Markets lept up on rumors that the IMF would give Italy roughly twice as much money as the IMF actually has, and that Germany has a big idea to solve this problem - which big idea seems to be that everyone else in Europe agrees to suffer, and Germany gets to define what suffering means. Also the Federal Reserve made deals with other central banks to improve swap lines of credit. This is the sort of thing that gets done when multiple banks are right on the edge of going very publically and noisily broke. I viewed this move as near panic, but everyone else seemed to think it was Bernanke to the World's Rescue. In any case, this market looks extremely unhealthy right now.
Europe meets this week on Friday to decide, yet again, on their new, final, absolute, this time will fix it forever deal. The rumor is that Germany wants a bunch of bilateral agreements, treaties, that say each country in Europe agrees to a balanced budget amendment, and that deficit spending will result in European officials coming into the country and cutting pensions, healthcare, and government workers. Then after that the ECB might be allowed to print up more money. Of course the conference on Friday will end with everyone congratulating each other on a job well done, a huge mountain climbed. The question is will the governments then actually fill out and ratify the treaties. That won't be known for several weeks at least, more likely several months.
The IMF is now talking about a $800B bailout of "Italy." Of course this is actually a $800B bailout of banks, primarily French banks. New IMF director Christine LeGarde, who stepped over to this job from being the French minister of the economy, is apparently very pleased to be able to use other people's money to help out her country. The US share of this bailout is about $150B, which means each worker in America is going to send $1000 over to Europe to help out their bloated and indebted welfare states. I hope the US finds a way to veto this. What does this mean? At 7%+ interest rate, Italy is effectively locked out of world markets to refinance their national debt - $300B of which comes due in 2012. This means either the ECB (Germany+) bails them out, or the IMF (US+) bails them out, or they default and bring Spain and France down with them. Republicans are working on a bill to block an IMF bailout.
Interest rate watch: Due to very few bond sales this last week, the ECB was able to buy enough bonds to get bond yields down across most of Europe. Perhaps Europe will wind up amputating several of the Club Med economies, but in the meantime the ECB seems to have an endless supply of band-aids. Italy and Spain have temporarily been taken below crisis levels, and Belgium, France and Austria seem to have pulled back from the edge a bit. But the next time someone needs to sell $150B or so of bonds, these band-aids are all going to fall off.
The Telegraph reports from London that the British Foreign Office is drawing up plans for riots caused by a euro collapse that they now view as just being a matter of time.
US Unemployment numbers continue on a long, slow grind down. Washington, who no longer counts the unemployed who have "given up," says unemployment is now down to 8.6%. Last month the US added 120,000 net new jobs, about a third of what we would need to recover from this recession on a normal time frame. Our unemployment is now solidly lower than the peak of the 1948 recession, and climbing quickly to reach the peak of the 1957 recession. Perhaps in another year we'll be all the way down to the peak unemployment of the 1953 recession. Where are the jobs coming from? Primarily health care. Health care jobs continue to increase both in total numbers, and as a percentage of our population.
The post office, on the edge of bankruptcy, has a plan to close roughly 250 of the nearly 500 mail processing centers across the country as early as next March. This would lower delivery standards for first-class mail. About 42 percent of first-class mail is now delivered the following day. An additional 27 percent arrives in two days, about 31 percent in three days and less than 1 percent in four days to five days. Following the change next spring, about 51 percent of all first-class mail is expected to arrive in two days, with most of the remainder delivered in three days. The consolidation of mail processing centers is in addition to the planned closing of about 3,700 local post offices. In all, roughly 100,000 postal employees could be cut as a result of the various closures, resulting in savings of up to $6.5 billion a year. They have already announced a 1-cent increase in first-class mail to 45 cents beginning Jan. 22.
Iran warned the West on Sunday any move to block its oil exports would more than double crude prices to above $250 a barrel. The comments come as Iran strives to contain international reaction to the storming of the British embassy last week, a move which drew immediate condemnation from around the world and may galvanize support for tougher action against Tehran. Washington and EU countries were already discussing measures to restrict oil exports after the United Nations nuclear watchdog issued a report in November with evidence that Tehran had worked on designing an atom bomb. The European Union is considering a ban on Iranian oil imports.
It's widely believed in US Asian communities that checking the box marked "Asian" on your college application costs you anywhere from 50 to 150 points on your SAT scores. Asian students have higher average SAT scores than any other group, including whites. A study by Princeton sociologist Thomas Espenshade examined applicants to top colleges from 1997, when the maximum SAT score was 1600 (today it's 2400). Espenshade found that Asian-Americans needed a 1550 SAT to have an equal chance of getting into an elite college as white students with a 1410 or black students with an 1100. So mixed-race Asian applicants to the Ivy League are now routinely checking off their father's race, often White, instead of their mother's race, usually Asian. At Yale 26,000 students applied for about 1,300 spots. 5,200 of those applicants checked the box Asian. This is working heavily in the favor of my own lily-white sons; and it's clear that the dream applicant of any Ivy League school is a black with tolerable grooming, decent grades and test scores that indicate they're literate. We may safely expect that in the near future similar competition will be on to identify and admit marginally academic or better Latinos.
For over 40 years, Harvard has had a course, "Honors Abstract Algebra and Honors Real and Complex Analysis." Math 55 is the hardest math course at the university and thus, Harvard likes to think, in America. Homework is expected to take from 24 to 60 hours per week.In this course freshmen math majors complete a typical university eight semester core math curriculum in one year, leaving them three extra years for math electives. I took most of the material in this course, but I took three years to do it, and that was often a struggle for me. One alumni of the class of 1976 said, "Seventy started it, 20 finished it, and only 10 understood it." In 2009 they had 51 students the first day, 31 students the second day, and 21 after five weeks. By the end of the first semester, the students in Math 55 were 45% Jewish, 18% Asian, and 100% male. One wonders how long Harvard will be allowed to keep up this obviously completely racist and sexist tradition.
The battle over "useless" majors is nothing new. For years, American college students have been told that a degree in English, philosophy or fine arts is a one-way ticket to a career in the fast-food business. But when China faced the same problem, they applied an old-fashioned capitalist solution to the problem: They announced plans to downsize or even cut majors whose graduates can't get jobs. Education officials have set a cutoff: Any major that has two consecutive years during which the employment rate for its graduates is below 60% will face the ax.
There's a new Lexus commercial, in four variants. In it someone gives their spouse a Lexus for Christmas. Here's what I find interesting: when the couple is white, it's the woman giving a car to her husband; when it's a black couple the man, nicely dressed and groomed like Bill Cosby is giving the car to his wife. I think this means the advertising agency has identified a desire among white women to control the family finances and have the associated power to give or withhold cars. Black women have been single moms for two generations now, this power is nothing new to then. The black women dream of a handsome employed black husband who will take care of them and give them a car. I think the white women should be careful what they wish for.
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