerity measures, 20% unemployment, and falling industrial output, it is beyond silly to rule out a GDP contraction.
What's even sillier are predictions of a "smooth recovery". Nonetheless, the Bank of Spain said "It is to be expected that the stagnation in the third quarter is transitory. Once the one-off effects linked to the value-added tax increase have passed, the economy will return to the path of smooth recovery."
Nonsensical statements like that will send Spanish bonds soaring when the economy slips further. The finance minister and the central bank went out of their way to create unrealistic expectations that cannot possibly be met.
Right now Spanish spread widened to a four-month high of 203 basis points while Irish debt spreads hit a record 650 basis points higher than the equivalent German bond. Yields on Iris debt topped 9%.
I do not know what happened until I talk with Google. I picked a bad day to sleep in. I suspect someone tried to hack my blog. It happened once before. I believe it happened once to Naked Capitalism as well.
My robotic curtain protects me from nosey looks of pedestrians passing by. An interesting project by Niklas Roy, here to his homepage for schematics, codes and infos.
Today we're going to take a look back at a few vintage products from the pre-internet era which were too unusual to survive in the today's competitive environment.
Even the Dark Side takes a break every now and then, and Darth Vader's choice of getaway is Hawai'i! Jill Ulander caught a series of photographs of the Dark Lord kicking back on the Big Island of Hawaii.
These rats sniff out landmines that are filled with TNT. They are trained by a Dutch nongovernmental organization in Tanzania. Whenever they make positive detection they are rewarded with some food.
The demolition of the former Ohio Edison Mad River Power Plant's 275-foot smoke stack in Springfield, Ohio, went awry because the demolition crew failed to notice a crack in the structure. The collapsing tower knocked down a pair of high-voltage electrical power lines and smashed into a building housing generators. Luckily no one was injured.
They are the most magnificent and emblematic monuments around the world without question. Instantly recognizable, many monuments have become national treasures and symbolize the country itself to the rest of the world. But each famous monument has a story behind its creation, giving each building a soul, and identity. So here are some facts about some of these famous structures that may have slipped through the cracks during the tour! More Infographics.
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