After adopting the euro, Greece borrowed huge sums of money. The country is now on the brink of a major default. "They're going to default ... it's now a question of how messy it will be," says writer Michael Lewis. His new book Boomerang looks at Greece and four other places affected by the financial crisis.
How The Financial Crisis Created A 'New Third World'
October 4, 2011Listen to the Story
Interview Highlights
Michael Lewis is currently a contributing editor to Vanity Fair.
On the future of Greece
"They're basically in this trap where anything they do to satisfy the demands of their creditors is likely to make them less solvent. So there's no obvious way out of their problem."
http://www.bbc.co.uk/podcasts/series/bizdaily#playepisode2
US-China Tensions 3 Oct 2011
Mon, 3 Oct 11
Duration: 19 mins
Available: 29 days remaining
The jig is up, says an American Senator. So is a trade war on the cards? The American Senate this week votes on a bill to punish China for undervaluing its currency. Is America really willing to risk a trade war on the issue and what will happen if it does? Plus, Lucy Kellaway on why companies shouldn't try to justify massive bonuses.
Orderly default?
Media : Listen now (18 minutes)
Availability: Available to listen.
Last broadcast on Tue, 20 Sep 2011, 12:32 on BBC World Service (see all broadcasts).
Synopsis
If Greece defaults on its debts, can it do so in an orderly way with minimal damage?
Lesley Curwen talks to Paul Blustein, visiting fellow at the Centre for International Governance Innovation about what an orderly default entails.
Mario Blejer, former central bank governor in Argentina, reveals the lessons from his country's disorderly default ten years ago.
Plus, has western capitalism failed?
In this edition it is the turn of Ken Ofori Atta to answer this question.
He is Executive Chairman of Databank Financial Services, an investment bank in Ghana.
On the Germans and the euro
"The euro, as originally conceived, was regarded as a tool for subduing Germany. It was going to yoke Germany to the rest of Europe so it couldn't declare war on it ever again. And instead, it has become this mechanism for Germans essentially running Europe. The periphery of Europe is now at the mercy of the German creditor. Right now, there are Germans in the Irish Treasury. There are Germans in Greece working with the tax collectors collecting taxes from Greek people. The Germans now have enormous leverage in Europe because without the German willingness to repay the debts of others, countries are going to be bankrupt."
On the Occupy Wall Street movement
"Wall Street, in recent years, seems to have become an engine of unfairness. And you can see why people are outraged by what's happened there. Just back away from this financial crisis, and the truth is, we're still in it. The story I'm telling in this book is just an extension of the story I told in The Big Short. It hasn't gone away. We haven't put to rest the problems that were created during the subprime bubble. But Wall Street private enterprises — these big Wall Street firms where people were paid more than anyone in the society because they supposedly know what they are doing with money — orchestrates the biggest misallocation of capital, of money in the history of the world. And they pay themselves an awful lot of money while they're doing this. The result of this is this crisis, and the crisis leads to Wall Street being essentially bailed out of its own mistakes — that the government decides that these big Wall Street banks going down is unthinkable. And so, once the Bush and Obama administrations decided that you couldn't let these firms fail and they didn't want the mess of nationalizing them, there was really only one way forward — and that way was to gift money onto these banks until they're back on their feet and can function at the center of the economy again. But that, to any normal person who is outside the system, just looks ridiculously unfair. It looks like socialism for capitalists and capitalism for everybody else. So it's no wonder people are marching in southern Manhattan."
On feeling like California is having what he calls "Third World problems"
"I feel like I live in a place that's going to be dealing with problems that one associates with the Third World: radical declines in public services, the real possibility that municipalities don't repay their debts, [and] kind of a fraying of the civil fabric that's all the more peculiar because it's taking place in the context of great affluence. There's a real connection to Third World problems. An hour north of us in Berkeley, there's an actual bankrupt city in Vallejo. You go there and you wander around the streets that are not being paved and the public services that are not being rendered and the police force that can't do its job because it's been cut in half, and you think, 'Oh my God, it can happen here.' "
CLASS WARFARE 21ST CENTURY STYLE
In the Communist Manifesto, Karl Marx (above) and Friedrich Engels used the German word Klassenkampfen, which translates as "class struggles." Their critics rendered it as "class warfare."
Geoff Nunberg, the linguist contributor on NPR's Fresh Air with Terry Gross, is the author of the book The Years of Talking Dangerously.
"Class warfare" was a dodgy phrase from the outset. In one of the most famous sentences in the history of political thought, Marx and Engels wrote in their 1848 Communist Manifesto: "The history of all society up to now is the history of ..."
That's where things get complicated. In the original German they wrote Klassenkampfen, which means "class struggles." But some of their critics rendered it more belligerently as "class warfare." That was the stock label they put on the bearded socialist agitator in political cartoons. And some socialists actually did use it, while others tried to turn it around to describe the capitalist oppression of labor. But "warfare" more readily suggested the disorderly violence that broke out from below. It conjured up the red flags, cloth caps and barricades of Les Mis, not the measured operations of the parliaments and law courts on the side of the bourgeoisie.
http://www.bbc.co.uk/podcasts/series/bizdaily
Has western capitalism failed? 23 Sep 11
Fri, 23 Sep 11
Duration: 19 mins
Available: 17 days remaining
There is a storm coming - that's what markets believe as the great and good of world finance warn that the outlook for the world economy is bleak. So is this just one of capitalism's periodic crises or is this something more: is the free market system itself failing? David F Ruccio, Professor of Economics at Notre Dame University in Indiana, Andrew G Briggs, resident Fellow at the American Enterprise Institute and Matthias Schaefer, leader of the Economic Policy Team for the Konrad Adenauer Foundation in Germany discuss this with Justin Rowlatt. Plus Professor Tim Jackson, an expert in sustainable development gives his view.
WALL STREET A HOUSE OF CARD & A ROLL CALL OF VILLAINS
Backstory to the financial crisis
William D. Cohan
William D. Cohan is the author of several books having to do with money and banking and the excesses on Wall Street. Right now I am interested in two: House of Cards: A tale of Hubris and Wretched Excess On Wall Street (2009); and Money and Power: How Goldman Sachs Came to Rule the World (2011).
In House of Cards, Cohan traces the beginning of the Wall Street banking crises to what he calls “the ultimate roach motel.” He state that the first murmurings of impending doom for the financial world originated 2,500 miles from Wall Street in an unassuming office suite just north of Orlando, Florida. There, hard by the train tracks, Bennet Sedacca, president of Atlantic Advisors, a $3.5 billion investment management company and hedge fund, announced to the world at 10:15 on the morning of March 5, 2008, that venerable Bear Stearns & Co., the nation’s fifth-largest investment bank, was in trouble, big trouble. “Yep,” Sedacca wrote on the Minyanville Web site, which is dedicated to helping investors comprehend the financial world. “The great credit unwind is upon us. Credit default swaps on all brokers, particularly Lehman and Bear Stearns are blowing out, big time. (3)
The problem at Bear Stearns and Lehman Brothers, Sedacca informed his clients and Minyanville readers, was that both firms had high inventories on their balance sheets of securities backed by home mortgages. The rate of default on these mortgages was growing and home values were falling rapidly. Sedacca could not help noticing that the effect of this double whammy were beginning to show up in smaller mortgage companies, one of which was Thornburg Mortgage. Thornburg had been “overwhelmed” by margin calls from its lenders. It tried selling bonds to settle the margin calls but couldn’t; results “the ultimate Roach Motel.” (4)
For Thornburg the trouble began on February 14, halfway around the world, when UBS, the largest Swiss bank, reported a fourth-quarter 2007 loss of $11.3 billion after writing off $13.7 billion of investments in U.S. mortgages. Amid this huge write-off, UBS said it had lost $2 billion on Alt-A mortgages and, worse, that it had an additional exposure of $26.6 billion to them. In a letter to shareholders before he lost his job on April 1, Marcel Ospel, UBS’s longtime chairman, wrote that the year 2007 had been “one of the most difficult in our history” because of “the sudden and serious deterioration in the U.S. housing market.” (5)
At about the moment when CNBC was reporting on Bear Stearns rumors, Tim Geithner and Ben Bernanke, chairman of the Federal Reserve Board of Governors, were hosting a long-scheduled luncheon in the windowless Washington Room on the thirteenth floor of the New York Federal Reserve Bank, at 33 Liberty Street in lower Manhattan, for the CEOs or senior executives of nearly every important Wall Street firm. It was an august gathering of Wall Street’s most powerful men.
Cohan states that Hank Paulson and Jon Corzine were non-Jews in a predominantly Jewish firm, Goldman Sachs. However, those in a frenzy to place blame, as was done in Germany in the 1930s, hear Wall Street and see Shylock Bankers. This was one of the main reasons that Barack Obama was helped into office.
ON POINT RADIO
Pulitzer-Prize winning columnist and “frustrated optimist” Thomas Friedman on what it will take to make America great again.
Thomas Friedman speaks with host Tom Ashbrook during a live taping of On Point Oct. 4, 2011 at the Paramount Center, Boston. (Alex Kingsbury/WBUR)
New York Times columnist Tom Friedman is a frame-maker. For thirty years he’s been framing first the Middle East then the world and world economy.
Love him or hate him, in bestselling book after book he frames the understanding millions of people have of what’s going on. Now Friedman says America’s going down – but doesn’t have to. That we need a third party candidate to shake up polarized and illusion-bound Republicans and Democrats. To lead the country back to greatness.
This hour, in a special live audience broadcast of On Point: Tom Friedman on making America great again.
-Tom Ashbrook
Guests
Thomas Friedman, co-author with Michael Mandelbaum of the bestselling new book, “That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back.” He is a three-time recipient of the Pulitzer Prize and columnist for The New York Times.
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Comments
I do not understand why you post so much in one post. Nobody has the time to get through all this unless they wish to forego all other internet activities. I don’t.
Mary, you do great work but I just do not have the time your blogs require. Sorry but I won’t be reading your blogs anymore.
Bye.
;-(
.