Good morning

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The headlines:

  1. Greece gets two more years.

    Link: but will it matter?

    After the meeting of the EU finance ministers yesterday, there was gracious agreement that Greece could have until 2016 to get its primary deficit (ie. before taking interest payments into account) below the 2% mark. But they decided to wait until next Tuesday to decide whether to let Greece have the money for the next bailout.

    Which seems a bit cruel – as the next round of repayments is due on Friday.

    Awks. But after more investigation (this reuters article), Greece is planning a giant treasury bill sale today, followed by some more sales before Friday – at which point, the proceeds will pay off the debt due. The t-bills will be bought, according to Greek officials. Which must mean that they’ll be bought by Greek banks.

    The jury is also out on continued IMF funding – as Christine Lagarde is still clinging to the “they must sort themselves by 2020, not 2022” line.

    In other news, “many avenues” for the alleviation of the debt are being explored, according to Luxembourg PM Jean-Claude Juncker. Just not the option of writing down official loans.

    It’s all a bit jarring and disjointed. I’m sure the Greeks are giving the “are you kidding me?” line – because the way it’s been presented, the further Greek financing was just a rubber stamp after the new reforms passed last week.

  2. Spanish suicide.

    Link: eviction conviction.

    During a mortgage foreclosure, a lady killed herself: the second person to do so in a month. This has caused a great deal of outrage – with many committees meeting to suggest and approve a two-year grace period from foreclosures and repossessions for “humanitarian reasons”.

    Do we think this will help?

    Let’s review: Spain is in crisis because its banking system is burdened with defaulting loans. In order to prevent a collapse of the financial system, which will cause untold economic damage, the Spanish government is needing to commit to recapitalise the banks as and when needed. That takes the deficit issue from here  to here which is the EUniversal signal for austerity cuts. Which causes short-term economic contraction. Which makes it more likely that the mortgage-borrowers will default. Which takes us back to the first part about the banking system being burdened with defaulting loans. Cue: vicious circle.

    Suggestion? Let the foreclosure happen. It’s an adjustment process that needs to take place. If we all take a step back and consider the following: what happens if I lose my home?

    I move back in with my parents and siblings. Yes – we’re cramped. But now there’s more of us contributing to the mortgage repayments on a single house. We’re sharing food costs and transport costs and electricity costs and all manner of domestic economies of scale. My lifestyle becomes cheaper, which means that I’m willing to work for less. Basically: we adjust. And then start over with the building-up and the looking-for-better-jobs and the moving-out-of-home.

    Why is everyone so afraid of the longer-term solution?

  3. Iran’s currency crisis.

    Link: economic contraction.

    Iran is in recession, with the rial falling 40% against the dollar, and such.

    Iran has now approached the IMF for assistance. Irony?

    Or do the sanctions not extend to “and don’t loan them money to get them out of the situation either, because that would be counter-productive”…

  4. Old people.

    Link: why QE is not working as well as expected, apparently.

    The baby-boomers are not spending enough because they got all conservative as they got older. And that’s why the QE isn’t working.

    This makes sense: you save as you approach retirement, especially if you think that your taxes might increase, and you expect cuts in Medicare and Social Security.

    The issue, I think, is that I’ve read Malcom Gladwell’s “The Tipping Point”. If QE has money being pumped into the economy, but no one is spending it yet because they’re concerned – that just sounds like cash reserves building to a critical mass. At which point: someone starts an epidemic of spending.

    Like the epidemic that took Hush Puppies from being a failing brand being worn only by hipsters in New York, and in two years turned it into one of the most valuable brands in the world.

    PS: what is a spending epidemic? Inflation. And/or hyperinflation – depending on how bad a case you have.

  5. US Energy Independence.

    Link: largest output in the world by 2020…

    There’s a new report saying that new production methods will make the US a bigger producer of oil by 2020 than Saudi Arabia. And this boom will last for about five years.

    Do you think it might join OPEC?

  6. Windows gets a new motherboard.

    Link: the rise of Julie Larson-Green.

    Steven Sinofsky has left his job as Windows president – and it’s been taken by the lady that gave us the toolbar ribbon on Microsoft Office (it replaced the drop-down menus of ’95).

    In her first board meeting, she walked in with a bottle of wine and told everyone to get to know themselves. And each other, I assume.

    But will that stop this for happening:

That’s all for now.

Have a good day.