Another Bank On The Brink

The Masters of the Universe on Wall Street, and in financial capitals around the world, will be holding their breath today.  They’re waiting to see what happens to Germany’s mighty Deutsche Bank, the latest big bank to fall into crisis and roil the international markets.

deutsche-bank-1If you are unfortunate enough to own Deutsche Bank shares, you know what I mean.  The value of its common stock has fallen more than 65 percent in the past year, and a credit rating agency has moved its outlook to negative.  The Department of Justice has demanded that Deutsche Bank pay $14 billion to settle an investigation into residential mortgage-backed securities, although the Bank hopes to negotiate down to a lower payment figure.  Deutsche Bank has been removed from  European blue chip stock index because its share price has fallen so far, so fast, and now there are reports that some hedge funds are moving holdings out of Deutsche Bank to other banks.

Why should we care?  Because earlier this year the International Monetary Fund issued a report that found that Deutsche Bank “appears to be the most important net contributor to systemic risks in the global banking system.”  “Systemic risks in the global banking system” — there’s a phrase that should send shivers down your spine.  The bank has substantial exposure in derivatives . . . and equally important, it has significant connections to the big banks in America, Great Britain, China, Japan, and other countries around the globe.  In our modern, globalist world, that’s just how the huge financial concerns work.  That means that any serious problem at Deutsche Bank will have a ripple effect in America — an effect that is already being felt in the markets here.

So once again we are faced with the prospect of a big bank that has engaged in risky behavior teetering on the brink, with calls for a national government — in this case, Germany — to come forward and say that it is ready to step in and rescue the bank from the consequences of its own actions.

Sound familiar?  Hey, I thought this was supposed to have been fixed in 2009.

 

Fuel To The Fire

New Year’s Eve might be even a bigger deal in Europe than it is here.  (Google “drunk Brits new years eve” if you don’t believe me.)  But in Cologne, Germany — and in other cities in Germany and elsewhere — the drunken mayhem took a turn for the worse.

In Cologne, mobs of drunken men surrounded, assaulted and robbed women in the huge square outside the city train station; two rapes also were reported.  German police now estimate that as many as 1,000 men were involved in the incidents and are looking for 16 men in particular.  More than 100 women and girls have come forward to report the gropes, robberies, and attacks by the men, and they describe a chaotic and lawless scene in which the gangs of men did whatever they wanted without fear of apprehension or reprisal.  The women say there was no meaningful police presence at the scene, and the Cologne police chief said the scale and nature of what happened was “a completely new dimension of crime.”

GERMANY-EUROPE-MIGRANTSWhat makes the story even more incendiary is that witnesses described many of the men gathered in the square as being northern African or Arab in appearance.  Critics of Germany’s recent decision to permit more than 1 million refugees from the Middle East to enter the country have seized upon the attacks in Cologne and elsewhere as another reason to reject the open-door policy.  German authorities have said, however, that there is no evidence that the men who committed the robberies and assaults were recent refugee arrivals.

And there is an undeniable undercurrent of distrust of German authorities lurking in reports of the incidents, too.  The initial police report on the New Year’s Eve celebration in Cologne said there was a “joyful, party atmosphere” and a celebration that was “mostly peaceful.”  It was only after countless women began telling people about being mauled and robbed that authorities changed their reports to acknowledge the lawlessness and disorder.  You can’t read about the Cologne mobs without wondering whether the initial reaction by authorities was to minimize the extent of the criminal activity in order to avoid additional criticism of the German immigration policy.  Indeed, comments by Cologne’s mayor, Henriette Reker, amazingly seemed to suggest that the assaulted women bore some of the responsibility for the attacks, saying they should “keep at an arm’s length” from strangers and “stick together in groups, don’t get split up, even if you’re in a party mood”.

We’ll have to wait to see whether the German police apprehend and identify specific suspects, but the failure of authorities to be forthcoming about the incidents in the first place simply, and unnecessarily, adds fuel to the anti-immigrant fire.  It’s hard for many of us to accept, but Donald Trump apparently appeals to some Americans because of the perception that he is “speaking truth to power” — and that perception can be created only if there also is a perception that power isn’t speaking truth in the first place.  When authorities are seen as trying to downplay the facts or bury the true story, it only reinforces that underlying perception and gives blowhards like Trump more ammunition for their anti-immigration rants.

Euro Zone Danger Zone

With all the bad news around the world lately — from ISIS savagery to North Korean nuttery, from Russian power plays in Ukraine to Chinese saber-rattling in the Pacific, from the Ebola outbreak in west Africa to Boko Haram mass kidnappings — nobody’s paying too much attention to Europe.  That’s unfortunate, because Europe is a mess right now.

Economically, Europe is a basket case.  In the second quarter of this year, Germany’s economy — the largest on the continent — shrank by 0.2 percent.  The most recent data indicates that business growth continued to slow in August.  In France, the economy is completely stagnant, producing no growth for several quarters while unemployment is above 10 percent.  The French economy minister resigned yesterday in a public disagreement with the country’s very unpopular President about whether France should follow austerity policies or policies that funnel government money directly to households; the economy minister said he felt compelled to speak out to try to avoid the European Union’s “descent into hell.” 

IMG_5596The unemployment situation in Europe is terrible.  Statistics presented by the European Central Bank president at an international conference last week are daunting — they show European unemployment growing while American unemployment is declining and indicate that the recession that hit the world in 2008 really hasn’t ended in the Eurozone.  The statistics also show that people who aren’t highly educated are losing their jobs by the truckload and that jobs are vanishing in the business sectors that traditionally employed less educated people — like construction and heavy industry.  The service sector is holding steady, which means that if you’re looking for a job in the Eurozone and you don’t have advanced degrees, you’re lucky to get a position as a waiter.

When economies fail and bitter people can’t find jobs to fill their time and feed their families, political and social unrest follows closely behind.  It therefore shouldn’t be a surprise that we are seeing a deeply troubling increase in anti-Semitism in Europe, from public protests triggered by the Israeli-Hamas fighting in Gaza to attacks on synagogues and social media hate speech.  The fact that some Europeans are returning to virulent anti-Semitism of their forefathers indicates that the EU initiative really hasn’t materially changed a continent where prejudices run deep.

The economic, political, and social situation in Europe is a toxic mix.  Other crises have distracted attention from the various Eurozone woes, but we shouldn’t ignore what’s happening across the Atlantic.

Tipping A Glass To Our Unknown Irish Ancestors

Tomorrow is St. Patrick’s Day. It’s a day when everyone is Irish, or at least claims to be.

The Webners are no different. Richard recently took one of those mail-in DNA tests, and the results showed a significant percentage of Scotch-Irish DNA. I get the Scottish part; our extended family tree includes Neals, McCollums, and Fergusons. My grandmother, born a Brown, claimed Irish ancestry, and I’ve no doubt that there are other, now-unknown branches that undoubtedly touched the Emerald Isle. It’s enough, at least, to allow us to celebrate March 17 with a heartfelt Erin go Bragh.

I’m proud of whatever Irish ancestry we have. In my view, you have to give the Irish credit — of all of the countries that have contributed to our melting pot nation, the Irish have the best traditional holiday, by far. St. Patrick’s Day blows Columbus Day and Cinco de Mayo out of the water, and most other countries aren’t even in the running. There’s no Deutschland Day, or British Bash. And no other country has the branding of Ireland, either. Whether it’s leprechauns, shillelaghs, four-leaf clovers, or pots of gold at the end of the rainbow, the Irish stand alone at the top of the heap.

It’s also admirable that the Irish made drinking beer an essential part of St. Patrick’s Day. Sure, we know St. Patrick had something to do with chasing snakes off the island, but most people associate the holiday with beer. Beer drinking also is an essential part of the culture of the Germans, the Brits, the Belgians, and even the French, but the Irish have co-opted it completely. Years ago, some savvy Irishman obviously understood that focusing a holiday on beer-drinking is bound to increase the amount of participation.

St. Patrick’s Day is an easy day to celebrate: you wear something green and drink beer. You don’t have to go to church, and there’s no significant physical danger involved, such as you might find in running with the bulls in Pamplona. Instead, there’s just an opportunity to bend an elbow with your friends, quaff a few dozen ales, and pretend you like droning Celtic music. The only risk is being punched in the face by some drunken, red-faced IRA member, getting a wet kiss from a beefy red-headed woman wearing a “kiss me, I’m Irish” pin, or ending up face down in a vomit-filled gutter.

Happy St. Patrick’s Day!

Why I’m Voting For Mitt Romney And Paul Ryan

On Tuesday, I’ll walk in to the polling booth at the church in New Albany where we vote and touch the screen for Mitt Romney and Paul Ryan.  I recognize that that decision won’t come as much of a surprise for loyal readers of our family blog.  I think it’s only fair to explain why, if only to add one more person’s perspective to the national conversation about this election.

In my view, the most important issue confronting our country is our federal deficit and national debt — the latter of which has passed the $16 trillion mark.  I care about other issues, of course, but I view our debt as the most fundamental issue of all because it involves basic concepts of national sovereignty.  Our debt is so large, and has existed for so long, that we tend to think of it as a kind of abstraction . . . but every dollar of that debt is a real obligation of our country, reflected in an instrument sold by the U.S. treasury to a willing buyer who will be paid a specified interest rate.  With each additional bit of borrowing, we give those people from whom we are borrowing leverage that may allow them to dictate terms — at first, the terms of the debt instruments, by insisting on higher interest payments, and then eventually the terms of how our government operates, by dictating whether we need to adopt austerity measures in how our country operates if we hope to obtain additional loans.  At that point, our national sovereignty is at stake.

We know this to be the case, because over the past few years we have seen it occur in Iceland and Ireland, and in Greece and Portugal.  Those countries borrowed irresponsibly and saw the interest rates on their debt instruments rise as investors became increasingly concerned that the debts might not be repaid and demanded higher rates as the price for accepting that risk.  And, ultimately, outside forces — the International Monetary Fund, European Union bankers, and others — went to each of those formerly sovereign nations and told them what they needed to do if they hoped to continue to borrow money.  Those governments accepted the conditions and agreed to the austerity measures imposed by outsiders because they had no choice.

I don’t want to see that happen here — yet, over the last four years, we have seen the United States move down that very same path, with annual trillion-dollar deficits that have taken our total debt past the unimaginable sum of $16 trillion.  We also passed a significant milestone on that road to perdition when our national credit rating was downgraded.  I don’t think that downgrade has received the attention it deserves.  Imagine!  Credit rating agencies presuming to raise questions about the credit of the leader of the free world, a country so stable that its currency gave rise to the now-antiquated phrase “sound as a dollar.”  But the ratings agencies are so presumptuous, and we are kidding ourselves if we think our many lenders aren’t also carefully considering our credit-worthiness.

I don’t want to wake up one morning and see that our political leaders are having to dance to the tune called by teams of grey-suited bankers from the IMF, or China, or Germany.  If that happens — and if we continue to rack up trillion-dollar annual deficits, it inevitably will — we shouldn’t kid ourselves about what it would mean.  Does anyone think federal funding of NPR or contraceptives, to identify only two of the issues being discussed during this campaign, would survive under the austerity measures forced upon us by creditors?  Does anyone think the bankers would hesitate to require fundamental changes in entitlement programs like Social Security and Medicare?  Does anyone think our country could continue to function as a world leader, and a force for good, as a debtor nation struggling to deal with its overwhelming credit problems?

I recognize this is a dire scenario, and some believe it just can’t happen here.  My response is to look at what has happened in Europe, to countries that have just been ahead of us on the irresponsible fiscal policy curve.  Their experience shows, I think, that it can happen here — and it will, if we don’t do something about it.  I’m too proud of this country and what it has accomplished to let that happen without trying to change course.

I don’t think President Obama places a high priority on grappling with our deficit and debt problems.  He’s talked about them, but his actions speak louder than his words.  He continues to propose budgets that would result in trillion-dollar debts for years into the future, and continues to propose the creation of new federal agencies and federal programs as the solution for every problem.  He hasn’t used the bully pulpit of the presidency to encourage Congress to act.  I’ve seen nothing from President Obama to indicate that his performance over the next four years on this crucial issue of national sovereignty would be any different than his performance over the past four years.

Mitt Romney and Paul Ryan, on the other hand, do focus on the issue of our deficit and our debt and have proposed approaches.  I think they understand the fundamental nature of the problem and would make working with Congress to address the issues in a meaningful way their top priority.  I want someone in the White House who will tackle the debt problem, not let us drift into catastrophe.  That’s why I’m voting for Mitt Romney and Paul Ryan.

Mein Kampf, And Combating Speech With Speech

Mein Kampf, Adolf Hitler’s feverish biography and racist Nazi manifesto, has not been published in German since 1945.  That will change soon, when an annotated edition will be published for students to read.

The book has not been banned in Germany.  However, the state of Bavaria controls the copyright, and it has not consented to any publication of the book in more than 65 years.  The copyright ends in 2015, and Bavaria has decided to publish a scholarly edition to preempt the field before Mein Kampf passes into the public domain — and also to “demystify” the book for Germans who haven’t been able to read it in their native language.

If you’ve never read Mein Kampf, don’t bother.  I had to read it for a college class, and it was dreadful — badly written, ranting, nutty, and boring.  Reading it was a long, hard slog.  Having read it, I wondered how in the world Hitler could have captured the imagination and loyalty of the German people in the years before World War II.  There certainly was nothing in the book that explained it.

Books can be extraordinarily powerful.  Uncle Tom’s Cabin, for example, may have been the most effective means of changing the views of Americans about slavery in the 19th century.  Fearing books and trying to suppress them, however, only enhances their power.  Far better to let hateful speech like Mein Kampf remain available, and respond to it in ways that demonstrate its appalling lunacy.

I’m convinced that those Germans who read Hitler’s diatribe anew will recognize it for what it was:  the rantings of a misguided madman.  Let them read it, and draw their own conclusions.

Adverse To Austerity

Elections have occurred in Greece, France, and Italy in the past few days, and voters have cast their ballots against the austerity measures that were imposed to try to put a brake on the European debt crisis and, in Greece and France, have thrown out the governments that agreed to those measures.

In France, the flamboyant Nikolas Sarkozy was replaced by a Socialist, Francois Hollande, who says he seeks an alternative to austerity and vows to increase taxes and spending.  In Greece, voters deserted the parties that had dominated the political landscape for decades and splintered their support among a broad range of parties, including the disturbingly neo-Nazi “Golden Dawn”.  The same trends were seen in local elections in Italy.

No one should be surprised by these results.  Austerity is hard; Europeans are soft.  They’ve become accustomed to rich benefits, lots of vacation time, a short work week, and generous pensions that allow them to retire at an early age.  The problem is that their lifestyle has been financed by debt, and now people are only willing to lend them more if they agree to actions that will bring their fiscal house in order.  The fact that Greek voters and French voters don’t like the austerity doesn’t change that result.  Why would you want to lend money to someone who hasn’t shown the responsibility or willpower necessary to pay you back?

This likely means that the Eurozone concept will fail.  Appeals for continental unity only go so far, and hardworking and thrifty German and Dutch voters aren’t going to support the unrestrained spending of the Greek and Italian and Portuguese governments forever.  The Euro will end as a unified currency, the responsible northern European countries will return to their highly valued local currencies, and the southern European countries will slink back to their devalued and debased drachmas and lire, look around for new saps to loan them money with no hope of being repaid, and find there are no takers.  At that point, the current days of “austerity” might begin to look pretty good, in retrospect.

There’s a lesson in here somewhere for America.