From the beginning of Brazil's preparation for hosting the World Cup to the thankfully approaching end of this fiasco it has reminded me at times of a Mexican novella and more lethally the Hunger Games.
Now we learn that Argentina fans have taken to the streets to protest an American hedge fund's refusal to take a 70% loss on a loan to the Argentine government. Which by the bye, was upheld by the U.S. Supreme Court.
The Argentine President, Christina Fernandez de Kirchner, threatens to default on the $95 Billion loan. Wanting the government to pay what it owes was characterized by the Argentine Supreme Court as "extortion".
In any event, the wingnuts of Argentina have taken to the streets in national support of defaulting on financial obligations. We note that negotiations are still ongoing, but given the name calling and threats to default by the Argentine President, (negotiations tentatively end July 30, 2014), we can only say "pay up or shut up' and don't ever come calling again for money.
If you care to get into the weeds on the history of the loan consider the Economist article A Victory By Default, March 3, 2005. My focus here is really on the absurdness of the World Cup.
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Wait, What? … Permanent!
"Five years past the end of the Great Recession, the share of adults with jobs has barely recovered, inflation remains below the level the Fed regards as healthy, and economic output remains weak. Officials are increasingly convinced that some of this damage is permanent — or at least, that it cannot be fixed by holding down borrowing costs — but they differ on the depth of the damage."
June Meeting, Federal Open Market Meeting (The above quote was gleaned from minutes of this meeting recently released.)
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"I May Have To Move In With You"
This was said by a Detroit retired municipal employee to her grandson.
I discussed the Argentine debt and now onto the municipal debt of the City of Detroit. Causes are abundant, but like many municipalities, including Houston, pension costs are dragging down cities to possible bankruptcy. It's not the unions fault here. The pensions were secured through negotiations with local governments. It was a 'I'll worry about it tomorrow' attitude on part of elected officials. Well tomorrow is here in Detroit and I am certain other cities and municipal unions are watching the proceedings closely.
To sum it up pledges by private and public entities have been conditionally made to save Detroit. Among the pledges include J. P. Morgan's pledge of $100 million and the State of Michigan pledge of $200 million. In return employees are being asked to vote "YES" to reduce pension payments by 4.5% and withdraw lawsuits against the city. So far it appears that the "YES" vote is prevailing. If it doesn't succeed the pledges will be withdrawn and everything is up for sale in Detroit including the art collection of the Detroit Institute of Arts.
Tomorrow, July 11, 2014 is the deadline for voting.
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Counting The Wages Of Sin
Mario Draghi, President of the European Central Bank wants more integration and uniform reporting on the health of the economies of member nations. In the spirit of implementation of President Draghi's wishes the statistical arm of the European Union, Eurostat, will require by September, 2014, all member nations to include in their Gross National Product (GNP) "an accounting of trade in sex, drugs and other underground businesses as part of an overhaul of economic measurements …".
The reasoning behind this requirement is that the lower debt to GNP ratio, the healthier the national economy of the country. This being the case, I suppose, the easier to get loans from the European Central Bank? Using GNP as an indicator of economic health is a much debated topic among economists, but you go with what you got.
Some member nations have demurred either in whole or part. For instance France is not going to include drugs and prostitution in their national GNP. These are often enhance by sexual slavery and give a "veneer of economic legitimacy". Italy has wisely decided to forego asking the Mafia for economic data.
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