FOR GOD'S SAKE, MERKOSY, HEED KEYNES!

Do our political "leaders" read the greats, do they read at all? To secure the blessings of our future prosperity, Europe first needs recovery. The Hayekian imperative for liberty is happily met. But Hayek's theory of saving and investment - the 'roundaboutness of production - will not save Europe, nay never could have.

In the final analysis, Keynes was right.. Preserving the Market can only be assured by guaranteeing Europe's way of life. In the Master's words,

 
'The reformers must believe that it is worth while to concede a great deal to preserve that decentralisation of decisions and of power which is the prime virtue of the old individualism. In a world of destroyers, they must zealously protect the variously woven fabric of society, even when this means that some abuses must be sdpared. Civilisation is a tradition from the past, a miraculous construction made by our fathers...hard to come by and easily lost....
 
The old guard of the Right, on their side, must surely recognise, if any reason or prudence is theirs, that the existing system is palpably disabled, that the idea of its continuing to function unmodified with half the world in dissolution is just sclerotic. Let them learn from the experience of Great Britain and of Europe that there has been a rottenness at the heart of our society, and do not let them suppose that America is healthy'.

NAMELESS MOTTO (AND ASSOCIATED COUPLETS)

Waiting not with words and thoughts, but enduring unto infinity.

Wanting not these wants, but abiding forever..




('How ever every ill has its share of good - this very bane would at any time enable me to look with an obstinate eye on the Devil Himself - ay to be as proud of being the lowest of the human race as Alfred could be in being of the highest'..

'I feel confident I should have been a rebel Angel had the opportunity been mine'.

- Keats' Letters, "To B.R Haydon")



('What share can they have in the fray in which every one fights on their side?'

- Montaigne, Essays, "On the Disadvantage of Greatness")



(..'without monsters and gods, art cannot enact a drama'.

'child art transforms itself into primitivism, which is only the child producing a mimicry of himself'

- Mark Rothko)

FLIGHT AND FOLLY: CREDIT DEFAULT SWAPS, MONEY MARKETS - IS EUROZONE ON 'YOUR OWN'?

[This post is under construction].


At the age of seventeen, Winston Churchill prophesied an attack on London such as had never been witnessed. Related in Professor Niall Fergusson's Empire: How Britain Made the Modern World, Churchill intoned:

"I can see vast changes coming over a now peaceful world; great upheavals, terrible struggles; wars such as one cannot imagine; and I tell you London will be in danger - London will be attacked and I shall be very prominent in the defence of London....I see further ahead than you do. I see into the future. The country will be subjected somehow to a tremendous invasion...but I tell you I shall be in command of the defences of London and I shall save London and the Empire from disaster."



In Spirit of Love, one discerns the gargantuan risk of very expensive divorce proceedings disrupting the European family.

At the same time, I think one could adopt the metaphor of a 'London' Moment tearing the sovereign fabric of the eurozone. But do we have Churchills waiting in the wings to tide Europe to safety? Or will the flight-from-liquidity become a fight for the exits?

In Spirit, the authors primarily discuss the technical aspects of formal default set against the alternative scenario of a Greek move for the Euro exits by outright or partial default.


reference entities

physical settlement matrices

money market problems

Irish Central Bank

lack of political credibility

continental sovereign risk

can we play through the crisis?


Churchill quote

Is this 'London' Moment?

Fergusson's Empire

Credit Event, according to authors, could range from 'discrete' to 'general cataclysm'.

One only has to recall, as Fergusson does, Charles II's 'Stop of the Exchequer' and the concourse of financial default over the centuries. (Cf Rogoff).

Relevant obligations will be affected, and possible credit events triggered, by repudiation/moratorium, outright default or restructuring - ie controlled or partial default. This is after all applicable 'grace periods'.


Redenomination to 'debtonation'? Problem of 'Permitted Currency'.

With strong or rapid deterioration of the euro currency, will everything be permitted?


To return to Churchill - a strong proponent of European union and permanent integration:

"Every prophet has to come from civilisation, but every prophet has to go into the wilderness. He must have a strong impression of a complex society and all that it has to give, and then he must serve periods of isolation and meditation. This is the process by which psychic dynamite is made."

A RESOLUTION, OR JUST ANOTHER 'SOLUTION'?

In partial recompense and resolution, I believe European sovereign debtors will require a 'strong and steady' devaluation in line with the markets. This will then have to cascade to corporate borrowers with the untidy prospect of mass bankruptcy. The question is whether outside market participants such as shadow banks and hedge funds will hold off on speculative frenzy thereby averting collapse of this Hogarthian 'carousel of fools'.

Quite apart from substantial 'haircuts', profligate - and unfortunately, perhaps more circumspect yet exposed - borrowers may have to stretch the maturity of their eurozone debt over much longer periods of time to avert collapse.

Though Keating denigrates her as the archetypal 'worry wart', Angela Merkel may yet see fit to institute a much deeper bailout AND RESTRUCTURE fund to limit contagion to other eurozone members; and as I have said before, Germany must not turn its face against a well-designed and instituted Eurobond.


Whatever the solution, time is only just on Europe's side..

AU NATUREL: REPRIEVE FOR NATURE

What is an artist without his or her canvas? In Four Classic Quarterly Essays, Amanda Lohrey reminds us that We termed the earliest environmental boards 'Scenery' boards. We are the philosopher Bradley's Idealist we and "them", the product and catalyst of socialization and progress. Is progress, however, the Progress of annihilation?

I leave you with Lohrey's distillation of the sustainable into the politics of change:

'The story of Lake Pedder has been told before and is well known to anyone over forty. Nevertheless it is worth revisiting here, not least because if there is a foundational narrative of the Greens Party in Australia it is the flooding of Lake Pedder by the Tasmanian Hydro-Electric Commission in 1972. The story of Lake Pedder and its erasure are to the Greens what the great shearers' strike and the town Barcaldine in the 1890s were to the Australian Labour Party. This is the Greens' own Genesis story and Pedder is it's paradise lost'.

There is much - too much - to preoccupy us. The world as friend or the world as foe?

Perhaps we should view things less 'in terrorem' and more 'in arcadia'?

SOCIAL PITCH: 'SOCIAL BANKING'

In response to Slavoj Zizek's 'Salaried Bourgeoisie' in LRB, can capitalism accomplish anew?

What about 'social banking',
an Idea for a Social Bank, with creativity a store of value?

We need (it seems to me) ideas with a capital "I" but the I in 'We'..

A surplus capital stock, a fund of regenerative power,

Full of business proprietary 'goodwill' as well as goodwill toward men (sic)

A boon to our living and social environment.


ME, WE, YOU --

Anyone with us?

SEEKING ASSURANCE

As global markets continue to see saw, QBE Australia has now announced a 50 pct reduction in expected profit on the back of increased insurance payouts. I can't wait to analyze the report in a value fashion, since this is potentially a time when the Munger-s of the world 'back up the truck'!

Indeed, it will be interesting to compare Buffet's references in his annual letters to shareholders regarding the impact of cost-to-float and the general outlook for the insurance sector. Further, quaere whether analysts and value investors can divorce insurance from wider sector performance in the FIRE listings. For eg, think of Suncorp in Australia.

Distress signals are often the sirens' call to true value investors. Then again, one does not want to be caught like Buffet's proverbial duck in an ebbing tide with no trunks!

After holidays, back to work and back to posts..