Monday, May 26, 2008

Debt Rattle, May 26 2008: Apocalypticisms

Arthur Rothstein: Oregon or Bust, July 1936
Vernon Evans (with his family) of Lemmon, South Dakota, near Missoula, Montana, on Highway 10.
Leaving grasshopper-ridden and drought- stricken area for a new start in Oregon or Washington.
Expects to arrive at Yakima in time for hop picking. Lives in tent .
Makes about two hundred miles a day in Model T.

Ilargi: Headquartered in Switzerland, UBS is one of the world’s, and Wall Street’s, biggest banks.

After looking at the numbers below, my crystal ball is filled with very dark clouds. And since UBS plays the same field, and the same games, as the other big moving shakers, this could be a bad omen for them as well.

When the year began, UBS’ market value was about $105 billion. It is now $61.7 billion. UBS also shed $38 billion in US subprime writedowns. While it’s now seeking $15.6 billion in new capital, it still has $64 billion -or more than its market value!- in potentially toxic US assets on the books.

In addition to that, they undoubtedly hold off-balance sheet assets in the US, though we can’t know how much. And then we haven’t even touched upon shaky assets in other countries. It seems certain UBS is involved in UK mortgage securities, and perhaps Ireland, Spain and more falling markets.

If global housing markets would recuperate, soon, perhaps they could hang in there. But that is not going to happen.

UBS Falls After Bank Says More Losses From Mortgages Possible
UBS AG, the European bank hardest hit by the U.S. subprime contagion, fell as much as 3.7 percent in Swiss trading after saying it may face more losses from mortgage securities. UBS declined 94 centimes, or 3.1 percent, to 29 Swiss francs by 11:28 a.m. in Zurich, the biggest slump among the 59 companies on the Bloomberg Europe Banks and Financial Services Index.

UBS has dropped 42 percent this year, cutting its market value to 63.3 billion francs ($61.7 billion). The bank, in the prospectus for its $15.6 billion rights offer published after markets closed on May 23, said its losses on non-U.S. residential and commercial real-estate securities last year and in the first quarter of 2008 "could increase in the future." UBS is also evaluating whether to limit or discontinue one or more of its U.S. reference-linked note programs, which "could result in a charge to income," it said.

"UBS will have to fight against negative news flow for at least several more quarters," said Rolf Biland, who helps manage about $3.1 billion, including UBS shares, as chief investment officer at VZ Vermoegenszentrum in Zurich. "The U.K. housing market is almost as overheated as in the U.S., and could lead to losses for banks."

UBS is seeking to replenish capital after about $38 billion in writedowns related to the U.S. subprime crisis. The bank still has more than $45 billion in U.S. mortgage-related assets, $8.6 billion in leveraged finance commitments and $10.4 billion in U.S. student loans on its books.

The company hasn't said how much it holds in non-U.S. mortgage securities. UBS's net exposure to reference-linked notes was $8.9 billion at the end of March. The bank had created 10 such programs, which sold bonds referenced to a pool of asset-backed securities held by the bank, with a face value of $16.9 billion.

'We face the most serious recession of our lifetime'
'This is a period of wealth destruction. The people who make money will be few and far between. There will be a lot more money lost than made."

When George Soros - the phenomenally successful hedge fund manager - says this, you know something is wrong, very wrong. And indeed it is. The 77-year-old billionaire sinks back into the sofa in his Chelsea townhouse and exhales.

He has managed to make money almost consistently for over half a century - from his early days as one of the world's first major hedge fund traders to his involvement in Black Wednesday as the man who "broke the Bank of England", and in the latter years generating multi-billion-dollar annual profits throughout the 1990s.

The conditions today are almost uniquely dismal, however. "I think this is probably more serious than anything in our lifetime," he says. In short, his feeling is that the United States and Britain are facing a recession of a scale greater than the early-1990s, greater even than the 1970s.

"I think the dislocations will be greater because you also have the implications of the house price decline, which you didn't have in the 1970s - so you had stagflation and transfer of purchasing power to the oil producing countries, but here you also have the housing crisis in addition to that."

Such apocalypticisms would be less worrying were it not that Soros was among the few prominent experts who warned of the dire consequences facing the American economy years ago, when the housing bubble was still inflating. But even cottoning on to the big economic story early on hasn't meant guaranteed success.

He returned from retirement last summer, and no sooner had he started trading than he pulled hundreds of millions of dollars of investment out of the US and the UK. It was enough to help him to a 32pc return last year. But amid the turbulence of 2008, he admits he is barely breaking even.

One of the problems is that leverage, the juice that has driven the hedge fund and finance trade in recent years, has all but dried up; the other is that the impending economic slump will be far-reaching and painful. In the UK, the economic clouds are particularly dark, he says.

"House prices have risen over the years and are further away from sustainable than in practically any other country, in terms of household indebtedness and the relationship of house prices to incomes." The slump may be more gentle than in the US, he adds, but it will be more drawn out.

"This is going to be compounded by the fact that the financial industry weighs more heavily on the economy than in other countries, because London is the centre of the global financial system, and you have the unfortunate condition that the Bank of England is bound into inflation targeting, and is not in a position to lower interest rates until you have an economic slowdown."

Mr Soros also warned that the Bank's inflation report represents a "Faustian pact", obliging it to keep interest rates high to control inflation, even as the economy is starting to slump. "You had the nice decade," he said. "Now that is over and you are in a straitjacket."

Ilargi: Reading this article made me smile, since it’s based on an argument that I’ve made numerous times in the past. It also goes straight to the heart of the misunderstandings about what inflation is.

In simple terms: If gas prices go up by $1 a gallon, and at the same time your home loses $100.000 in value, do you live in an inflationary economy? Or is that only true if you buy 100.000 gallons of gas?

NB: this line contains a very important statement; it depicts a source of huge trouble to come in our societies: The housing bubble has transferred wealth from the younger generation to the older.

Lower house prices can make you happy
Petrol prices rise: shock horror! House prices rise: what good news! Isn't it odd that when the price of ordinary goods and services rises we think this is bad but when the price of property rises we think this is good? The former we call inflation but not the latter. Something does not add up.

On the face of it, there is a marked difference between petrol and property. Goods and services are things we buy to consume and when their prices rise, other things equal, this makes us poorer. By contrast, houses are assets and when their prices rise this makes us richer.

But once you examine this distinction more closely, it breaks in your hands. What do houses do? In economists' parlance, they provide housing services - to you and me that means quite simply that we can live in them. When house prices go up, that does not imply any increase in the quality or quantity of housing services provided but rather reflects an increase in the scarcity of property relative to demand.

If, for the moment, you look through the veil of monetary values and concentrate on the real world of production and consumption, you will see that nothing real is changed by higher or lower house prices. Societies no more enrich themselves by buying and selling each other's houses at higher and higher prices than by everyone agreeing to take in each other's washing.

But what about all the fortunate millions of people who have been personally enriched by higher house prices? Reading this, you may already be feeling distinctly upset by what you have just read. In that case, stand ready to be outraged by what you are about to read. Never mind, I'll risk it. That wealth amassed in the housing market is part illusion and part redistribution from other members of society.

First, the illusion. If you are going to continue living in the property, how are you better off from higher house prices? You are only better off if you take out some of the equity by borrowing against it and/or by selling the property and downsizing, perhaps on retirement.

Admittedly, there are countless people who do benefit in this way and for them housing wealth is far from a mirage. Indeed, for many people the wealth acquired through house purchase is the foundation for their retirement income.

How can this be squared with the idea that collectively higher house prices cannot make us better off? Here we come to the second element. The answer must be that there are some losers from higher house prices.
Indeed there are - all those people who don't own property, or who own property too small for their lifetime needs.

Think, for instance, of the young person struggling to buy a small flat, or the young couple already in a small flat but desperately wanting a house for themselves and their expanding brood of children. These groups are made worse off by higher house prices. There is a strong generational aspect to this issue. On the whole, the gainers from higher house prices are older and the losers are younger. The housing bubble has transferred wealth from the younger generation to the older.

Fuel suppliers demand airlines pay cash in advance
Airlines are being forced to pay cash in advance for jet fuel as the major oil companies tighten the screws on an industry that is being crushed by an extraordinary surge in the price of crude oil. Sources within the airline industry indicate that credit is being denied to most of the leading American carriers and the practice is moving to Europe and Asia.

So uncertain is the cash solvency of the industry that jet fuel suppliers insist on prepayments into special bank accounts. A credit controller at a leading European multinational oil company told The Times that the oil industry was moving to jet fuel prepayment. “It’s common in the US and it is moving to Europe. We have been moving to prepayment since Swissair went bust.”

The need to put up money before delivery of fuel is a huge financial burden that has been shifted from the oil companies to the airlines. According to John Armbrust, a US jet fuel consultant, the oil industry had $5 billion (£2.5 billion) of jet fuel credit outstanding to airlines before the 9/11 terrorist attacks. Now they are demanding that airlines leave cash on deposit.

“The airlines can’t afford it. Traditionally, oil companies extended credit for 14 or 21 days and some as long as 30 days. Now, most American airlines are on prepay. South West is one of a few likely to still get credit.” The extent of the cash squeeze was highlighted last week when American Airlines said that it would charge $15 per bag checked even as it revealed plans to shed 75 aircraft, shrinking the airline’s capacity by 12 per cent.

The price of jet fuel has risen by 60 per cent since January and American Airlines paid $665 million more for fuel in the first quarter of this year than in the same period of 2007.

The credit crunch is likely to worsen and a number of financial institutions will fail, according to research from Atradius, the credit insurance group which conducted a global survey of its customers’ views of the financial outlook. Although Atradius said that companies expect the number of failures to be small, about 65 per cent expect there to be failures.

The group added that direct exposure to sub-prime lending is higher in Europe than in the United States even though the bulk of the sub-prime mortgage defaults are in the US and many of the securities these loans are packaged into would have originated from US-based mortgage companies.

“Some explanation for this may be investments by European companies in US securities offering higher returns and more frequent use of secondary financial markets to securitise receivables by European countries,” it said.

Ilargi: A ban on real estate speculation would be (have been) much more effective in limiting economic losses than an oil speculation ban. We’re not going to see a few dozen trillion dollars vanish through gasoline anytime soon. And it wouldn’t need to be global: any country can decide to control its own real estate prices. Anyway, too late now.

NOTE: I don’t mean to say that there is no oil price speculation, but that it can’t be regulated, since it’s global. The truly perverse consequence, soon to come, is that pension funds who are now doing the speculating -often to (secretly) make up for already incurred losses- are about to lose untold -more- billions of their clients’ deposits..

Germany calls for global ban on oil speculation
German leaders are to propose a worldwide ban on oil trading by speculators, blaming the latest spike in crude prices on manipulation by hedge funds.

It is the most drastic proposal to date amid escalating calls from Europe, the US and Asia for controls on market forces, underscoring the profound shift in the political climate since the credit crunch began. India has already suspended futures trading of five commodities.

Uwe Beckmeyer, transport chief for Germany's Social Democrats, said his party would call for joint measures by the G8 powers to prohibit leveraged trading on energy contracts. "It's an extreme step but it has to be done," he told the Berlin media.

Mr Beckmeyer said the last 25pc rise in the price of oil to $135 a barrel had nothing to do with underlying supply and demand. “It’s pure speculation,” he said. Oil has doubled in price over the past year and the concerns are echoed on Washington’s Capitol Hill where irate Democrats want rules compelling traders to take delivery of crude oil, a move which would paralyse the market.

There is now broad support in Germany for a clampdown on “locust” funds. President Horst Köhler said modern capitalism had turned into a “monster”, bringing the entire financial system to the brink of collapse this spring. The Social Democrats form part of Chancellor Angela Merkel’s ruling coalition.

Her own Christian Democrat Party shares concerns that funds are causing a fresh bubble in commodities, risking further havoc for the real economy and society. In the long run, any scheme to ban futures trading would be extremely hard to enforce as the markets would tend to move offshore. Hedge funds are probably not the culprit in any case.

Speculators are split, with some betting that oil will fall. The mass of money coming into the commodity indexes is mostly from pension funds and long-term investors. Oil markets are likely to shrug off the moves as political posturing, instead focusing on Norway’s suspension of crude output at three platforms, cutting supply by 138,000 barrels a day.

The news comes as Lloyd’s Marine Intelligence reported Opec oil shipments fell by 1m barrels per day in the four weeks to May 4, confirming suspicions that the market has been chronically short of supply.

George Soros: Oil price is in a bubble, UK in a straitjacket
Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned. The billionaire investor's comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.

In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.

"Speculation... is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said. The comments are significant, not only because Mr Soros is the world's most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices.

Oil prices stalled on Friday after their biggest one-day jump since the first Gulf War earlier in the week. At just over $130 a barrel, the price has doubled in around a year, causing misery for motorists and businesses. However, Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically.

"You can also anticipate that [the bubble] will eventually correct but that is unlikely to happen before the recession actually reduces the demand. "The rise in the price of oil and food is going to weigh and aggravate the recession."The Bank of England recently warned that soaring energy and food costs would push inflation above its target range for most of the next 18 months, making it more unlikely that it will cut borrowing costs soon.

Mr Soros warns Britain is facing its worst economic storm in living memory, dwarfing those of the 1970s and early 1990s, with a housing slump and serious recession. He said: "The dislocations will be greater [than in the 1970s] because you also have the implications of the house price decline, which you didn't have in the 1970s."

The warning undermines predictions that Britain will suffer only a brief and relatively painless recession, unlike the precipitous dives of previous years.

S&P reckons oil market not like the 70s but good for gold
Today I caught up with Standard & Poor’s VP for commodities, Eric W, Kolts who was over from New York speaking at a conference in Dubai. He is resolutely bullish on oil prices, and rejected my comparison to the 70s. ‘I can remember what happened then personally and it was not the same.

The 70s oil price spikes, and there were two big ones were caused by political interference in the marketplace, not the fundamentals of supply and demand.’ Mr. Kolts is of the opinion that the oil market has undergone a structural shift with demand way out of line with the capacity of existing installed infrastructure to deliver supply.

This is very different from political interference – the Arab oil embargo of 1973 or the Iranian revolution in 1979 – and makes a correction in price far more difficult. ‘We have seen forward oil prices move up by an unprecedented $45 since the beginning of the year,’ he says. ‘Of course there is a speculative element but this is also the start of including the cost of new infrastructure in the oil price.

It is a structural shift and if you are going to tap oil offshore in a place like Brazil this is necessary to pay the cost of extraction.’ On the demand side Mr. Kolts is convinced that the tripling of the GDP of China and India since the year 2000 has also produced a permanent increase in demand for oil as China’s one million new car owners a year are not about to go back to their bicycles. Yet the oil market is still puzzling.

‘We have seen the open position in WTI crude declining since July 2007 which implies short position covering and should be producing a decline in the price,’ he says. ‘But it looks as if over-the-counter trading is more than compensating with prices rising further out.

‘I think oil prices will prove far more resilient in this climate and that we are in a super bull market due to the long-term fundamentals of emerging markets which have now emerged.’ At the same time Mr. Kolts believes petrodollars will find their way into gold as a dollar hedge with silver ‘riding on the coat-tails’ of gold.

‘The Middle East and Russia were always the big buyers of precious metals when I was a trader in the 1980s and this is of course a hedge against inflation and a declining dollar.’ But clearly S&P’s top commodities analyst does not see the oil boom fading away anytime soon because of market fundamentals. ‘That would take a very deep and long US recession,’ he concludes. Interestingly Mr. Kolts is very bearish on the outlook for US equities.

"Walkaway" Mortgage Deadbeats Jailed in California
Despite objections from consumer advocates, in the last two weeks California judge Jed Clampbet has sent 142 delinquent homeowners to state prison for up to three years each, for failing to honor their home mortgage obligations. 

Most of the former homeowners were shocked to find they could be suddenly locked up for employing the common “walkaway” strategy, where homedebtors whose no-money-down adjustable-rate teaser mortgages are about to reset to full actual interest rates simply stop making payments but continue living in their homes rent-free for up to eight months before being evicted, then try to skip town leaving the bank holding the bag.

Under the anti-fraud provisions of the 1969 California Real Estate Loan Statute, section 7, chapter 13, such behavior is indeed criminal and can be prosecuted.  Until recently the law had not been actively enforced, but due to the tidal wave of foreclosures the district attorney is now cracking down hard on mortgage scofflaws.

Banks generally applaud the stepped-up enforcement.  “These folks thought they could just scam the system and get away with it,” admonished mortgage industry spokesman Snidely Wachovia.  “Now they’re finally getting what they deserve.”

Consumer rights groups are organizing protests across the state, trying to stop or at least slow down the impending prosecution of an estimated 20,000 additional delinquent homeowners.  “These people are completely unaware of what is about to happen to them,” claimed Shirley Yewghest of the California Delinquent Homeowners Protection Association. 

“Yes, they did receive foreclosure warning letters in the mail, but very few actually read the fine print.  They hear people telling stories of walking away without getting caught, and they think they can get away with it too.  By the time they realize that they are in fact criminals, it’s too late, and they find themselves behind bars.”.

All the news is not negative, however. Apparently spring is in the air in the California state prison system, bringing along with it dozens of whirlwind romances between newly-jailed former homeowners and long-time inmates. And thanks to the new ruling legalizing same-sex marriages in California, wedding bells have been ringing non-stop.

Lifetime inmate Bubba “Whoppa” Johnson found new love with Cornwell Sooie, a San Diego real estate investor caught up in the recent sting operation targeting delinquent homeowners. Back in 2006 Mr. Sooie was sitting atop a mini real estate empire worth nearly $8 million on paper. When the housing bubble collapsed, he lost it all.

Those fast-paced days of real estate deal-making are butt a distant memory now, as Mr. Sooie settles in to his new married life in prison. While nuptial bliss is no substitute for the thrill of easy real-estate riches, at least it will keep him busy for the next three years.

Ilargi: China had more mobile-phone users, 583.5 million, at the end of April than the combined populations of the U.S. and Japan.

China Mobile Shares Fall, Losing $26 Billion in Value
China Mobile Ltd., the world's largest phone company by users, lost more than $26 billion in market value in Hong Kong trading after the government said it will merge smaller operators to increase competition. The shares fell 8.2 percent to close at HK$114.90, the biggest drop in more than six years. The stock was the largest contributor to the MSCI Asia Pacific Index's 2.1 percent decline.

The nation's two biggest fixed-line companies will also provide wireless services under the government plan, threatening China Mobile's dominance of a market with 583.5 million customers. Goldman Sachs Group Inc. cut its rating on the carrier, which has two-thirds of the country's subscribers, to "sell" today.

"The government wants to balance the telecom industry instead of having just one dominant player," said Teresa Chow, who helps manage $1.1 billion at RBC Investment Management Asia in Hong Kong, including China Mobile shares. "The move is positive for the two fixed-line operators and will broaden their revenue."

Under the plan, the parent of fixed-line carrier China Telecom Corp. will buy a mobile-phone network from China Unicom Ltd.'s parent, which in turn will merge with the company that controls China Netcom Group Corp., the Ministry of Industry and Information said in a statement on May 24. China Mobile Communications Corp., the state-owned parent of China Mobile, will take control of fixed-line carrier China Tietong Telecommunications Corp., the ministry said.

The government said it plans to create a more balanced market structure through the reorganization and new regulations, according to the statement jointly issued with the Ministry of Finance and the National Development and Reform Commission. It didn't give details of the rules. The new regulatory regime may "seriously threaten" China Mobile's advantages, said Goldman Sachs analysts Helen Zhu and Lucy Liu, who cut the rating from "neutral" and lowered the 12- month share-price estimate to HK$105 from HK$135.

After the revamp is completed, China will issue three licenses to offer third-generation high-speed mobile services. The country had more mobile-phone users at the end of April than the combined populations of the U.S. and Japan.

West Side door to global crisis
A run-down brick two-flat sits in a muddy yard at 1034 N. Central Park Ave. on Chicago's West Side. It's a dangerous area with plenty of drug activity, but the crime rate didn't stop real estate mania from reaching this troubled neighborhood. Four years ago, 1034 N. Central Park sold for $205,000, far above its current market value of $165,000.

The buyer, a 22-year-old single man named Lamont Fletcher, applied for a $194,750 mortgage from Option One Mortgage Corp., a subprime-mortgage lender. He got the loan. Fletcher made only a handful of payments before the mortgage fell into default, and his loan has been in foreclosure proceedings since early 2005. But none of that stopped Fletcher's debt from finding its way into the so-called secondary mortgage market.

In the context of the $2.6 trillion in mortgages originated in 2004, the nearly $200,000 that Fletcher borrowed on 1034 N. Central Park barely registers. But it is unlikely investors will recoup anything on his mortgage, which may have been based on fraudulent documents (see related story). In fact, they could well lose the entire $194,750 plus the four years of legal fees they have incurred trying to foreclose.

If 1034 N. Central holds any lesson for the future, its uncertain status suggests that fixing the mortgage mess could be painfully complicated, time-consuming and costly for everyone involved. On June 23, 2004, Option One, a California-based subprime lender owned by H&R Block Inc., made a 30-year mortgage to Fletcher to buy a two-flat from a man named Raymond Washington.

The adjustable-rate loan carried a hefty interest rate of 8.7 percent, mortgage documents show, more than double the 4 percent he would have paid on a one-year adjustable loan. In the industry, Fletcher's loan was known as a 2/28 because the interest rate would adjust in two years. At that point, the rate could climb to as high as 11.7 percent and would continue adjusting every six months.

Fletcher could end up paying as much as 14.7 percent on his mortgage, the documents show, 6 percentage points higher than the initial rate. Because of their exploding interest costs, the 2/28s were time bombs, said Mike Sante, managing editor of, a personal finance Web site. "The loans were sold with no regard whatsoever if the people could repay once the rate starting resetting," Sante said.

When borrowers asked what would happen two years down the road, they were told by mortgage brokers, "Don't worry. You're going to make the payments and your credit score will improve. You'll be able to refinance into a conventional mortgage, and your life will be great," Sante said. "The mortgage brokers selling these things really loved them. These loans paid big fees and created a promise that in two or three years, the borrowers would be in the market for refinancing. … Put that in your Rolodex."

Until early 2007, 2/28s and their cousins, 3/27s, accounted for three out of every five subprime loans made to borrowers with bad credit, according to By one estimate, 1 in 8 borrowers with 2/28 mortgages made during the boom years of 2004 and 2005 will default. "That's probably conservative. Those people were set up for failure," Sante said. "These were the loans at the heart of the mortgage crisis. They were terrible loans."

Option One didn't have to worry about what would happen in two years. As a mortgage broker, it was selling loans as fast as it could make them. Fletcher's loan was sold within months to Citigroup Inc., the giant banking and investment firm. Citigroup packaged it with $1.6 billion of other Option One loans to create a new pool of mortgage-backed securities, Citigroup Mortgage Loan Trust Series 2004-OPT1. A collateralized mortgage obligation, or CMO, was born.

Ilargi: I like Evans-Pritchard’s articles, because he has information that nobody else has, on a regular basis. But he often has no clue what it all means. Blaming the demise of the "miracle" Irish economy, which was solely built on one great big bubble, on today’s EU policies, is missing the target by a mile and a half. If the EU has made one mistake, it’s not calling the Irish to task a lot sooner.

Free enterprise in Europe hangs on Ireland's EU vote
For 700 years Ireland was Britain's outer defence - nolens volens - against the great powers of continental Europe. By a twist of fate, the Irish must now cast the ballot on the EU constitution for both islands, since Labour has defaulted on its pledge for a British referendum.

Our shared Anglo-Celtic culture has long been a well-spring of free enterprise (with Dutch, Swedish, and Hanseatic help in fighting European absolutism along the way), and that is what is so threatened by the Lisbon Treaty, the treaty to end all EU treaties. The text strikes the words "free and undistorted competition" from the core objectives of the Union.

Corporatist aims will enjoy a higher legal status at the European Court (ECJ) and must prevail if the two clash. The Rhineland Model has locked in a permanent advantage. Euro-creep is already eviscerating the Common Law that underpins the British and Irish way of doing business. Lisbon quickens the pace. It upgrades the ECJ to a de facto supreme court, with broader jurisdiction.

It will have the last say on a raft of new economic and social rights. Who can stop them imposing a Colbertist agenda by court rulings, if they so choose? The ECJ is beyond appeal. Euro-judges will decide how and when to enforce the Charter of Fundamental Rights, now made legally-binding. Article 52 allows the "limitation" of all liberties in the "general interest" of the Union. This is the old Reich clause.

Such justifications for state coercion have been illegal in Europe for 60 years. Now they return, by the back door. Ireland is the only state to hold a vote. Lisbon gives Europe the paraphernalia of a proto-state: a full-time EU president and foreign minister; a justice department; an energy department; "legal personality" so it can negotiate treaties; etc, etc.

The other 26 EU members have ducked a referendum, their leaders hiding behind each other in an anti-democratic pact. Some 3m Irish voters carry the lonely burden. They have been through this before, shocking themselves with a No to Nice in 2001. This time stakes are higher. The Celtic Tiger is flagging. Brussels is turning hostile to Ireland's buccaneering capitalism, and its 12.5pc "fiscal dumping" taxes.

Paris let slip that France's incoming EU presidency would push for "harmonised" business taxes. "Untimely," muttered Dublin. The Anglo-Celts are the targets of last week's open letter by a roster of EU statesmen calling for a new "European Crisis Committee" to take the markets in hand.

"The financial world has accumulated a massive amount of fictitious capital, with very little improvement for humanity. The financial market is not capable of self-regulation," they thundered. Who can stop the regulatory squeeze in Europe once Ireland's free marketeer, Charlie McCreevy, is unseated as EU single market commissioner next year?

For now, the "Yes" side is ahead in the polls, 35pc to 18pc (47pc undecided). They have the money and all the parties, except Sinn Fein. Even so, Premier Brian Cowen is lucky this vote will be over by June 12, for the economy is turning bleaker by the day. Allegations have begun to fly that the Finance Ministry is massaging figures to disguise the violent plunge in growth. I doubt it. That way lies perdition.

Ireland deserves great praise. The Tiger has achieved miracles. But that will not prevent the swing from boom to bust as monetary union works its perverse effects.[..] EMU monetary policy was too loose early in the decade. Now it is tightening at the wrong time. House prices have fallen 8.9pc over the last year. Mortgage rates have been rising into the slump. Ireland's central bank cannot come to the rescue. Rates are set in Frankfurt for the needs of core-Europe.

Canadian Housing Market Also Subject To Housing “Physics” And Is Going Down
Alas, what goes up, must come down- even in Canada.  After months of the MSM reporting that the Canadian housing market would not go the way of their neighbors to the south- the Canadian housing market is going the way of their neighbors to the south:
Canada’s long-running housing boom has ended, with the formerly bubbling markets of Calgary and Edmonton already having gone from hot to not, and with the current hot spots of Saskatoon and Regina to follow, a major Canadian bank says. Mortgage-market innovation delayed the inevitable but couldn’t prevent it, Royal Bank of Canada said in its analysis of major urban real estate markets Thursday.

"After yet another blockbuster year for Canada’s housing markets in 2007, the much-anticipated housing market slowdown in Canada has arrived," RBC said. "The delayed arrival of softer housing markets can be partly attributed to recent mortgage innovation that has seeped into the Canadian market during the last two years," it said, citing higher loan-to-value ratios and longer amortization periods of up to 40 years, which opened the market to a wider range of buyers and prolonged the housing boom.

The mortgage-market innovations, which make housing more affordable in the short term, also heighten the risk of default in the long term, it said. Markets in the West, which have risen the furthest above their underlying values, are the most at risk of an increase in defaults as a result of recent mortgage innovations, the report’s author, RBC economist Amy Goldbloom, said in an interview.

Americans generally don’t pay a lot of attention to housing markets beyond their shores, but speculative fever followed by a credit crunch has hurt markets in New Zealand, Britain and Spain as well. Canada is following behind, but denial is still rampant.  Doomers- do these excuses sound familiar?
There will not be a U.S.-style correction, despite such concerns in markets like Calgary and Edmonton, said the report, released amidst further evidence of the depth of the U.S. housing market meltdown — a record drop in a government index of housing prices in the first quarter of this year.

"Canada’s housing market is on much firmer footing than the U.S. market," it said, citing more conservative mortgage lending practices, healthy household finances, tight labour markets, and a manageable supply of homes on the market.

Ilargi: 1/ The decision to put the polar bear on the US Endangered Species list can not and will not be reversed; Ms. Palin, the Alaska Governor, is asleep at the wheel.
2/ Drilling in the Arctic is off the agenda because of the decision.
3/ No, I still don’t see why Bush&Cabal have caved in. Best guess: first, they were given an ultimatum by the judge involved. Second, they may think adding a line saying it "should not be misused to harm the economy and “set backdoor climate policy” will allow for drilling anyway, sometime down the line. If so, they’re wrong. It won’t. Any attempt to even prepare to drill will be taken to court, and held there for years to come. The US Endangered Species Act is strong legislation.

Protecting polar bears gets in way of drilling for oil, says governor
The polar bear should be removed from the endangered species list because its protected status will hamper drilling for oil and gas in Alaska, the state's Republican Governor has demanded.

Sarah Palin is suing the Bush Administration over its decision last week to place the animal under the protection of the Endangered Species Act, claiming that climate models predicting the continued loss of sea ice - the main habitat of polar bears - are unreliable.

The lawsuit came as a surprise because most of the outcry after last week's decision came from environmental groups. Although pleased that the Bush Administration had singled out climate change as a reason to place an animal under the protection of the Endangered Species Act, the green lobby were dismayed about restrictions attached to the listing.

The listing came with a big caveat: that it should not be misused to harm the economy and “set backdoor climate policy”. Some environmentalists also accused the Administration of deliberately delaying the ruling to make it easier for oil companies to finalise $2.7 billion (£ 1.35 billion) in offshore oil leases in the Chukchi Sea, an area that is home to about 20 per cent of the world's polar bears. Numerous lawsuits were threatened by the green lobby.

Yet the Governor of Alaska - a state whose residents overwhelmingly support oil exploration - is arguing that the polar bear does not need added protection, and the bear populations have increased significantly over the past 30 years because of conservation.

Ms Palin maintains that any commercial development in Alaska requiring federal permits or funding would have to go through a consultation process - described by Steven Daugherty, Alaska's assistant Attorney-General, as “basically a big time-and-money waster”.

He added: “We believe that the listing was unwarranted and that it is unprecedented to list a currently healthy population based on uncertain climate models.” There are an estimated 20,000-25,000 polar bears in the Arctic, but scientists from the US Geological Survey predict that two thirds of the world's bears will disappear in the next 50 years because of a decline in the Arctic sea ice.

In a stark warning last year, scientists at the National Snow and Ice Data Centre said that the total Arctic ice cover had melted to its lowest level in modern times, and that if melting rates continued the summertime Arctic could be ice-free within 80 years.
Kassie Siegel, of the Centre for Biological Diversity, said that it was unconscionable for Ms Palin to ignore overwhelming evidence of global warming's threat to the polar bear's habitat.

“Even the Bush Administration cannot deny the reality of global warming,” she said. “The Governor is aligning herself and the state of Alaska with the most discredited, fringe, extreme viewpoints by denying this. “She is either grossly misinformed or intentionally misleading, and both are unbecoming. ”


Anonymous said...

"Banks generally applaud the stepped-up enforcement. “These folks thought they could just scam the system and get away with it,” admonished mortgage industry spokesman Snidely Wachovia. “Now they’re finally getting what they deserve.”

I think this is a joke, guys. "Snidely Wachovia?" lol

Stoneleigh said...

It's definitely a joke. Did you catch the name of the supposed California Delinquent Homeowners Protection Association representative - Shirley Yewghest? Try saying that phonetically :)

Anonymous said...


Concerning the photo, is that really on Highway 10 or near it?


Anonymous said...

Today in NYT:

"This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks."

Thomas Friedman


Don said...

I did like the names of the prison couple, though.

"... Bubba “Whoppa” Johnson found new love with Cornwell Sooie ..."

I wonder what the "Whoppa" means ... (g)


Anonymous said...

Look at the size of that guys left hand in the photo. What is going on there?

. said...

Monbiot's on it for 5/27 ...