“The entire world is insolvent”

The financial instrument everyone loves to hate – Credit Default Swaps – are now flashing red when it comes to government debt. The worst offenders are the so-called “PIIGS” – Portugal, Italy, Ireland, Greece and Spain. But make no mistake, the big battleships like the US are in trouble, too. Note the uptick in the US CDS (the light blue line at the bottom – Greece is the dark blue line at the top) in the graph below.

kyd77hjpg1

Of course, recall that CDS were flashing red in advance of the credit crisis, too, yet were ignored by many.

And one persuasive blogger argues “the entire world is insolvent.”

Washingtons Blog.

The Greek Tsunami?

imagesWith a tsunami its not the first wave that counts, it’s when the water recedes and then ever so slowly a second wave approaches that the alarm bell should sound. It looks like it’s a small inconsequential shift in the tides, but then the water rushes towards the beach and all is lost.

That’s one reason to keep a close eye on the Greek events. Portugal, Ireland, Italy and Greece are all thought to have unsustainable debt levels leading to the need to impose austerity that in turn is feared will trigger social unrest.

A flight to safety causes the dollar to increase in value and undercuts the US recovery.

We are not out of this financial crisis by a long shot.

Yves Smith at Naked Capitalism points to the role of the investment bank everyone loves to hate in covering up the mess that was building up.

Goldman Helped Greece Disguise Deficit « naked capitalism.

Alito breaks protocol of State of the Union

The President is wrong about the impact of the Citizens United Supreme Court decision – it is hard to imagine that it will unleash special interest groups, as if their role in our political process could get any worse.

But what was Justice Alito thinking when he shook his head and accused the President of misconstruing the Court opinion?

“Not true,” he mouthed visibly in response to the President as the Democrats sitting around him erupted in applause.

A judge, particularly a life tenured federal judge, knows that he sacrifices a certain amount of his right to freedom of speech when he is elevated to the bench. The place for Alito to express his opinion is in his written opinion, not during a state of the union speech by the President.

Ordinarily the Justices sit silently at the State of the Union as a visible symbol of the Court’s autonomy from the rough and tumble of American politics. That autonomy is fragile and yet is also the source of the legitimacy and power of our Supreme Court. Alito forgot that this evening and thus tore a small hole in that veil of legitimacy.

Perhaps it is time to dust off the requirement that a Justice serves for life only if he engages in “good behavior.”

Above the Law

Corporate speech and democracy

My colleague David Yosifon has an excellent Op-ed piece in the SF Chronicle today making the point that in the wake of the Citizens United US Supreme Court decision that corporations enjoy free speech rights these corporations have increased responsibility to insure that their speech reflects democratic input from all of their constituencies, including employees and shareholders.

I like his analysis because it gets beyond the idea of many on the left that somehow it is just plain wrong to allow corporations, which include unions many of which are organized as non profit corporations, free speech rights. Of course corporate personality has long been well established in American law all the way back to a case from Santa Clara County, in fact, dealing with the umbrella of equal protection spreading to corporations as “legal persons.”

The bottom line is that we live in society not just as individuals but through institutions, including unions, corporations, political parties. The goal should be to democratize fully those institutions rather than curtailing their ability to speak for us in the name of a utopian “individualism.”

As the Court itself held: “Because speech is an essential mechanism of democracy—it is the means to hold officials accountable to the people—political speech must prevail against laws that would suppress it by design or inadvertence.”

“Progressive” Economist Excuses Mass Murder, Again

A few years ago Cal State Chico “Marxist” economist Michael Perelman argued with me on his “Progressive Economists Network” that the Cambodian genocide, if it really happened at all, was really a side effect of the otherwise justifiable attempt by the Khmer Rouge to feed starving Cambodians.

He is at again – this time arguing the Rwandan genocide was really just a side effect of a civil war.  The real story can be found in the reports of Human Rights Watch as developed by the heroic Alison des Forges, who is nearly slandered by the specious article provided by Perelman.

What seems to stymie Perelman, like others of his political cohort like Mike Klonsky and Bill Ayers, is the naive notion that the enemy of my enemy is my friend. Thus, any regime, whether that of Chavez in Venezuela, Ahmadenijad in Iran, Ortega in Nicaragua, or Hu Jintao in China, however brutal and authoritarian, is to be excused or defended as long as they indicate they are in opposition to US foreign policy.

The tougher job of establishing an independent and democratic foreign policy for the United States is ignored. Whether they know it or not, Perelman, Ayers, Klonsky, et al, are the flip side of the “new realism” that is in such fashion among certain human rights activists. These people argue that the US government can make genuine support for human rights an integral part of US foreign policy. Tell that to the Dalai Lama. My critique of that position can be found here.

In an era when Chavez admirer and stalinoid education professor Bill Ayers can be a guest at numerous college campuses perhaps it is not a surprise that Perelman is being “honored” by his campus, Cal State Chico, next month.

PEN-L: Rwanda: The Case for Humanitarian Intervention.