Category Archives: debt ceiling

Obama’s Iranian deadend


The growing absurdity of Pres. Barack Obama’s arguments in favor of his negotiations with the Tehran mullahs grows ever more self evident.
The International Atomic Energy Agency, itself at best never much more than a token effort to enforce anti-proliferation agreements, has revealed that Iran’s nuclear fuel stockpile is growing. In fact, the AIEA says, it has grown 20% during the last eighteen months. During that period Washington has been insisting the preliminary November 2013 Joint Plan of Action Agreement between the Islamic Republic and the West, had put a cap on Iran’s nuclear activities, and perhaps had the makings of a final agreement to halt any Iranian move toward nuclear weapons.
But only a month before the proposed completion of that constantly postponed final agreement, the IAEA calculations completely give the lie to Obama’s continued insistence his negotiations at leasdt temporarily had reigned in Iran’s nuclear developments.
Furthermore, the proposed final deal is supposed to reduce the Iranian fuel stockpile to 300 kilograms of nuclear fuel, less than requirements for a single bomb. That means Tehran would have to get rid itself of nine tons of enriched uranium fuel. No one really knows how that would be done. [The mullahs long ago ignored their agreement when Moscow sold them a reactor with the proviso fuel byproducts from its generating capacity would be shipped back to the then Soviet Union.]
Having backed off the whole concept of restricting Iran’s capability to make nuclear weapons to a position where the mullahs would have the capacity to do so but would foreswear it, Obama’s critics now have a new concern. Obviously, the size of its nuclear fuel stockpile would be decisive in any calculation – now ridiculously the new major issue in the whole discussion – of how long it would take the mullahs to make bombs. That “breakout” calculation, foolishly enough, has become a central argument between Obama and his Congressional critics. Obviously, a political judgment, an estimate, of whether the mullahs would and could be trusted to abide by any such self-imposed schedule, is the more demanding and paramount issue.
The IAEA report matter of factly pointed out that no progress has been made in its efforts to implement UN Security Council resolutions calling for information from the mullahs on possible movement toward “weaponization” .Needless to say, the IAEA report also says Tehran has made no suggestions how it might move to conform to the UN demands.
The IAEA report sums up that given the missing intelligence, it is not able to make a judgment on whether Iran is moving toward producing weapons.
The combination of Washington having lifted some economic sanctions – apparently the only weapon in its effort to restrain the mullahs short of military intervention – and the White House bogus claims on progress in restraining Tehran, already has led to diplomatic disaster. Washington’s nominal allies in the Persian Gulf and a disgruntled Egypt and Turkey are increasingly showing every evidence of abandoning the U.S.’ traditional leadership and looking to their own security calculations.
Israeli Prime Minister Benjamin Netanyahu continues to scold, but he most of all, will have to decide what happens in the absence of what he has called “a good agreement”. Israel is after all a continued target for the mullahs’ threats to wipe it off the map.
Apparently the Obama Administration will continue to issue preposterous statements on progress of the negotiations – or ask for further extensions — as the region and the world slide toward crisis.
sws-06-01-15

The [Chinese] emperor has no clothes


The shudder that relatively minor bad news from China sent through world markets last week was a warning that the halcyon days of Beijing’s economy are over. Indeed, reluctantly because of self-interest and wishful thinking, a universal consensus finally is emerging that the Chinese economy is in deep trouble, a crisis that could perhaps overturn the regime itself.

The cardinal indicator is that the Chinese economy is slowing down. How much, how fast, which sectors, is all open to speculation given the notorious unreliability of Beijing statistics. But certainly we long ago dipped below that 8% minimal annual gross national product growth rate which once was accepted inside and outside the Middle Kingdom as the requirement for political stability.

In a sense, it was inevitable: perhaps the world has no history of a regional economy as large as China’s growing at its phenomenally high rate over the past two decades. But, then, too, it has been obvious to all but the most optimistic that huge aberrations were being built into a wanting modernization process that would eventually haunt the leadership. That’s where we are now.

There is unusual agreement, again, among Chinese and foreign critics of what is wrong and even accord on remedies for amelioration. Communist Party Chairman, chief executive, and chief of state Xi Jinping and to a lesser degree Prime Minister Li Kegiang, some 18 months in office, are saying all the right things. Xi, unlike his predecessors, even manages to project charm to sell what will be under the best circumstances extremely difficult structural reforms. The new leadership has come down hard on corruption which is not only endemic, but has taken on growing economic aspects with everything from undermining manufacturing quality to facilitating a huge capital flight. It acknowledges that pollution, paralyzing major cities for days and increasingly jeopardizing children’s health, is an economic hazard.

But however clear a new formula would have to be found, the task is daunting. Such a strategy would have to replace the two-pronged drive put into place once the Chinese Communists abandoned Marxist-Leninist-Maoism in all but name. Mao-style autarky was trashed for an enthusiastic welcoming of foreign investment and transfer of technology to build export markets based primarily on abundant cheap labor. But at the same time, Beijing continued the Soviet tradition of enormous expansion of the infrastructure, well beyond contemporary or projected demand.

This Weltanschauung now has eroded dramatically.

The worldwide economic downturn ended an unlimited expansion of markets for Chinese exports. These manufactures had become part of a vast, new production chain in which international companies used Chinese assembly to produce products for sale to the U.S. and the rest of the industrial world at bargain prices. While these operations introduced limited manufacturing, through manipulation of currency and subsidies Beijing was in fact subsidizing foreign buyers. One look at the retail prices of products at an American retailer indicates that some dissident Chinese economists may well be right arguing that a capital-short country was exporting capital to wealthier nations.

Furthermore, Chinese razor thin margins have been jeopardized by rising costs, including growing fuel imports and a flattening out of the labor supply due to the regime’s attempts to stem population growth. For these reasons China already has lost many of the lowest end manufactures to other low-wage competitors; infants garments, for example, to Bangla Desh. There is even some movement because of technological improvements of off-shored manufacturing back to the industrial countries. For example, with America’s shale revolution reducing the price of domestic natural gas to a third of delivered prices of LNG in East Asia, petrochemicals and their plastic products are returning.

At the same time, China’s vast infrastructure expansion is falling victim to a growing credit crunch. Having sailed through the financial crisis with an unprecedented “stimulus” package of $586 billion in November 2008, Beijing created overcapacity and overinvestment. At the same time, local government’s expansion was based on sales of diminishing farmland for industrial and infrastructure development and credit from regional bankers.

The net result of all this is debt that even the government has found difficult to estimate and a fragile financial structure at every level of government. Perhaps more important, it has resulted in an increasingly onerous situation for private developers who carry a disproportionate weight in the overall growth. With stop and go credit policies, intrepid bureaucrats have created new shadow credit organizations beyond the scope of government monetary and fiscal policy.

The generally accepted recipe for solving these problems is to move the economy away from its concentration on investment and exports toward greater consumption and financial liberalization. But, in fact, recent trends have been in the opposite direction, as the government faced dismantling a system which had profited small urban elite enormously with a superficial appearance of modernization. The strongest resistance has come from huge government corporate entities and the welter of smaller SOEs [state owned enterprises] in the hands of regional and local Party apparatchiks. Their influence inside the ruling Communist Party gives them call on capital, even when as often happens, to entities either deficit or bankrupt.

What gave the markets the shivers last week was a statement from Li that a series of defaults were inevitable as the government tries to rationalize. A default by Haixin Steel, a relatively small operation but with ties to coal and iron ore companies was what gave rise to international concern. It also reflects what industry sources believe is a growing collapse with half of the country’s steel mills losing money. A week earlier China experienced its first bond default when Chaori Solar, a small privately owned solar panel maker, was unable to meet interest on Rmb1bn ($163 million) of bonds sold only two years ago.

In the past, the government has always picked up defaulting companies. If that policy is now to be abandoned, it is unclear just how big the debacle will be and whether it could lead to panic. Already world copper and iron prices fell sharply under the pressure of Chinese speculators retreating from their bets on a continued high level of metals production.

To remedy these problems, Xi’s highly publicized reforms, however much pushed by the leadership, are running into the often hidden outcome of past excesses. For example, not only does the attempt to moderate the “one child” policy appear as a lame effort to resolve an already warped sex ratio in the society – female fetus abortions having produced a vast excess of males – but a huge, corrupt bureaucracy created to enforce the strategy is blocking real changes. Furthermore, such side issues as hundreds of thousands of “illegal” births have produced a sizeable population which cannot claim identity from the still deeply held conviction of Party leaders they must control any dissidence through strict monitoring. A similar problem exists for the hundreds of thousands of part-time workers in all the major metropolitan centers, brought in as “cheap labor”, but refused urban citizenship and a right to limited social welfare benefits. The security proponents are allied with local governments in this instance against any “reform” because of the additional costs it would heap on already overburdened local government and the dismantling of authoritarian control of every individual.

While the system does have the support of the Party apparatchiks, a highly touted new urban middle class does not exist. Best estimates are an upper 1% of households — 2.1 million out of about 530 million households — owns 40-50% of the country’s $10.5 trillion worth of real estate and financial assets. That these ultra-rich – many at the Party’s highest echelons – are moving money into foreign real estate and other investments is widely reported. Should they consider moving 30% of their assets abroad, which is a figure rumored in Chinese circles, the much celebrated Chinese monetary reserves of $3 trillion in dollars would be inconsequential in stemming the tide.

This prelude to a cataclysmic readjustment of the Chinese economy is arriving at a time when Western economists and businessmen have had to abandon a long-cherished hope that continued rapid Chinese [and Indian] development would prop up the world economy. But their disillusionment on this aspect is likely to pale into insignificance as the effects of the Chinese slowdown impacts further on commodity producers in Africa, Latin America and Australia.

Beijing leadership’s quandary is that the struggle to refashion the Chinese economy with further liberal economics comes up against the determined effort of the CCP to maintain its power monopoly which forbids just that. For example, the effort to turn the yuan into an international currency requires it become convertible. That would not only jeopardize current export subsidies but would further encourage the flight of capital, largely a function of the corruption in the Party, often at its highest levels. .

That produces an explosive environment where almost scenario is arguable.

sws-03-16-14

 

 

 

 

 

The great wait


Looking around the world, the striking characteristic is waiting out a number of crises. Their outcome seems almost artificially suspended, and their interaction on one another and their ultimate effect on the world is at issue.

We start with the Euro. Chancellor Angela Merkel’s supplications in Beijing were perhaps laudable but a little ridiculous. There is no evidence Beijing could or would bail out the Euro. Meanwhile, Greece appears headed inevitably for default – if for no other reason than the severe austerity measures are not only the proverbial late closing of the barn door but making it impossible for growth necessary for any climb out of its debt bind while increasing social deterioration. Can Spain, Portugal, and perhaps Ireland and Italy, be far behind? Meanwhile, Germany refuses to assume the role its hard work, discipline and export-led economy has bestowed as the main source of reserves to refinance the European Union. We wait.

Israel, the U.S. and Iran wage a ferocious propaganda war, with the mullahs’ repeating their unprecedented threat to Jerusalem’s existence. Sanctions are having a disastrous effect on the Iranian economy. But past history demonstrates third world economies have no bottom – especially those propped up by oil revenues skirting restrictions to reach markets. But there is a consensus among Western intelligence circles Tehran continues to make progress toward nuclear weapons of mass destruction, perhaps even including missile delivery. Tehran surrogates also threaten Israel and the West in Lebanon, Gaza, Iraq and Afghanistan and with worldwide terrorism. How much coordination continues between Israeli policymakers and Washington has become an issue. We wait.

Syria, Iran’s ally, descends into civil war with the prospect its minorities’ ties to neighboring states will further derail any promise of The Arab Spring for a radical Mideast betterment. Egypt is already beset by a chaotic contest for power between the military and the Islamicists – with threatening problems of food and youth unemployment. Washington and Western Europe – surprisingly joined if ineffectively by the Arab League — has abandoned a hands-off policy on Damascus. However inevitable the fall of a 35-year-old dictatorship, the attenuated struggle typifies the absence of international collaboration against bloodshed. We wait.

The Chinese economy dips below levels conventionally held necessary to maintain stability under an authoritarian government with a rapidly growing workforce. Expanding exports and unlimited infrastructure growth, its two principal props for two decades, can no longer spur the economy with credit reaching explosive levels. A slowdown in China’s market for raw materials is the last straw for the worldwide economic malaise. Debate over policy within the Communist Party appears to have reached unprecedented levels, leaking to the highly censored but innovative personal communications networks. The argument comes on the eve of this fall’s planned transfer of generational leadership. Meanwhile, Beijing’s military power accelerates with chauvinistic rhetoric and threats over disputed sovereignty with its neighbors. We wait.

Japan’s political stalemate continues with the world’s third largest economy on autopilot. Another round in the prosecution of the generation’s most powerful politician, Ichirō Ozawa, comes in mid-February, with the perennial hope a restructuring of political factions will provide new, vibrant leadership. Meanwhile, a demographic catastrophe is overtaking the society as birth rates continue to drop with the most rapidly ageing population among the industrial societies and cultural obstacles to in-migration. We wait.

Russia approaches presidential elections with growing opposition toward what appeared the inevitable victor, Vladimir Putin. Failed efforts at reform of the economy and the military coupled with incredibly destructive social phenomena – a rapidly declining population, an HIV epidemic, drug addiction and alcoholism – all point toward another implosion. Immigration of capital and young skilled professionals reinforces decline. If world energy prices drop in the face of slack economies, Putin’s formula for stability could quickly evaporate. We wait.

The world as well as the U.S. enters the apex of its election season with a confused picture. An American electorate appears more polarized than ever between interventionist and market orientation with more mundane issues largely holding the debate spotlight. The world, dependent on American leadership since World War II, seeks clues whether the Obama Administration’s “lead from behind” is the leitmotiv of the coming four years with the relative success of the Paul candidacy signaling a possible new isolationism. Meanwhile, the country grapples with tenacious seesawing employment, ironically the result of technological advance as well as a credit collapse. We wait.

sws-02-3-12

Energy at home, energy abroad: disaster


Pres. Barack Obama’s war on fossil fuels is adding to world instability already wracked by international debt, demographic bulges and largely unpredictable galloping technology.

Domestic implications of his policies are increasingly apparent: the closing in of prospecting and drilling is costing tens, perhaps hundreds of thousand of jobs. The attempt to choose winners and losers through “green energy” subsidies is producing market distortions, huge losses of taxpayers’ funds and corruption rarely seen since the old Soviet Union’s Gosplan. Using executive fiat for arbitrary environmental rulings after Mr. Obama’s “cap and trade” quietly died in Congress is eroding Constitutional government by creating “precedent” for defying public opinion as expressed through the legislative process.

On the world scene, the impact is equally grim, although as always with intricate politico-economic problems, difficult to quantify.

It is a given, of course, that world energy is, as the economists say, an imperfect market. It runs the gamut: Pres. Hugo Chavez gives 100,000 bbl/da to his ideological buddy Fidel Castro to keep Havana lights on from Venezuela production, a principal source of American imports. Hand-me-down restrictive policies, a heritage of the Carter Administration’s misbegotten Department of Energy and its first head, James R. Schlesinger, dogs natural gas. Cartelization of the industry despite all the legislation and litigation since the Supreme Court broke up John D. Rocekefeller’s Standard Oil in 1911 continues to inhibit competition with the Organization of Petroleum Exporting Countries [OPEC] trying to set production quotas to control prices.

Yet, by and large, world energy is fungible – that is, production, stocks and therefore prices in one region impacts the worldwide market. After becoming a net importer in 1970, then doubling imports since the mid-80s to 50% of total consumption in 2010, the U.S. as world’s No. 1 consumer [and a producer of 25% of the world’s liquid gold] is decisive in establishing price, stocks and supply in other markets.

By impeding U.S. production through its refusal to lift controls, dragging out decisions or initiating or threatening to initiate new controls, the Obama Administration helps put a floor under world prices. That’s despite their erosion by a fall in consumption impacted by the worldwide economic recession, a very “leaky” OPEC struggling to control its 40% of world production, and production in the Persian Gulf for some grades a fraction of costs in North America. At a time of growing worldwide economic stagnation, despite the argument the real price of oil is skewed by a depreciating petrodollar in which most of it is traded, cheap oil remains as it has always been the sine qua non of American prosperity – and probably for world recovery.

Higher prices gorge feudal satrapies with their small backward populations in the Persian Gulf, unable to absorb and efficiently utilize capital. Worse, they indirectly finance world terrorists wherever they may be. For example, Saudi subsidies to mosques and community activities in the U.S. and the West as well as in the rest of the Muslim world carry with them Wahhabbi sect preachers insinuating sharia [pre-modern Islamic law] into Western legal codes, advocating armed jihad against “:infidels” and even fellow dissident Muslim sects or reformers.

Higher prices produce a petroleum bonanza for the increasingly authoritarian and corrupt Russian regime permitting it to avoid basic post-Soviet reforms. They give Moscow’s inefficient producers increasing international political leverage through gas sales to Germany and other Western countries. They reinforce the Putin regime’s efforts to reestablish Soviet hegemony over Ukraine and Central Asia and Moscow’s hope to intervene in a post-U.S. withdrawal Afghanistan.

Higher prices for its meager oil exports has propped up – along with Obama Administration appeasement – the bloody al-Assad dictatorship at war with its own Syrian people.

Not only has the natural gas snafu produced a temporary domestic surplus –with new technology pointing toward vast new production but it prevents potential liquefied natural gas [LNG] exports to high priced markets such as East Asia. U.S. sales to South Korea, for example, would block a proposed Moscow-Seoul gas project whose transit fees through North Korea would bolster the bankrupt, peace-threatening regime in Pyongyang.

Much of this, again, is the Obama Administration’s heritage. But its pandering to environmentalistas within its ranks has exacerbated old problems and invented new ones. With most of the President’s foreign policy initiatives in shambles, the external manifestations of his energy policy could be the straw that breaks the camel’s back.

sws-09-23-11

We already went through that


News item, August 23, 20111

Spain will reform its constitution to limit the budget deficit and the level of public debt under a law proposed by José Luis Rodríguez Zapatero, the Socialist prime minister, and supported by the rightwing opposition.

Nobody seems to remember that we had a stipulation in the original Maastricht Treaty [Feb. 2, 1992] limiting national budget deficits and France and Germany were the first ones to ask for the remission of the proviso — temporarily, that is. 

Oh those naughty North European spendthrifts!

Paralyzed? no, numbed a bit!


from a dear friend:

It is not the US President, Senate of Congress, but the full application of “check and balance”:
in the past “balance” was not applied to the full because Republicans and Congress shared the same basic values; now Congress as well as Senate are fundamentally divided, and Congress, Senate, Legislative and Executive all blocking each other. The US Government is paralysed, no matter who is President, and how good the President is…

I don’t see it this way at all.
First of all, the financial crisis [the 20107-08] was initially brought on by government interference resulting from the housing debacle which was the product, not of the markets, but of government legislation and regulation intended to manage the housing scene for supposed beneficial and narrower partisan ends.
The nature of the crisis was also exaggerated in the heat of the debate: there was no threat of immediate default given the government’s revenues, etc. Obama & Co. were trying to use  concern with default to force their philosophy of government intervention in the economy on the majority which still opposes it, at least in theory although the electorate has to some extent been “bought off” with populist arguments and “spoils”. It is a basic argument over whether more of the resources of the economy are to be used to fund government and its intervention in the markets and the society or to permit the markets with all their imperfections to dictate the direction and progress of the economy and the society generally by  maintaining maximum personal freedoms and choices.
The debate was useful and necessary as nasty as it looked. Great ideological battles are always ugly in a democratic society with representative government. After all, what is the use of having a debt ceiling if it is a matter of “routine” as the Administration argued, to keep voting it larger and larger, without this fundamental examination.
The partial resolution of the crisis has, for the moment, been effective. While it was a compromise of the goals of one party — the fiscal conservatives — it did accomplish its purpose by making increasing debt and additional taxation the main subject of the debate, which it had not been and which the opposition — the Obama Administration and its supporters — had refused to accept until now.
I think a watershed in thinking has been achieved and will have its long-term effect.
All this fashionable commentary — such as this BBC piece, which I see as typical of the “bien pesant”, and I must say, more trypical than not, of the BBC and The Economist — about the paralysis of government, etc., etc., is superficial and ahistorical. The U.S. has always gone through these kinds of crises when big issues are being debated. They are inevtiable, a part of the life of a relatively effective system of representative government but one based on a division of powers. [Please note that the European style of the monopoly of a legislative body — where it hasn’t broken down — rather than an intended balance of forces among legislative, executive and judicial certainly doesn’t work better. The evidence, if further historical references were not enough, is the crisis of the Euro and the EU which is as deep if not deeper than the present situation in the U.S. with less possibility of resolution, I would argue.]

What Obama Could Do


The dust has far from settled on the Washington stalemate over setting a new debt limit. As Thomas Sowell pointed out, so logically, were an increase in the debt ceiling only  “routine”, held up by pesky Congressional Tea Partiers, as the spenders charged, then what would be the purpose of having a ceiling at all? But while an indecorous debate encapsulated the larger ideological divide, America rapidly moves on, remorselessly, to threatening politico-economic issues cascading in from Europe and Asia as well as at home.

Ironically the current world crisis proved one thing: a continuing overwhelming faith in America’s importance, whether economically or culturally. Proof is “the flight to quality” by investors worldwide into the American Republic’s indebtedness as witness all-time record low interest in U.S. Treasuries auctions. Prime Minister David Cameron’s turn to American police [overcoming the usual our British Greek to your American Roman prejudices] in the face of chaotic English urban rioting is another indicator. But disquieting news from Libya approaching indecisive civil war and tragic events in Afghanistan where withdrawal leaves a highly vulnerable Pakistan indicate just how wanting is continued Obama Administration “leading from behind”.

US economic amelioration and patching up its world role would require extraordinary statesmanship. And as many observers, Pres. Harry Truman for one, have judged, the Constitution and history has made the presidency a very strong executive, and it sometimes matters less what he decides but that he act. “The buck stops here”, Mr. Truman’s pithy saying, remains a call for presidential courage on Pres. Barack Obama.

Here’s the kind of action that might result were that summons answered:

  • Send Michelle and the kids off to Martha’s Vineyard while making a seminal Oval Office Labor Day speech on economic affairs.  The spin might be: while holding to fundamental beliefs for a new era of economic justice, pragmatism demands that agenda be put on hold to meet the deepening emergency replaced by a program of cooperation with business to produce jobs immediately.
  • Ask the Congress to skip vacation and reconvene in special session, if needs be three days a week, to consider economic-political measures necessitating legislative action, or simply as a forum to vent the public’s criticism.
  • Call for a summit at the highest level with our allies in Europe and Japan on the world economy — including the simultaneous attendance of all central bankers –to discuss coordinating economic strategies and tactics.
  • Begin weekly meetings in closed session with a group of recognized private sector leaders to brainstorm recovery strategies and tactics.
  • Call for an immediate minimum two-year extension of the Bush tax cuts, ask Congress immediately to cut capital gains to zero, and begin the examination of longer term tax alternatives including a flat tax.
  • Propose a tax reform commission of experts modeled after the Defense Base Closure and Realignment Commission to suggest immediate incremental incentives for small businesses – the fountainhead of jobs.
  • Lift all administrative restrictions on discovery and production of fossil fuels, especially in the Gulf and Alaska and Virginia, creating perhaps a quarter of a million jobs immediately.
  • Use the extensive administrative powers written into Obamacare to suspend any implementation for at least five years and suggest its review by a body of medical, insurance and regulatory technocrats to be presented to the Congress before November 2012.
  • Ask Congress for a one-time tax remission for multinationals to encourage repatriation of an estimated $2.5 trillion in profits held overseas, on condition 25% be invested immediately in an infrastructure fund [highways, bridges, airport, rail reconstruction, etc.], a private sector Reconstruction Finance Corporation administered by those companies in collaboration with local governments.

And then sit back and see the American economy take off!

Alas! I fear we have as much hope for such a program, either thematically or in its specifics, as the proverbial snowball in the nether regions. Hangers-on, leftwing Democrats and the kept mainstream media will continue to hope for victory in next year’s elections, clinging to an agenda designed to enthuse the President’s “politically correct” base, demonize his opponents and flimflam independents by pretending a position of compromise.

Unfortunately, it looks like that indomitable American economy with its incredible history of jobs creation will have to continue to tread water – as it will manfully — against a Washington tide.

sws-08-12-11

Poor Richard’s Debt Almanac


The debt crisis is likely to be with us for quite a while. And since TV talking heads speak in gobbledygook, what better than a layman’s glossary? Herewith:

Banks  Safehouses where hardworking individuals and corporations put their savings supposedly to discreetly finance other people’s worthy projects.

Bonds  Paper representing company or country debt bought and sold with interest paid to owners whose value peaks when repayment looks more and more unlikely.

Central Bank Each government’s own bank to protect the national prosperity by printing money at a proper level and manipulating it against other currencies.

Correction When the bottom falls out of the stock market, and small investors get caught with their pants down, not knowing whether to ride it on down and hope or sell at a loss.

Derivatives Bets on bets on bets hidden in computers until someone punches the wrong algorithm and all hell breaks loose.

Dollar The USA currency, devaluing in a deteriorating economy, but still the standard for international transactions and guarantee for other even weaker currencies.

ECB European Central Bank, the Euro mother bank unable to salvage bankrupt Greece, Portugal, Ireland, Spain and, perhaps, Italy, who can’t pay their bills because they borrowed too much elsewhere.

Euro The European Community’s common currency but uncommonly in trouble because 17 different finance ministries drive their countries’ earning and spending in different directions.

Financiers Technocrats who believe they have mastered markets in order to feather their own nests but in times of crisis panic endangering the system by calling for government handouts.

GDP Gross domestic product is an estimate of all national economic activity, often divided to give a widely used per person figure not revealing much about you and me.

Geithner The U.S. chief financial officer who is looking for a way to get off the Obama ship of state after his government bureaucratic instincts called all the shots wrong.

Gold It’s a precious [as in valuable not cute] metal which shines when polished whose value is considered immutable and therefore a refuge when currencies cheapen wherefore now at all time highs.

IMF The international money pot, the cavalry supposed to come to the rescue when individual donor members got into trouble before the whole caboodle got too big and complicated.

Inflation When too much money chases too little goods, the prices begin to spin upward and shortly get out of control if the government simply continues printing money to chase it.

Intervention When Central banks buy up or sell their own currency in order to halt, slow or accelerate its value against other currencies which often doesn’t work and results in further panic.

Merkel Germany’s chief executive whose training as a physicist in Communist East Germany hasn’t equipped her to keep pumping out exports to countries who can’t pay in order to maintain Europe’s largest economy’s prosperity.

Obama The American chief executive, the first in the 200-year history of The Republic who believes government directed redistribution of the fruits of citizens’ labor will insure future stability, prosperity, peace and justice.

RenMinBao Beijing’s currency, for which no one knows the value, only used in China except when held outside in the hope it can eventually be reinvested in China, but which is usually called the yuan.

Revenue The money coming into the government’s coffers – particularly in the US –enhanced only in periods of prosperity created by a government which promotes business and suckles taxpayers.

Stocks  Paper representing bets on the ability of corporations to profit under changing circumstances, swapped with fellow gamblers who think they know more than their trading partners.

Taxes   Money squeezed out of citizens to fund the commonwealth which when reaching exaggerated heights encourages government profligacy and citizens’ evasion blocking entrepreneurial talent.

“Terrorists” That’s what spendthrift liberal politicians call Congressmen who think they ought to stick by 2010 campaign promises to rein in Washington’s 75-year-old spending spree to pay off debts before drowning.

US Treasuries American government debt traded and still considered, despite all the US trials and tribulations, the better place to keep money as its current relatively low interest paid buyers indicates.

World Bank A collection of highly paid, income tax free Washington theoreticians which helped reconstruct Europe after WWII but mistakenly preached government to government lending could modernize backward economies and societies.

sws-08-05-11