Europe’s slow-motion economic collapse continues apace as Eurozone governments and banks continue to wring their hands over what to do to postpone the inevitable Greek default. And now there’s a new wrinkle: Italy, whose level of sovereign indebtedness relative to GDP is second only to that of Greece, has suddenly appeared on investors’ radar screens. If Italy — the second largest economy in the Eurozone — goes the way of Greece, Ireland, and Portugal, there will not be enough money in Europe’s rapidly-dwindling rescue fund (the European Financial Stability Facility or EFSF) to effect a bailout.
The impasse over Greece is bad enough. Several countries in the European Union, including the Netherlands and Germany, expect private holders — large European banks — of Greek bonds to share some of the burden for the next Greek bailout, reckoned at some €110 billion. But European megabanks, given the precedents set with numerous recent taxpayer-funded bailouts on both sides of the Atlantic, are refusing to consider losing any of their own money. And all sides are finally awakening to the realization that a Greek default in the form of some kind of debt restructuring is inevitable. As Julian Toyer and Dan Flynn of Reuters report:
Once again, the Gawker.com has shown, if you work for the man who talked about hope and change, you can have a lot of hope you’ll get a lot of change: 146 of President Barack Obama’s 270 staff members received an average raise of eight percent for the 2010-11 year.
Gawker correctly observes that Americans suffer while the Obama class of 2012 rakes in the money, every cent of it taken from those suffering American taxpayers. Obama plays golf; his leftist myrmidons get rich. Americans pay for it.
But more disconcerting than the average eight-percent raise during a time when some Americans can’t get raises is this little fact: The top 20 White House employees received increases, on average, of nearly 50 percent. Some nearly doubled their salaries.
ITEM: “Regulators want to ensure mortgage lenders retain some of the risk on loans they originate, as it is crucial to strengthen the housing finance system, a top Treasury official said on Friday,” reported Reuters for June 24.
ITEM: “The Obama administration is ‘seriously considering’ a proposal by bank regulators that could cause mortgage rates to rise on all but the safest home loans, a Treasury Department official is set to say Friday,” reported Dow Jones on June 24.
CORRECTION: The same folks who brought you the managed housing economy that tanked want to continue to serve as the mismanagement.
Sea Isle, N.J. — James Fenimore Cooper's historical novel The Last of the Mohicans concludes with Tamenund (1628-98), the tribal leader of an Indian clan in the Delaware Valley, lamenting the pain of old age and the near-extinction of his people.
"Why should Tamenund stay?" he asks. "The pale-faces are the masters of the earth, and the time of the red-man has not yet come again."
Well, there's big news up the beach in Atlantic City that would bring a big smile to the old chief's face.
With the federal borrowing clock allegedly ticking down to financial Armageddon on August 2, discourse on Capitol Hill is becoming predictably envenomed. The official Republican position, framed repeatedly by House Speaker John Boehner, is that no legislation to raise the debt limit will be admissible without deep spending cuts, and that tax increases of any sort will not be countenanced by the Tea Party-fueled Republican majority in the House. The Obama administration and its allies in Congress are making calls from a time-dishonored playbook, pushing for tax increases on the rich rather than meaningful cuts in government spending, and accusing Republicans of calculated obstructionism.
Texas Congressman and presidential candidate Ron Paul, one of only a handful of congressmen with a commitment to fiscal responsibility and a genuine yen for limited government, issued a statement warning of coming Republican duplicity in the face of the continued refusal of the Obamaites to contemplate deep budget cuts without a massive tax increase: "Sources in Washington tell me that House Republican Speaker John Boehner [pictured] is considering a deal to raise taxes as part of a debt limit 'deal.'"
Unnamed White House and U.S. Treasury sources told MoneyNews.com that options to handle the government’s debts in the event no debt ceiling deal is reached are being explored, despite official protestations to the contrary.
Mary Miller, Assistant Secretary for Financial Markets, is in charge of paying the government’s bills, and on June 21 she repeated the party line in London to bankers holding substantial American debt that there is no "Plan B," assuring them that the debt limit would be raised before August 2. Official Treasury spokeswoman Colleen Murray expressed practically the same thing:
It is hard to understand politics if you are hung up on reality. Politicians leave reality to others. What matters in politics is what you can get the voters to believe, whether it bears any resemblance to reality or not.
Not only among politicians, but also among much of the media, and even among some of the public, the quest is not for truth about reality but for talking points that fit a vision or advance an agenda. Some seem to see it as a personal contest about who is best at fencing with words.
The current controversy over whether to deal with our massive national debt by cutting spending, or whether instead to raise tax rates on "the rich," is a classic example of talking points versus reality.
Americans know the term "stagflation"; the decline in economic activity accompanied by an artificially inflated money supply is what Europe is presently experiencing. On Thursday, European Central Bank President Jean-Claude Trichet announced that the ECB had raised its interest rates 1.5 points and suggested that this action, intended to contract the money supply, might be pursued more aggressively in the future — even though the so-called "PIGS" nations of Europe (Portugal, Ireland, Greece, and Spain) need influxes of money in order to prevent default.
While Trichet recognized that this hike in interest rates might slow down the world economy, he stated that controlling inflation remained the bank’s most important task at present. He hinted that another raise might be in store in future months, noting that the bank would “monitor very closely” price developments, which has been a code for suggesting that interest rates would not be raised the next month. “Our monetary policy stance remains accommodative," he assured. "It is essential [that] recent price developments do not give rise to broad based inflation pressures over the medium term.” Marc Ostvald, an market strategist at Monument Securities, advised: "A further quarter point rate hike probably in October or November still appears to be the central scenario."
Seemingly unaware of the nation’s debt crisis, the federal government is attempting to revamp its foreclosure-prevention program to make it easier for out-of-work homeowners to keep their homes.
On August 1, the Federal Housing Administration plans to extend the amount of time homeowners will be permitted to miss mortgage payments from four months or less to a full year. At that point, the full foreclosure process would begin, if necessary.
The foreclosure program began in 2009 to assist those at risk of foreclosure by reducing their monthly payments. Borrowers were permitted to make lower payments on a trial basis, but thus far, the program has been unable to convert them into permanent loan modifications. In the beginning, nearly two million homeowners were receiving the trial modifications, but since then, a large majority of the homeowners dropped out of the program entirely.
In 2009, in the middle of the automobile industry bailout controversy, White House advisor Ron Bloom, then “car czar,” told reporters, “I did this all for the unions.” When asked to clarify that statement recently, Bloom denied ever making it. Unfortunately for Bloom, however, credible sources indicate that the remark was in fact made by him.
On June 22, the Congressional Oversight Committee held a hearing to address a number of concerns regarding the controversial auto bailout. In the process of the bailout, Bloom apparently took “money from bondholders and handed it directly to the unions,” and also elected to cut salaried employee benefits while “giving strangely deferential benefits to the Unions in the middle of a bankruptcy," reports The Blaze.