The International Swaps and Derivatives Association, a private organization which is the world’s supreme authority on a multi-trillion dollar market, has ruled that the Greek debt agreement was not a “credit event.” This ruling means that all the investors who purchased credit default swaps (insurance policies) on their Greek bonds will not be paid for their losses (up to 70%) on their Greek bonds. Many banks are breathing sighs of relief because it means that they will not have to pay for the losses the investors have experienced. Other banks are gnashing their teeth because they bought the swaps precisely to cover their possible losses from such a default. Theoretically, the gains and losses should equal zero (assuming that the premiums paid for the insurance were accurately determined to equal the possible losses–a very implausible assumption–someone always makes a mistake assessing the real risks). It is safe to say that there will some losers. Who they are and how much they lost is a very important question. We won’t know for a few months (unless someone leaks the information sooner). If you want to know more about the ISDA, here’s the link to their homepage. Barry Ritholz, one of the most prominent and insightful of all the Wall street bloggers, has a right-on post about the ISDA.
How impatient are you when you surf the web? The world has the attention span of a gerbil. (Not a quiz link)
The public relations campaign on the possible bombing of Iran continues. We’ll see if the New York Times publishes an opposing view any time soon.
How bad is it in Greece? Check out this graph. (not a quiz link)
The Institute for Economics and Peace has published an extraordinary study entitled “ECONOMIC CONSEQUENCES of WAR on the U.S. ECONOMY.” This is one of the very few studies I have ever seen that has gone beyond the usual framework of simply adding up standard military costs and standard defense revenues. I recommend it highly. (not a quiz link)
The North Korean government is making conciliatory gestures, and the US is reciprocating. One should not interpret these moves as genuine–they are actually part of a pattern that has played out over the last 10 years. But this step is occurring early in Kim Joung-eun’s regime, so perhaps there are some reasons to be a little more optimistic.
A very interesting chart from The Economist. Apparently, the happiest people in the world live in some of the poorest countries.
The Economic Times from India is reporting that Israel has decided not to tell the United States if and when it attacks Iran. If true, this decision will complicate tremendously the dynamics of the planned meetings between Israeli and US officials in early March. Such a level of distrust among close allies is unusual, and it places the United States in an extremely awkward position if an attack does occur and somehow expands upon clear US interests in the region. It will be interesting how the Congress decides to interpret this decision.
Der Spiegel has published a very interesting compendium of quotations about the Greek bailout in the German press. The wide range of views was unexpected, but the degree of cynicism seems to be uniform. It seems highly likely that the Germans will not go along for another round of bailouts, so this is the last step for Greece.
Riots against the United States continue in Afghanistan after American soldiers were involved in the burning of the Quran. The United States has apologized for the accidental burning, but many Afghans want the soldiers involved prosecuted. The cultural divide between the US and Afghanistan could not be more explicit: the Americans do not appreciate the significance of the issue, and the Afghans do not appreciate that no American law (the burning occurred on an American base) was broken. But the clear loser in this crisis is the United States since it indicates how thin support for the NATO operation is in Afghanistan.
Even the Oscars are fodder for world politics. The Iranian official spin on the award given to the film, “A Separation.” One should never be surprised.
The protests against President Putin of Russia continue. In an attempt to gain sympathy, Putin has dredged up an assassination attempt. Truly pathetic.
In defiance of the Iranian support for Syrian’s President Assad, Iranian rappers release a song condeming Assad; The song, “The Battle For Homs”, is produced and performed by Iranian singers Emad Ghavidel and Hamed Fard. Link: http://www.memri.org/clip/en/0/0/0/0/0/0/3333.htmSee The Russians, on the other hand, have doubled-down their support for Assad.
The quiz will be on the blog articles from 23-27 February and Ambrose & Brinkley, Chapters 4-7, the Gaddis chapter, and NSC-68. Happy Leap Day!
Syria is conducting a referendum today, signaling its disregard for the protests and violence that have been going on for so long. The last referendum in 2007 gave Assad 98% of the vote, so its not hard to predict what the outcome of this vote will be. The world still remains inert, although there are an increasing number of discussions and proposals being floated. Syria still receives support from Russia, China, and Iran so the Assad government can probably hold on for quite some time.
An article in Al Arabiya about the Greek debt crisis. This particular point of view is very common in the world, but it is rarely articulated in the Western press. Note that an article in the Toronto Star can be just as damning about how devastating the bailout terms have been, but doesn’t go to the next step of suggesting that the reason for all this pain is to bail out the banks, not the Greeks.
Pushback by the elements in the US who do not wish to see an attack on Iran: an article in the New York Times articulating the view that some important intelligence agencies do not believe thats Iran has made a decision to build a nuclear bomb. Articles such as these represent a propoaganda war within the US domestic political arena since they are obviously timed to be released right after the International Atomic Energy Agency released a report that Iran has accelerated its production of enriched uranium.
Paul Krugman offers some interesting graphs on the european debt crisis, testing three hypotheses on why the crisis occurred: 1) excessive social welfare spending; 2) excessive budget deficits; and 3) export competitiveness. The results tend to support explanation #3 which suggests that it is the reliance on the euro itself that is the underlying cause of the crisis. The graphics are quite persuasive, but be careful of drawing such sweeping conclusions from single data points.
The Greek debt situation is rapidly descending into the absurd. Germany has offered to send some of its tax collectors to Greece to help the Greeks run a more efficient collection system One can hardly think of a more insulting offer and the Greeks will certainly feel less obliged to worry about the financial safety of the German banks who are holding Greek bonds. To make matters worse, the German Interior Minister has suggested that Greece would be better off if it left the eurozone. I am certain we will enjoy a strong Greek reaction to these comments.
The Economist periodically runs online debates on topics of great public interest. These debates are patterned after traditional Parliamentary Debates and the motion discussed this week is: “This house believes that military intervention in Syria would do more harm than good.” There are essays supporting and opposing the motion and a vigorous online debate. I won’t ask any questions about this post in the American foreign policy class quiz next week, but I highly recommend the posting for those who wish to be better informed about the options available to the world in the face of this tragedy.
The Greeks have passed a law to restructure its debt, imposing losses on private bondholders. Private investors will now have to decide whether to accept these losses (perhaps as much as 75%). These debts need to be resolved by 20 March, so there will be a high degree of posturing and brinksmanship among the bondholders. It will be an interesting week, but most of the gory details will be carried out in secret. We will be reading tea leaves for a while.
More information on the role of domestic politics in the US on the question of military action against Iran. In this case, an interesting article in Foreign Policy on how to interpret the public opinion polls in the United States on the question of whether the US should attack Iran.
The inability of the world to respond effectively to the tragedy in Syria begs an explanation. The explanation is rooted in the disagreements among the states with the power to mount an effective intervention, as well as the difficulties in determining what internal forces in Syria to support. This article from Reuters gives a good summary of these cleavages. It is not an optimistic read.
Tensions are building in Senegal as the Presidential election nears. Anger toward President Wade is rising as he seeks a third term, which most Senegalese regard as unconstitutional. The likelihood of violence appears to be very great right now, an extremely unfortunate turn for a once peaceful society.
We do not know very much about the decision-making process within the Obama Administration on the issue of the Iranian nuclear program. Quite clearly, the Administration is working hard to tighten sanctions in order to induce the Iranians to change their program. But we know very little about President Obama’s back-up plan. The rhetoric is that “everything” is on the table which includes a military strike. But that rhetoric could simply be a bargaining ploy. There is a constituency in the United States, however, that believes that a military attack is necessary and that constituency is applying pressure though Congress to force the Administration’s hand. This political pressure will intensify in the next two weeks before Israeli Prime Minister Netanyahu visits Washington in early March. The decibel level of the rhetoric is certain to go up dramatically. To complicate matters even further, the Russians have issued a strong warning to Israel against a military strike on Iran.
The news reports out of Syria are tragic beyond measure. It appears as if the Syrian military is now shelling civilian areas indiscriminately without any pretense of a military objective. These are war crimes and the world still seems unable to mobilize itself. One wonders how the Russians and the Chinese will justify their obstruction when all the evidence comes out, as it inevitably will.
If you are interested in listening to some of the music coming out of the Egyptian revolution, you can check out this site at the Middle East Media Research Institute:
http://www.memri.org/report/en/0/0/0/0/0/0/6109.htm
World Politics News 