December 18, 2011 archive

Our regular featured content-

• On This Day In History December 18 by TheMomCat

These featured articles-

• My Little Town 20111214: Lucy the Cat by Translator
• A Glass Half Full by ek hornbeck
• What’s Cooking: Potato Latkes by TheMomCat

our weekly feature-

• Six In The Morning: On Sunday by mishima
• Punting the Pundits: Sunday Preview Edition by TheMomCat
• Rant of the Week: Stephen Colbert by TheMomCat

The Stars Hollow Gazette

Cross posted from The Stars Hollow Gazette

Reposted from December 4, 2010

It isn’t Hanukkah without Potato Latkes, those wonderful, crispy pancakes of shredded potato and onion served with apple sauce. It’s lot easier than when I was growing up in the 50’s. Back then we had to shred them with a metal grater that often resulted in some shredded knuckles, too. Food processors have saved a lot of knuckles and teary eye from shredding the onion.

This recipe is really simple. The trick to getting latkes that hold together and aren’t “oily” is the  potato. Idaho’s win, hands down.

Traditionally, according to kosher law, when latkes are served with a fish meal they are fried in oil and served with sour cream. If they are served with meat, they are fried in chicken fat and served with apple sauce. Since, I haven’t kept a kosher kitchen in over 40 years, I fry the latkes in oil and serve both apple sauce and sour cream.

Because this recipe has no flour or egg, the latkes are more delicate and lacy. These are best served when they are fresh from the pan, so, we take turns making them all during the meal. It can actually be fun.

Pure Potato Latkes

* 4 large Idaho potatoes, about 2 1/4 lbs.

* 1 large onion, peeled

* 1/2 teaspoon of salt

* 1/4 teaspoon fresh ground black pepper

* 1/4 cup canola oil

In a food processor with a coarse shredding disc or o the large shredding hole of a hand grater, shred the potatoes. Squeeze them well to rid them of as much water as possible and place them in a bowl. I use a cotton dish towel to squeeze the water out. it gets them really dry. Shred the onion and add to the bowl. Add the salt and pepper. Mix well. More water will be exuded and should be squeezed and drained thoroughly.

In a large heavy frying pan (a 12 inch iron pan works best), over medium heat, heat 2 tablespoons until a slight haze appears on the surace of the oil. Drop about 1/4 cup of the mixture into the oil, flattening slightly with the back of a spoon Leave a little pace between the pancakes for ease in turning. They should be about 2 1/2 inches in diameter and will flatten as they cook.

Cook about 7 minutes or until the edges turn golden brown. Flip and cook another 5 to 7 minutes or until the other side is golden brown. If the oil starts smoking or the latkes brown too quickly, reduce the heat and briefly remove the pan from the heat. Remove the latkes and drain on layers of paper towels Continue with remaining mixture adding 2 tablespoons of oil with each batch.

Serve with apple sauce and sour cream.

Bon Appetite and Happy Hanukkah!

Crossposted from The Stars Hollow Gazette

Recently some people of my acquaintance have had traffic accidents that damaged their cars (fortunately there were no injuries).

They had insurance which, over the lifetime of the vehicle, amounted to much more than its replacement cost.  So an adjuster came out and examined the damage, determined whether or not repair exceeded replacement cost and issued a check for the lower of the two values.

In the mean time the insurance company had the use of the payment money which they invested and collected the profits of that investment.

At least that’s the way insurance is supposed to work.

Accountancy is boring.  I want to be a Lion Tamer!

What If Lehman Happened Today?

By Michael Hirsh and Stacy Kaper, National Journal

Updated: December 1, 2011 5:19 p.m.

And now Gensler-a former Goldman Sachs executive whose stand against his erstwhile Wall Street comrades has won praise from progressives-is facing down the biggest Goliath of all. Europe’s raging financial crisis may not leave Gensler the time he needs to get a handle on the vast global market in derivatives, the arcane instruments used to bet on everything from interest rates to currencies to credit default swaps on the Continent. At $708 trillion (yes, trillion), the derivatives trade is already much larger than it was during the 2008 crisis. Just as last time, this opaque market may hold the key to whether the evolving eurozone disaster causes another market meltdown worldwide. With a staff of only 712 (roughly unchanged from the 1990s, when financial products where much less complex), the CFTC must regulate markets seven times the size of the futures market it used to oversee. Mostly, it supervises America’s $300 trillion portion of the global derivatives trade. “Until we complete this task, the American people remain at risk,” Gensler warned in an interview with National Journal at his office in downtown Washington. “We are midstream” in rule-writing and in requiring firms to report their trading positions, he admits. “The only thing that we would have right now is the data that banks and others are voluntarily reporting.” Even after the rules are written, Gensler says, “we won’t necessarily have the cops on the beat to oversee the market.”

…

The most frightening (but still very plausible) scenario is that some of the CDS dealers won’t have capital to pay off the swaps as they are “triggered” by the plummeting value of European bonds. That shortfall could lead to defaults on trillions of dollars in other types of derivatives. Something similar occurred when Lehman Brothers collapsed in September 2008; it failed to make good on nearly 10,000 contracts for swaps and derivatives. Lehman was severely over-leveraged, relied too heavily on short-term funding, and ultimately succumbed to a liquidity run. “That’s exactly what’s going to bring the system down,” says Michael Greenberger, a derivatives expert at the University of Maryland who once served as a senior CFTC official. “Here you’ve got people holding on to potentially valueless government debt.”

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A panic may be just around the corner. The International Swaps and Derivatives Association appears to be trying to tighten its standards for paying out credit default swaps on euro debt, making it more difficult to collect on them, the Financial Times reported this week. That decision has angered the firms holding the CDS insurance. The situation also has similarities to 2008 and the failure of American International Group, the world’s biggest dealer of credit default swaps, which required a $150 billion bailout by the U.S. government. AIG imploded because it couldn’t keep up with the triggers that required it to post more collateral. “The real problem is that CDS moves the financial consequences of a default much further up the line,” says Dennis Kelleher, the head of Better Markets, a D.C.-based activist group. “So, long before someone defaults, be it an institution or a country, anyone who has written insurance-ie, credit default swaps-has to start posting massive amounts of collateral.”

…

“We still don’t have transparency in the swaps market,” Gensler says. “There is $20 of swaps for every dollar in our economy.”

Or so it would have been, if certain modern theories about the shape of the world had not proved to be disastrously wrong.

Crossposted from The Stars Hollow Gazette

Germany’s Hidden Risk

By Peter Coy, BusinessWeek

December 14, 2011, 11:00 PM EST

Germany’s Bundesbank-BuBa for short-has quietly, automatically lent €495 billion to the European Central Bank via Target2. That lending has balanced correspondingly huge borrowings from Target2 by the central banks of weaker nations including Greece, Ireland, and Portugal-and lately Spain, Italy, and even France. They are technically “claims,” not loans. To find them you have to root around in the footnotes of the reports of the 17 national central banks of the euro zone.

If the euro zone breaks into sorry little pieces, Germany could possibly lose its entire €495 billion claim. That’s more than $650 billion. It is 60 percent bigger than Germany’s annual federal budget-and larger than the lending under the European Financial Stability Facility and other aid programs that have received more scrutiny.

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Germany’s Bundesbank-BuBa for short-has quietly, automatically lent €495 billion to the European Central Bank via Target2. That lending has balanced correspondingly huge borrowings from Target2 by the central banks of weaker nations including Greece, Ireland, and Portugal-and lately Spain, Italy, and even France. They are technically “claims,” not loans. To find them you have to root around in the footnotes of the reports of the 17 national central banks of the euro zone.

If the euro zone breaks into sorry little pieces, Germany could possibly lose its entire €495 billion claim. That’s more than $650 billion. It is 60 percent bigger than Germany’s annual federal budget-and larger than the lending under the European Financial Stability Facility and other aid programs that have received more scrutiny.

…

Here’s how it happened. When a Greek businessperson buys a truck from Germany with money from a checking account, the transaction is carried out between the two nations’ central banks via Target2. The truck seller isn’t interested in financing the purchase-it wants euros now. So the Bundesbank has to come up with money in order to deposit it in the seller’s checking account. In accounting terms, the Bundesbank acquires a liability (what it owes to the truck seller’s checking account) and an asset (a claim on the ECB).

The transformation of the Bundesbank’s balance sheet through this slow-but-steady process has been stunning-and to hard-money Germans, sickening. At the end of 2006, Target claims represented just 7 percent of the Bundesbank’s assets. By this October they represented 64 percent, according to data compiled by economists Aaron Tornell of the University of California-Los Angeles and Frank Westermann of Germany’s University of Osnabrück. The collateral the ECB holds to back those loans is primarily the sovereign debt of the euro zone’s weakest nations. It’s a far cry from the gold that’s the Bundesbank’s second-biggest asset (17 percent).

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As Europe’s financial crisis has worsened, the ECB has benevolently turned a blind eye to the poor quality of collateral posted by the Bank of Greece and others. But a reckoning is due. In an interview with Bloomberg News on Dec. 13, Bundesbank President Jens Weidmann expressed more concern about the collateral than the volume of ECB balances. “In a situation like the current one, where we are providing solvent banks with liquidity,” he said, “for me the size of the Target2 balances is less important than the risks we are taking on. It is my concern that we limit these risks as much as possible.”

…

Germany faces a dilemma familiar to anyone who has ever made a bad loan-whether to keep throwing good money after bad to keep the debtor afloat or pull the plug and suffer the consequences. The half-trillion-euro claim the Bundesbank has on the ECB is an important but poorly understood factor in the decisions over the future of the euro.

European Banks Get ‘False Deleveraging’ in Seller-Financed Deals

By Anne-Sylvaine Chassany, Simon Packard and Neil Callanan, Bloomberg News

Nov 22, 2011 7:01 PM ET

Because most buyers of distressed assets fund purchases with debt, which has become increasingly expensive and difficult to obtain, banks are financing transactions themselves, even if it means retaining loans on their balance sheets. That will slow deleveraging and make more asset sales necessary, analysts say.

“A lot of those asset sales might be dependent on the banks themselves, the sellers, providing financing to the buyers,” Raoul Leonard, a London-based RBS analyst covering southern European banks, said on a conference call with clients Oct. 20, without referring to any specific deal. “It’ll be almost false deleveraging going on, but it’s off your book and you can argue that the risk-weighting changes.”

…

European banks will dispose of less than 100 billion euros of the more than 500 billion euros of distressed loans and other impaired assets because they can’t afford to take losses on the sales, Huw van Steenis, a Morgan Stanley analyst in London, wrote in a Nov. 13 note. Banks may have to unload some of their good assets to U.S. or Asian competitors, he said. Van Steenis estimated banks in Europe may shrink assets by between 1.5 trillion euros and 2.5 trillion euros in two years.

The IMF-ECB ‘Plan’ – Fig-Leaf Upon Fig-Leaf

Authors: Warren Mosler & Philip Pilkington, EconoMonitor

November 29th, 2011

The latest Euro fashion is for the IMF to fund distressed sovereigns while being, in turn, funded by the ECB – while all this includes the fashiony gimmick that the IMF guarantees the loans.

The end result, of course, is that the ECB writes the check – which is precisely what it takes to make any of these schemes work. In fact, whenever you hear of any of these wacky evasions… er… sensible proposals, you can be safe in the knowledge that it will always work as long as it is the ECB writing the check. But we digress; and so here is how this latest one scheme will function.

When the ECB buys European national government bonds it credits member bank accounts on the ECB’s spreadsheet. Those accounts count as ‘money’ while the bonds did not count as ‘money’ and so, this action is said to be ‘printing money’ – and printing money is bad for some reason or other according to our German friends… and so the ECB undertakes a further step: sterilisation.

The ECB offers different euro accounts – which are also just numbers on an ECB spreadsheet – with relatively short maturities that pay interest. This is called ‘sterilisation’ because these deposits don’t technically count as money. Cool, huh?

…

When the ECB buys Special Drawing Rights from the IMF it credits an IMF account with the required euros. This does not count as ‘printing money’. And when the IMF loans those funds on to Italy or whoever, it does not count as ‘printing money’ either even though, when all is said and done, the same euros sit in the same ECB accounts and they effectively come from the same place. How clever.

ECB puts emergency plans in place as German banks feel the heat

Heather Stewart, Jill Treanor and Patrick Collinson, The Guardian

Thursday 8 December 2011 15.33 EST

Following European-wide “stress tests”, Germany’s banks were found to need more than double the amount of capital anticipated, with the focus immediately turning on Commerzbank, in which the German state already owns a 25% stake, and amid speculation the government may need to step in with a fresh capital injection.

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When the initial results of stress tests intended to protect banks against the eurozone crisis were announced in October the European Banking Authority announced that €106bn (£90bn) of extra capital would be needed to shore up banks against the eurozone crisis and restore confidence in the battered sector. But that shortfall was revised up to €115bn and the gap for Germany’s banks raised to €13.1bn from €5.2bn. Commerzbank alone needs €5.3bn of the total for Germany, up from €3bn, Deutsche Bank needs €3.2bn, while the amounts needed by Spanish banks remain unchanged at €26.2bn – with Santander needing to find €15bn of the total. Commerzbank is confident it can find the extra capital by its own means.

…

Those banks with shortfalls have been given until 20 January to present their proposals to their regulators and must find ways to fill gaps without leading to a “reduced flow of lending to the EU’s real economy”. The EBA reiterated that they should reduce bonuses and retain their profits to bolster their capital before attempting assets sales. Efforts already announced by French banks reduced their shortfall by €1.5bn to €7.3bn.

Europe Still Heading For Collapse

Author: Tim Duy, EconoMonitor

December 15th, 2011

The half-life of the effectiveness of European summits is growing increasingly shorter.  While I have been a long-term Europessimist, market participants are more willing to trade on whatever appears to be positive news, thus markets jump whenever it appears the Europeans are taking action.  But eventually the game will wear thin as market participants increasingly realize European “solutions” are never more than half-measures intended to kick the can down the road another few months.

And the last summit was no exception.  The reality is quickly sinking in that, relative to the dimensions of the challenge, very little was really accomplished two weeks ago.  And very little will be accomplished until European leaders come to the realization that they continue to treat the symptoms of the disease, not the cause of the disease.  They need to find a mechanism to address Europe’s internal imbalances that does not rely exclusively on deflation as a cure.

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Arguably, European policymakers might see the fundamental problem, but also recognize a real solution in years away.

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Europe doesn’t have years.  The vice of austerity packages will eventually crush to hard, and the cost of staying within the Euro will exceed the costs of exit.

Meanwhile, the ECB is at best having mixed results.  On one hand, recent actions appear to have stabilized government debt markets in Spain, Belgium, and France.  On the other, Italian yields have retraced much of their collapse.  Probably more importantly, however, stabilization of the banking crisis remains elusive.

…

Germany needs to issue a massive amount of debt to support demand in Europe, even at the cost of higher relative inflation.  And, better yet, to support debt writedowns in the periphery.  The response from Germany:  Nein.

Bottom Line:  I still don’t see where this ends well.  Play the news cycle if you are so inclined, but keep one eye on the key issue.  Is Europe working to resolve their fundamental internal imbalances with anything other than deflation?  As long as the answer continues to be “no,” be afraid.  Be very afraid.

Crossposted from The Stars Hollow Gazette

Sigh.  I’m reluctant to jump on the bandwagon but there is a section of the Left/Democrat blogosphere that agrees with dday in his assessment that the inclusion of a Keystone XL deadline in the 2 month Social Security Tax Holiday extension (bad for reasons not relevant here) contrary to conventional Washington “Wisdom” actually effectively kills the project.

Republicans Demand to Kill the Keystone XL Pipeline

By: David Dayen, Firedog Lake

Friday December 16, 2011 10:54 am

The provision would force the Administration to decide on a permit for the pipeline within 60 days, and that the permit would automatically be granted otherwise. The President could decide that the pipeline production “would not serve the national interest,” and deny the permit. Politico goes on to claim that this decision would be “fraught with political risks in the thick of an election year.”

No it wouldn’t. The State Department has already come out and said that they would not have enough time within 60 days to assess the environmental risks from the pipeline project. So they would have to deny the permit if forced into a 60-day decision-making process. And that serves as the excuse. It becomes a political discussion, like any other, and calling it a “risk” is really overblown.

Senate Passes Two-Month Extension for Payroll Tax Cut, Unemployment Benefits, Doc Fix

By: David Dayen, Firedog Lake

Saturday December 17, 2011 8:41 am

The second measure concerns the Keystone XL pipeline. There’s been a ton of misinformation around this part. I know some people have termed this a GOP victory but I don’t see why. Even the venerable 350.org rushed out a call to action last night saying that Obama caved on the pipeline and that everyone must call to get him to veto the bill. They are either playing along or don’t understand that this provision will ensure a denial of the permit in rapid fashion.

The bill stipulates that the Administration must make an up-or-down decision on the permit for the pipeline within two months of the signing of this act. The State Department has already said that doesn’t leave them enough time to explore the re-routing both they and the state of Nebraska and pipeline owner TransCanada have said they want to consider, to avoid the Ogalalla Sand Hills region, and particularly the aquifer that supplies water to the area. So if faced with a 60-day timeline, the State Department said, they would have to deny the permit. Earlier in the week the White House agreed with them, saying that The House bill simply shortens the review process in a way that virtually guarantees that the pipeline will NOT be approved. So adding this provision kills the pipeline in the short term.

And Republicans, by the way, KNOW this. They want the President to deny the permit. The tell is that Newt Gingrich spoke up about the pipeline in the debate on Thursday night. Republicans want to position Obama as someone destroying US jobs to satisfy environmentalists. They also would like to say that he is stopping the supply of domestic energy production. None of this is true with regards to Keystone XL. The pipeline won’t create jobs, all the energy production in this case comes from Canada, and the President actually has presided over a boom in domestic energy production, although that hasn’t led to a drop in oil prices because we simply don’t have that much oil domestically.

But the likely outcome on Keystone XL fits a narrative for the GOP. So they want to see the President cancel the pipeline to make it a campaign issue. The counter-argument for the Democrats is that the demand by House Republicans to give an answer within 60 days on a pipeline whose route remained in flux killed the permit. So this becomes your run-of-the-mill he-said/she-said, and the pipeline doesn’t get built. My understanding is that it would not impact the possibility of the pipeline being approved after the elections, when more time is given to the environmental impact. So that’s a fight environmentalists will still have to wage. In the short term, within 60 days they will have a President reject the pipeline, and then they can go to their lists and tell everyone how their pressure got it done. But they’ll have to extend a note of gratitude to Republicans, who made it all possible.

If those are not adequately sourced enough for you there is also The Hill–

Democrats: Concession to GOP on Keystone will force Obama to kill pipeline

By Alexander Bolton, The Hill

12/16/11 09:08 PM ET

Republicans hailed inclusion of the pipeline provision as a victory, but Democrats said the practical effect of the language would be to kill the project.

“They’ve just killed the Keystone pipeline. They killed it because they forced the president to make a decision before he can make it so he’s not going to move forward with it,” said Sen. Barbara Boxer (D-Calif.), chairwoman of the Senate Environment and Public Works Committee and an ally of environmental groups.

…

A senior Obama administration official noted that the president said he would not accept an attempt by Congress to mandate construction before adequate review of health and safety regulations.

Regardless of the current decision there’s no reason at all the next Administration couldn’t revisit the proposed project provided it’s still economically viable, but that seems less and less likely with every delay.  Pushing the deadline to 2013 is a good thing, but not a stake in the heart.

I’m an optimist.

Not that it does any good.

‘The war is over’: Last US soldiers leave Iraq

The last American troops crossed the border from Iraq into Kuwait early Sunday, ending the U.S. military presence there after nearly nine years.  

By NBC News, msnbc.com staff and news services

As the last convoy left Iraq at daybreak Sunday, soldiers whooped, bumped fists and embraced each other in a burst of joy and relief, The Associated Press reported.

NBC News’ Richard Engel tweeted from the border: “The gate to #iraq is closed. Soldier just told me, ‘that’s it, the war is over.'”

The final column of around 100 mostly U.S. military MRAP armored vehicles carrying 500 U.S. troops trundled through the night along an empty highway, across the southern Iraq desert to the Kuwaiti border.