Four Day Weekends

This should be a headline from The Onion.


Spain's Beloved Four-Day Weekends Are At Risk

NPR has the details.

Reckless Financing

Reckless financing causes bubbles...

See Housing:

or Student Loans:

And most stunning, Japanese government debt:

Most Interesting Timing

The mortgage settlement being worked on between nearly all state attorney generals and the five largest mortgage services is coming to the close. As pointed out on Naked Capitalism here, here, and here this settlement is looking like a slap on the wrist for the servicers with an extra helping of moral hazard.  The state is absolving them of further liability and prosecution. This stinks of more state shielding of [bankers, bond holders, unions] with large bailouts, little consumer relief and no criminal investigations.

How many prosecutions have there been during this entire crisis?  Subpoenas?

Most interesting is the timing of the settlement - before Christmas.  The best way to give bad news is to do it before a holiday when it will get forgotten.  That is Public Relations 101 - give the bad news when nobody will notice it.

I expect to see the settlement next Wednesday or Thursday of next week.

Further Reading:
Calculated Risk
Mish's Global Economic Trends Analysis

Obama Failed Math

Obama proposes to spend 3% of GDP to get a 2% boost - no thank you.

Obama's big jobs plan, according to economists at Goldman, Moody's, and JPMorgan, will boost GDP 2%. What happened to the 1.5 multiplier in the 2009 mega stimulus, which never materialized. The 2009 plan projected further that unemployment would not go over 8% with the ARRA. Notice the bold claims from the administration are not quite so specific. Expect to hear the stories of roads to nowhere, pet projects, programs that cost $400,000 per job, and an unemployment rate that does not go down to the claimed 7%. This program will NOT create 1.9 million jobs and unemployment will go up when labor force participation is factored in.

Government jobs plans don't materially create jobs on net. This plan spends over 3% of GDP to get a hoped for 2% GDP boost – there is no money back guarantee. We are borrowing the economy toward insolvency. The ability to print money does not change this.

References:

Bloomberg Article

Greek Bonds

Greek bonds are priced in expected recovery - not a borrowing rate.

Here is a 3 year chart of 1yr Greek Government Bonds:

Whither thy Euro?

Giant Phillipine Salty

Video of a very large salt water crocodile captured alive in the Phillipines

State Insurance Subsidies for the Wealthy

North Carolina and other states create a situation where private insurance are disallowed to charge rates commensurate with coastal property risk. With the rate restrictions, the insurance companies stop issuing policies since it is a huge liability. To supplant private insurance, NC and other states step in as the insurance provider of last (only) resort. The state provides below cost risk, backed by taxpayers, to coastal property owners. The state, being the rule maker, creates reserves that will likely prove inadequate in a bad year.

The outcome is to subsidize risk by lowering the cost of ownership thus creating moral hazard. With the artificially reduced rates, more people are encouraged to develop coastal properties. This means the taxpayers are on the hook for ever bigger payouts. According to the Wall Street Journal article below, these taxpayer backed policies are up 82% since 2005. Homeowners and taxpayers far from the coast and damage pay to rebuild, generally wealthy property owners, beachfront vacation homes.

Here is a quote from this article

Homeowners insured through companies other than the Beach Plan would have to bail out the Beach Plan only if a "one-in-134-year" storm hits, officials estimate.

Still, critics say the worst-case scenarios underscore deeper problems with insurers of last resort. Many of the pools are in the same uncomfortable spot as North Carolina, with capital cushions that could be wiped out by one mega-storm, or several midsize ones.

In addition, by trying to keep rates affordable for homeowners, the last-resort insurers help fuel coastal development that puts homeowners across the state at financial risk, some critics say.