The Power of Thanksgiving and Speaking English

My grandfather came to the United States as a 13 year old in June, 1914.  He was definitely a stranger in a strange land.  And yet when I reflect on my memories of him, heavy as his accent was, there was no question that he was American, and certainly that all his children were Americans.

Speaking English.

I also remember that his favourite holiday was Thanksgiving.

With the exception of the turkey, which would cause trouble if you were a vegetarian, the entire menu could be adapted to whatever your religious/ethnic/cultural bias might require, and yet there you were at the table celebrating the pilgrim fathers.

Despite all the baggage surrounding the Indians and the Puritans and that the Pilgrims survival was the beginning of the end for the Native Americans Thanksgiving still sets the stage for the development of the United States and is an entry point for almost every immigrant.

For despite the deeply religious fervour of the Pilgrim Fathers, the celebration itself became a non-denominational if not outright secular event, which allowed my grandfather to be enamoured with it although he was an orthodox Jew.

I would maintain that one of the most important keys to his integration was language.

Not far behind was the need to adapt to a secular society, outside, if not inside the house.

It is the only way forward and the sooner the nations of Europe, and the immigrants, face up to these requirements, the better.

Syria, Again.

So the Russians have bombed quite a bit in Syria, almost none of which has been Islamic State positions but rather have focused on Free Syrian Army rebels and other groups.


Russia is trying to force a peace convention through its military intervention, and of course would like to ensure that when the various parties come to the table that events on the ground have evolved to putting Assad in a stronger negotiating position.


Following on from my previous note on Putin I draw your attention to the 2 incursions into Turkish airspace by Russian aircraft.


Turkey is a member of NATO and an "attack" on one member of NATO is an attack on NATO as a whole.  The European member states of NATO already have a lot on their plate dealing with the economic and political fallout of the Great Recession.  This has been amplified by the wave of Immigrants emanating from the instability in the Middle East and other flash points in the world.


The Russians would like nothing better than to push NATO to the point that NATO should respond, militarily, but won't, putting the organisation under even more stress.


It could be said that these incursions should bring a response beyond terse words and the scrambling of Turkish interceptors.  Some might say that response should be robust certainly firing upon if not shooting down the Russian aircraft in question.


That would of course bring a Russian response, the nature of which under Mr Putin is quite difficult to predict.  But that uncertainty is exactly what he is counting on.


I believe he will continue to push until someone pushes back.  The way things are going it is becoming a question of not "if" but rather when it will happen,

Peace in Our Time....

I have been worried that Mr Putin's manoeuvrings kept smelling like Hitler's antics regarding the Rhineland, Austria, the Sudetenland and Czechoslovakia only for Poland to be the straw that broke the camel's back.


For like Hitler, Putin is playing on the fact that the West has demonstrated that it doesn't really have the stomach for war and so Putin has continuously pushed allowing each fait accompli to create a new reality.


And so we sat and watched as he stockpiled tanks, airplanes and other military hardware in Assad's piece of Syria, just as the West saw Hitler do the same thing time and time again.


Now he has again demonstrated that he has no intention of respecting agreements or understandings and that he is willing to do whatever he thinks is necessary to further his goals.


The ball is in our court. 


But Putin is playing on many courts. 


He is determined to maintain a deep-water port in the Mediterranean and the path to that end is through Assad.


He is annoyed that he was cut out of the USA/Iran deal, and this gives him some weight with Iran in that they are both interested in supporting Assad, though for different reasons.


And he was out to demonstrate that his Russia can match if not outdo the USA on the world stage as he certainly showed no compunction in blatantly bombing anti-Assad militias under the cover that he was acting to join the anti IS-coalition.


Lastly, over the past few weeks Putin been the good guy in reining in the Ukrainian separatists on the battlefield and in negotiations. 


I would venture to say that his actions in Syria were designed to rope the US into Russian led diplomacy in the Middle East, and get the US to engage in the Ukraine.


The US didn't play ball. 


They have not yet really responded to Putin's actions in Syria, and they did not engage in the Ukraine regarding a discussion on sanctions or a reduction in military and political aid to Kiev.


For me the question is where are we in the "run-up" to WWII with regards to Putin?  Hitler had actually hoped that the West would not come to Poland's defence in September 1939.  It was a colossal bet, that went badly wrong in the end.


At the loss of some 40 million lives.


But that's what Putin is counting on.  He just might be waking a dragon.


 

What Was VW Thinking?

In my years on Wall Street it was always said that Fear and Greed were the driving forces which led to the massive excesses which occur with disturbing regularity.

That they would drive the management of VW to the same excesses was something that was not supposed to happen.  Manufacturing industries still make things and the quality, and the nature of the products were there for all to see. 

There were no structured products; no sub-prime mortgages; no power caps; no inverse floaters; in short no financial engineering to create opaque financings where the bank was always the house and the clients always the mugs.

And then VW decided that engineering is engineering and if a financial construct could be used to circumvent regulations then an engineering construct could do the same.

Create a bit of kit that initiates emission controls when required, and turns them off under normal driving conditions.  (Criminally) Brilliant!

This is an intelligent bit of software.  It bypassed regulatory emissions tests for years.  No one believed the figures as everyone knew that the test results were done under circumstances far and away from actual driving conditions.

But I don't think anyone in their wildest imagination ever considered that the test results were achieved by a piece of software that would  turn on the "cleaning" equipment thus complying with the emission standards, and then automatically turn them off  allowing the engines to run without any emission controls at all.

It's not fudging.  It's not exaggerating.  It is pure and simple actively and consciously contravening the regulations. 

It is criminal.

And the fallout could have global repercussions. 

I can only hope that this actually is the first nail in the coffin of the internal combustion engine. 

Electric cars will remove a significant amount of pollution.  Of course we still need to deal with how that electricity is generated, but that is a discussion for another blog.

 

Don't Leave it to the Right Wing

Without a shadow of a doubt the rich developed world has had a crisis in the making since the original creation of colonial empires.


No matter how one tries to shade it the colonial powers practiced political, racial and economic  exploitation which left deep scars regardless of how recent-or not- the granting of "independence" was.


Now the West is reaping the rewards of its geopolitical arrogance.  We drew lines across geographies which had no relevance to the peoples living there; not to their loyalties, their religion, their language, their culture or even their ethnicity .  Indeed, there were times that boundaries were drawn precisely intended to keep any one group from gaining hegemony over an area ensuring that the inherent tensions were an accident waiting to happen.


And the result?  War, Famine and Poverty plague the former colonies from North Africa into the sub-Sahara  through the Middle East to Afghanistan creating a migration of peoples not seen since Attila the Hun came charging out of Central Asia driving such a mass of refugees that the West Roman Empire eventually collapsed leading to the East and West Goths controlling Central Europe.


The point here is to highlight that Europe is facing a massive challenge to formulate a cohesive response to a massive influx of refugees- be they driven by political, economic or military fears.  And it is not looking very coherent.


Twenty years ago I saw a film about the ramifications of having rich and poor continents essentially bumping up against one another. The plot was straight forward.  The poor and miserable of Africa were marching across the continent to Gibraltar.  There, despite the currents, through their sheer mass, exercising non-violence a-la- The Battle for Algiers they bridged their way to the Spanish coast.  And their mantra was that they were poor, because we are rich...


Today that film is reality.  I would like to emphasize that the causes of the migration are myriad, but somewhere in the mix it is clear that economics are involved.  Economics drive politics.  Economics drive wars.  Economics drives everything.


Generically Europe is a wealthy area.


It is not to say that Europe shouldn't be taking refugees.  It should.  But it has to look at who is coming.  It has to look at how the intake of refugees effects the social structure of the country, the county, the city and the village to which they are coming. 


Currently the pro-narrative has been driven by Germany with its twisted history of the Second World War and concurrent desire to demonstrate that its fascist past was an aberration.


The contra-narrative has been left to the far right such as Alternative fuer Deutschland,  The National Party Deutschland, The National Front, The British National Party, The Party for Freedom, Jobbik
Golden Dawn, Finns, The Danish People's Party, Austrian Freedom and Liga Nord.


This is extremely dangerous.


They are populist parties not only preying on the fears of the lower strata of society, but also appealing to the Middle Classes who feel their position in society is perilous and are looking for a party that "protects" their interest.


The Refugees are "ad Portas.  We have to have a response which is both humanitarian and, frankly, takes into account the fact that it will be expensive to integrate them and part of that cost will be to ensure that those to whom their very presence is a threat-be it real or perceived-are not alienated.


For that door leads backwards to a past we would like to leave behind us. 



What is the Greater Good

As a firm believer in the idea of the European Union (EU) despite the many problems associated with it I am especially at a loss regarding the negotiations with the Greeks.

First, as a bit of background, I support the idea of a Federal Europe which goes far beyond the current construct.  A monetary union without a fiscal union, which by definition presumes a political union was always going to be a problem.  But sometimes the perfect is the enemy of the good.

Believers in Europe amongst the political elite felt that a trade and monetary union, even without a fiscal union was better than no union at all.

And until the Great Recession it was.  Prosperity was the coating which glossed over many of the problems inherent in the structure.

Even after the crisis and despite the harsh austerity budgets forced upon the Irish, the Portuguese, the Spanish, the Italians, the Balts, the Slovaks and even to a degree the French,  the monetary union held together.

Greece on the other hand, despite a loan of Euro 110 billion and a write-off of 50% of the outstanding debts owed to private investors has resisted the austerity measures forced upon it as part of the new loans it requires to stave of insolvency.  It has elected a government which happily accepted the poisoned chalice of a dual mandate  renegotiating the terms of the loan and keeping Greece in the Euro.

That's what populism gets you.

So I ask myself what is it about Greece that makes them unwilling to accept the austerity terms that the other nations begrudgingly accepted.

Greece has a difficult history.  It was part of the Ottoman Empire for over 400 years gaining independence in the 1830's.  Since then it has gone from a republic to a monarchy to a republic to German occupation to a civil war to a republic to a military dictatorship to a republic.

Greece joined the European Union in 1980 and joined the Euro in 2002.  As with many countries involved in the Euro there was a bit of statistical magic to get the Greeks to adhere to the Maastricht Treaty requirements.

Many observers are quick to point out that the Germans manipulated their statistics to reach the 3% of GDP debt level so why should one query Greece's accounting tricks.

That might be where the problem began.

Germany was in the midst of trying to incorporate the former East Germany which unsurprisingly was a very expensive undertaking for which the Germans are still paying through the solidarity surcharge.

But Germany has an economy.

Even before the Great Recession Greece was behind the rest of Europe.  In 2008 only one third of households had internet- less than anyone else in Europe including the Baltics and some south-east European nations.  Youth unemployment and government debt were among the continent's highest despite major funding through the EU's infrastructure development program.

Since then unemployment has tripled to 26% with over three quarters of the jobless being out of work for 12 months or more.  This has happened parallel to a serious decrease in the birthrate coupled with mass migration of youth seeking opportunity (youth unemployment is over 60%).  This has left Greece with an ageing population dependent upon state pensions.  Over one third of the population is on the cusp of the poverty line, more than any other euro-zone member.

And yet everything you hear from the Greeks is that it's someone else's problem.

Today,Greek premier Alexis Tsipras has accused the EU of intentionally trying to subvert the Greek democratic system, having pillaged the country for the last 5 years and now trying to institute regime change.

I have been against a Grexit.  I still would like to avoid it.  But as the adage goes, "as long as my neighbour wants to fight I will have no peace".

Mr Tsipras seems to think this is a game and that at the end of it everything will be fine.

He is totally wrong.  And his arrogance could certainly bring the Great Depression to Greece.  With that comes financial and political chaos.

This is about to get very ugly.
   

Suddenly the Billionaires Care About the 99%

I have just read two articles, one by Mr Stephen Schwarzman, CEO and co-Founder of Blackstone in the Wall Street Journal (WSJ) and the other on Mr Jamie Dimon, CEO of JP Morgan in CNN Money. They are both members of the billionaires club thanks in a large part to the excesses associated with Quantitative Easing  (QE)which created ferocious bull markets predicated on essentially free money.

Now they both have suddenly got religion and are out explaining how the the Dodd-Frank Financial Regulations are the harbingers of the next financial crisis and how this will hurt the mom and pops of the world.

The culprit: a liquidity crisis which Mr Schwarzman attributes to the prohibition on proprietary trading by the banks.  He explained that this prohibition, when combined with enhanced capital and liquidity requirements has led banks to avoid some market-making functions in some key equity and debt markets.

Really?

In the same article Mr Schwarzman tells us that Deutsche Bank noted that dealer inventories of corporate bonds are down 90% since 2001.  And this despite the outstanding supply of corporate bonds almost doubling.  Funny that.  I could have sworn that the Great Recession started in 2007.
And the doubling of outstanding corporate bonds has been driven by QE which was inaugurated in 2008....

Mr Dimon on the other hand, whose bank is one of the largest issuers of corporate bonds was quoted, along with a 'slew' of other smart people on Wall Street that there is a liquidity crisis looming and "...in a crisis there might not be enough bonds to go around".

So which is it.  Is there going to be a liquidity crisis because there won't be enough bonds around?  Or is the prohibition on proprietary trading, which is run solely for the banks profit, stopping those same banks from fulfilling their role as financial intermediaries and helping facilitate a fair and orderly market- and thus contributing to a liquidity crisis?

I'm not sure that either of them know.  But the cake goes to Mr Schwarzman.  His concern for small business owners, farmers and local real estate markets is predicated on the fact that the traditional lender to this segment of the economy are the Community Banks.  Their number has decreased 41% since 2008, and he blames this on Dodd-Frank.

Selective memory perhaps?

The major cause of the demise of the Community Banking sector was that they all held the preferred stock of the housing related government-sponsored enterprises (GSE's)-Fannie Mae and Freddie Mac which went into conservatorship before Dodd-Frank.

Banks were able to hold considerable amounts GSE preferred shares because, even though banks are normally restricted from investing substantially in equity securities, an exemption to the standard limits on permissible equity securities was established for the GSE investments.

Some will cry that Mr Frank and Congress were behind this, trying to expand home ownership in the United States.

Other more sanguine observers will remember that the reason the real estate related GSE's went bankrupt was that the major banks and unregulated private lenders stuffed them with sub-prime loans rife with major documentation problems.

The truth is that all of these highly respected billionaires have been against financial regulations from the start.  Wall Street smells blood and is starting to flex their muscles in the political corridors of power to try and roll back history.

They have learned though. This time they are cloaking their desires in the guise of wanting to protect the little guys- and reopen the floodgates to unregulated financial markets.