It’s Where the Money Is

Willie Sutton was a famous bank robber. When asked why he robbed banks, Sutton famously never said, "it is where the money is." 

Willie robbed banks for over 2 million dollars. He was a cunning, inventive thief who almost made you glad he robbed you so you could say he had. He was famous, but the biggest robbery in the history of the world has occurred and very little attention is being paid.

The LA Times reports:

After the U.S.-led invasion of Iraq in March 2003, the George W. Bush administration flooded the conquered country with so much cash to pay for reconstruction and other projects in the first year that a new unit of measurement was born. 

Pentagon officials determined that one giant C-130 Hercules cargo plane could carry $2.4 billion in shrink-wrapped bricks of $100 bills. They sent an initial full planeload of cash, followed by 20 other flights to Iraq by May 2004 in a $12-billion haul that U.S. officials believe to be the biggest international cash airlift of all time.

This month, the Pentagon and the Iraqi government are finally closing the books on the program that handled all those Benjamins. But despite years of audits and investigations, U.S. Defense officials still cannot say what happened to $6.6 billion in cash

I guess that $2.4 billion will now be called a "Hercules." The auditors are not sure of the amount and the missing money may be ONLY $2.6 billion, a Hercules of Money. I bet you have heard all about this. Or have you? Why do crooks and scoundrels go into government service? (Along with many sincere people I am sure.)

"It's where the money is."

How to Deceive Friends and Influence People

Krugman prays he is right There is an interesting opinion piece by Nobel Prize winner and Enron advisor Paul Krugman dated June 18. Krugman's approach in past articles to our economic problems is to print money.

This column says that while some countries are in trouble, it will not spread. He quotes the new head of the Bundesbank:

The current crisis is no crisis of the euro. It is a sovereign debt crisis of individual, smaller countries in the euro area, which is caused not least by the disregard of the rules.

Of course the head of a bank is going to say this. Can you imagine a banker who is the new head of a bankrupt company saying the truth? Krugman then produces this chart to justify his opinion that things are just fine in Europe. 

I must confess that this chart at first confused me. I did not have time to study it as it was a busy day for me. Then I remembered a book I had read called How to Lie with Statistics and remembered some of the tricks. First, notice that the scale does not begin at zero. The reason this is done is that it makes the contrast with the rest of the chart more pronounced. At first glance it appears that Ireland and Spain have no debt. They do. It also was quite confusing in that it showed Ireland and Spain with a budget surplus. Everything I have been reading says this is false. Then I noticed that Krugman had used data from 2006/2007. What is the more current data?

Here is the Irish Financial Times from Dec 2010

Irish Economy 2011: Budget 2011 forecasts a deficit in 2011 of €17.7bn and public debt as a ratio of GDP (gross domestic product) will rise to 99%.

As you can see this is quite different than the chart Krugman provides. The article also tells us that the deficit to GDP is projected to be 9.4% of GDP. Ireland is not running a surplus. In fact the deficit for last year was the largest in the EU:

Official EU statistics show that Ireland again recorded the biggest budget deficit in the EU last year. Ireland's deficit was 32.4% of economic output, though this was mainly because the EU figures include the cost of injecting more money into Anglo Irish Bank and Irish Nationwide

Greece had the second-biggest deficit at 10.5% of GDP, while the UK was third with 10.4%. Spain and Portugal recorded just over 9%.

As the article points out most of this was a one-time bank rescue package. But it is predicted to return to about 10%. Rather than a budget surplus and a debt to GDP ratio of 25, Ireland today is running a deficit of 9.4% of GDP, and the total debt is 99%. It is expected to peak at 111%.

What about Spain? On Krugman's chart Spain is running a surplus. What is the truth?

Spain’s deficit was 9.2% of GDP in 2010. The government aims to cut the deficit to 6% of GDP in 2011.

Other articles suggest that Spain will fail to cut this much.

Notice that Italy for some reason is not on the chart. What about other European countries? From CNN:

Topping the European debt league is Greece with 142.8% government debt to GDP ratio, followed by Italy (119.0%), Belgium (96.8%) Ireland (96.2%), Portugal (93.0%), Germany (83.2%), France (81.7%) Hungary (80.2%) and the United Kingdom (80.0%).

Krugman might be right and the problem will not spread beyond Greece and Ireland. I hope he is right. But there has to be a reason that Prime Minister Merkel of Germany is supporting bailouts when it has to cost her the next election. She realizes that if a firewall is not built the problems will spread.

Krugman's chart, to be charitable, is misleading.

Finally, More Reporting On The Crisis In Europe

Even though the European Crisis is due for a meltdown, the reporting on American Television until recently was light on substance and details. Here is a sample of what you are just now starting to hear-mostly from European sources. From England's Guardian:

Since 25 May, when demonstrators first converged here, this has become an open-air concert – only one where bands have been supplanted by speakers and music swapped for an angry politics.

Almost a month of protests! 

There is another mic here, and it's grabbed by a man wearing a mask of deputy prime minister Theodoros Pangalos: "My friends, we all ate together." He is quoting the socialist politician, who claimed on TV last year that everyone bore the responsibility for the squandering of public money. Pangalos may have intended his remark as the Greek equivalent of George Osborne's remark that "We're all in it together", but here they're not having it."You lying bastard!" They roar back. "You're so fat you ate the entire supermarket."

...

Taken for granted in these negotiations is that the Greeks (and by implication, the Irish and the Portuguese) must accept more austerity. Yet in Athens, whether on the streets or even at a policy-making level, these technical details barely figure on the agenda. It's not just that the terms are different, the entire debate is too. Here, the argument concerns how much more austerity the Greek economy, its people and even the government can take – because all three are already at breaking point.

What is not understood by the elites is that the people can accept austerity, and at the same time repudiate the debt. This is what I predict will occur. 

Who’d A Thunk It?

I can’t predict which of my blog posts will get the most traction. The one from last week that got the most comments, all of them on other venues, was on nose rings. As the noted philosopher, Mortimer Snerd, would have said, "Who'd a thunk it?”

This is a lot more of an important issue in Biblical interpretation than one would think at first glance. The reason is that it is difficult to directly apply a portion of the Bible because our customs are quite different. Nose rings are just the proverbial “camel’s nose in the tent.”

I used to be what is called a Biblicist. I wanted to directly apply the Bible to modern life. While I still fit loosely in that category, I have to acknowledge that one can’t apply the Bible woodenly to our modern society. If one wants to be a strict Biblicist, then I suggest that all the women get nose rings.

While this problem is greatest in the Old Testament, it also exists in the New Testament. Paul tells us 4 times that there is a certain activity that was integral to first century church services. The original Greek is even in the imperative mood, which for the grammatically disinclined like me means that it is a command. 1 Thessalonians 5 tells us:

26 Greet all God’s people with a holy kiss.

I had almost as much fun with this over the years as I had as an insecure teenager with "women should be silent in the church." I have pointed this scripture out in sermons and suggested that we need to kiss each other. The implication I give is that men need to be kissed by women. Of course this is not what is commanded. It was men kissing men, usually on the lips. It would have been totally culturally inappropriate for first century men and women to kiss in public. So if this command is to be obeyed without consideration of the culture of the time, we men need to greet each other with a kiss on the lips when we meet in church. I may have a French surname, but I am not that French!

Instead the proper approach is to understand what role the holy kiss played in the culture and try to suggest a way to express that same idea in a more culturally appropriate way. J.B Phillips translates the 'holy kiss" verses as "shake hands all around"-how very British of him. Eugene H. Peterson's The Message paraphrased Bible suggests a holy embrace.  The Holy Hug seems to be the appropriate cultural response for Americans. Be friendly is the general principle.

If it is difficult to apply these kind of things directly to our modern situation, how much more difficult is it in the area of economics? While the Bible is very clear that “wealth inequality” is not a good thing, it is difficult to apply the Biblical solutions. As I blog on wealth inequality starting next week, I will try to keep this in mind.

Crisis Spreads

While there are a few relative bright spots around the world, the whole world is awash in debt. The Telegraph reports:

Riots in MadridStandard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.

Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal. 

CNN Reports:

Large protests outside the Catalan regional Parliament in Barcelona on Wednesday left 36 people slightly injured, including 12 regional police officers 

...

Spain is gripped by a deep economic crisis with 21% unemployment nationwide, and 42% unemployment for young people.

The Catalan Parliament protests were seen as part of the so-called May 15 movement of demonstrations that have sprung up across Spain since last May 15, including tent cities in some emblematic public squares in various Spanish cities.

While things are bad in the USA, things are actually worse elsewhere.