Bailout queen Dexia, the mega-bank that was bailed out twice in three years, turns into a nightmare for the tiny Kingdom of Belgium, which guaranteed a pile of debt, nationalized local subsidiaries, and bailed out the rest of the financial sector. Exposure: €162 billion—41% of GDP! And now Dexia announces monumental losses. But finally there is resistance.
Between 2002 and 2011, Boeing reported to its investors that it earned $31.8 billion. But it reported something entirely different to the IRS and didn’t pay income taxes. Instead, it received tax benefits of $2.06 billion. Other companies were similarly agile. So Geithner is ballyhooing President Obama’s latest election-year ploy: putting some fresh lipstick on that ugly tax code though it has a fundamental flaw that turns it into an absurdity.
Germans are euphoric these days—compared to the dour mood that prevailed for nearly two decades when real wages declined in a stagnating economy with high unemployment. This new optimism is joyriding the powerful German export machine and appears to be impervious to the nightmarish scenarios playing out at the periphery of the Eurozone. And now, Germans have something else to be euphoric about: a housing bubble.
While all eyes are on the Greek farce, a much bigger fiasco on the other side of the globe is advancing at an inexorable pace. All Japanese prime ministers since Koizumi slither down a steep slope that lasts between 8 and 15 months. When approval ratings drop into the low twenties, they’re replaced by a new sacrificial lamb. And Prime Minister Noda is on a straight line down to replacement hell—while economic fundamentals are falling apart.
Hullabaloo broke out after the Bureau of Labor Statistics reported that a surprisingly robust 243,000 jobs were created in January, and that the unemployment rate was 8.3%. Cynics, academics, BLS heretics, hype mongers, and politicians waged a media battle over these numbers that President Obama serenely trotted out as validation of his policies. Even Rush Limbaugh jumped into the fray. Alas, suddenly, there is a sharp deterioration.
There never was that “giant sucking sound” that Ross Perot had warned about during his quixotic presidential campaign in 1992—the sound that manufacturing jobs would make as they head south to Mexico. Turns out, he was wrong. The jobs went south silently. However, yesterday in San Francisco, there was that sound. From money going east. Lots of it. From fundraisers.
Europe returned from its begging expedition to Beijing. Well, they called it a summit, one more in a series. They were trying to lure China into plowing part of its hard-earned foreign exchange trillions into the European bailout fund, the EFSF, and they made that dreadfully convoluted and opaque creature smell like a rose. Even a small amount would have been something. Anything really.
The Eurozone debt crisis has frayed a lot of nerves, particularly among Greek politicians, whose country is on the verge of bankruptcy, and German politicians, who no longer trust Greek politicians—they’d willfully misrepresented deficits and debt in order to accede to the Eurozone and had continued to do so up to insolvency. But now a far bigger confrontation at the very core of the Eurozone is shaping up. And it may bring epic changes.
Luxembourg’s Finance Minister said it out loud: “If the Greek people or the Greek political elite do not apply all of these conditions, they exclude themselves from the Eurozone.” All of these conditions. And there are a lot of them. Then he added crucial words: “The impact on other countries now will be less important than a year ago.”
Even the Soviets with their iron-fisted approach couldn’t come up with a reliable five-year plan. In the US, one-year forecasts are accurate only by accident. And ten-year forecasts, whether by the White House or Congress, are the ugly sisters of BS—hilarious gimmickry during the dreariness of politics. So President Obama unveiled his budget for fiscal 2013 through 2022.