Poland Seizes Half of Private Pensions

Zero HedgePoland Confiscates Half Of Private Pension Funds To “Cut” Sovereign Debt Load:

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel’s playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state – i.e., confiscate – the bulk of assets owned by the country’s private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.

Venezula seized pensions, but Poland is a member of the European Union. It’s one thing for a small country with a shaky political history to do this. You expect EU countries to have better finances and more respect for private property.

This is Your Train on Drugs, UK and Detroit Editions

High speed rail scheme cost to double to £80bn, economists warn:

HS1, the high-speed rail line that connects the Channel Tunnel with London, was initially expected to cost £1billion. The final bill was around £11billion.

The London Underground’s Jubilee Line extension, the biggest rail project before HS1, came in at four times the original estimate in real terms.

And unlike buses, trains require the destruction of everything along their route:

Even though the first train is not due to run along the new line until 2026, values of homes close to the route have already fallen by as much as 40 per cent. Estate agents have said that properties up to a mile from the route are being blighted by the proposed line, with some close to the proposed line failing to sell at any price.

Apparently the UK wants to be Springfield to Detroit’s North Haverbrook.

Everyone’s heard about Detroit’s financial problems. One of the many failed attempts to revitalize their downtown (and to funnel taxpayer money to political cronies) was a train system, the Detroit People Mover:

The Mover costs $12 million annually in city and state subsidies to run.[9] The cost-effectiveness of the Mover has drawn criticism.[10] In every year between 1997 and 2006, the cost per passenger mile exceeded $3, and was $4.26 in 2009,[11] compared with Detroit bus routes that operate at $0.82[11] (the New York City Subway operates at $0.30 per passenger mile). The Mackinac Center for Public Policy also charges that the system does not benefit locals, pointing out that fewer than 30% of the riders are Detroit residents and that Saturday ridership (likely out-of-towners) dwarfs that of weekday usage.[12] The system was designed to move up to 15 million riders a year. In 2008 it served approximately 2 million riders. In fiscal year 1999-2000 the city was spending $3 for every $0.50 rider fare, according to The Detroit News. In 2006, the Mover filled less than 10 percent of its seats.[12]

Among the busiest periods was the five days around the 2006 Super Bowl XL, when 215,910 patrons used the service.[13] In 2008, the system moved about 7,500 people per day, about 2.5 percent of its daily peak capacity of 288,000.[14][15]

Under-utilized and overbudget is a pretty good summary of recent urban trains.

PreviouslyThis is Your Train on Drugs: CA Train Versus Endangered Species, Asthmatic Children

This is what happens when a country dies

Smallest MinorityItalian university switches to English:

There’s much more to the article, which I recommend you read, but this is the kicker, for me:

Professor Azzone says there is a stark choice between becoming isolated and parochial or trying to compete with these academic superpowers – and he argues that this will require European universities to work together.

“We have to give a sense that we are not a dying country – but we are not large enough to have a critical mass. We need to have a European alliance of strong universities.”

(My emphasis.) But Italy is a dying country – that’s why they need foreign students.  Italy’s reproduction rate has been declining for quite a while, and currently women in Italy bear 1.3 children each – way below the replacement level of 2.1.  That’s the definition of a dying country.

The Bank Drain in Spain Falls Mainly on the Plain

Zero HedgeNationalized Spanish Bank Plummets On News Of Bank Run:

The problem with bank runs is that once they start, they don’t stop. And while the world was conveniently distracted by events in Greece, debating whether or not people were withdrawing money in droves (they were), the real bank run happened elsewhere, namely in Spain, where just nationalized bank Bankia moments ago plunged 30% and was halted following an El Mundo report that “customers had withdrawn €1 billion over the past week.” In other words –  a bank run (but whatever you do, don’t call it that – it’s not the politically correct and accepted nomenclature) which has sent shockwaves through Europe, pushed the EURUSD under 1.27, and bond yields in their traditional “Europe is open” direction – wider.

Greece: Bank Runs, Nazi Party Getting Votes – This Sounds Strangely Familiar

Zero HedgeHas The Greek Bank Run Started?

Minutes ago Bloomberg sent out a notice that things in Greece may be on the verge of the final collapse. From Bloomberg: “Anxious Greeks have withdrawn as much as 700 million euros ($893 million) from the nation’s banks since the inconclusive May 6 election, President Karolos Papoulias told party leaders yesterday, according to a transcript of the meeting posted on the presidency’s website today. Papoulias said he got the information from the head of the Bank of Greece, the central bank, George Provopoulos, according to the transcript.” While this was likely a negotiation talking point to facilitate the formation of the government, the reality as we now know is that there has been NO government formed, which now means that the bank run will only get worse. Needless to say, a Greek banking system which is now virtually shut out of any extrenal funding except for the ELA, where it has a few billions euros in access left, will be unable to deal with hundreds of millions in deposit outflows.

Zero HedgeMajority Of Neo-Normal Greek Cops Vote Neo-Nazi:

In a somewhat stunning revelation, especially after our earlier note on the Golden Dawn leader’s ‘position’ on the issues of the day, GreekReporter notes via the news paper To Vima, that more than half of all police officers in Greece voted for pro-Nazi party Golden Dawn in the elections of May 6th. It’s not really for us to judge (well maybe it is) but when some polling stations report Golden Dawn receiving 19-24% of the votes, things are going from the dismal to the horrific (and potentially chaotic) very fast.

EU Bans Iran from Trading Gold and Other Precious Metals

Reuters report that the EU has agreed to freeze the assets of the Iranian central bank and ban all trade in gold and other precious metals with the Iranian Central Bank and other public bodies in Iran. According to IMF data, at the last official count (in 1996), Iran had reserves of just over 168 tonnes of gold. The FT reported in March 2011 that Iran has bought large amounts of bullion on the international market to diversify away from the dollar, citing a senior Bank of England official.

Charles Smith on the the Euro as 21st Century Colonialism

Charles SmithEU Leaders Throw Europe a Plutonium Life Preserver:

A slightly more formal model for understanding the increasingly unstable dynamics of the EU is the post-colonial “plantation” model I’ve described here before. The key characteristics of the Colonial Model of Capitalism are:

1. Low cost labor and low-value materials flow from the periphery (colonies) to the Empire (center), which then ships high-value, high-profit finished goods back to the colonies.

2. The colonies must buy the high-value finished goods on credit that is issued and controlled by the Imperial center.

Hmm–doesn’t this sound like the relationship of Germany to the European periphery? The euro cemented this co-dependency: Germany had the most efficient production, and once the euro raised the cost of production in the periphery nations, then of course nobody could beat Germany’s cost advantages. The euro actually lowered Germany’s cost of production in terms of foreign exchange rates while raising the costs in periphery nations that were previously able to lower their cost of production via currency devaluations.

This helps explain why even the supposedly prudent Germans are seeking something for nothing as the painless answer to an intrinsically unstable and self-destructive system. When it all implodes, German exports to the periphery will be a shadow of their past glory, and the surpluses which enabled the leveraged orgy of credit will dwindle. (Germany’s other big export markets, China and the U.S., are also contracting.)

S&P Downgrades Greece Two Notches

BloombergGreece Joins Belarus as Europe’s Lowest-Rated Country After S&P’s Debt Cut:

Greece‘s credit rating was cut two levels to B from BB- by Standard & Poor’s, which said further reductions are possible as the risk of default rises.

Another cut would make Greece the lowest-rated country in Europe as today’s reduction, the fourth by S&P since April 2010, left it even with Belarus. The yield on Greek 10-year bonds rose 21 basis points to 15.7 percent, more than twice the level of a year ago when Greece accepted an international bailout.

Bad news for Greeks, Greek bondholders, the EU, you name it. This is part of that ocean of debt that won’t be repaid.

France Raises Retirement Age from 60 to 62

About damned time.

Me, I was born in 1968 so I get to retire at 67.

You know what this is? It’s the world’s smallest violin playing “My heart bleeds for the French people who can’t retire until 62.”

Things that can’t go on forever, don’t, though I’ll grant that the laws of economics are somewhat less-precisely defined than the laws of physics.

Contract Notice: UT MD Anderson Cancer Center Issues Solicitation for Kitchen Expansion Services (Texas) this web site md anderson cancer center

US Fed News Service, Including US State News May 20, 2010 HOUSTON, May 20 — UT MD Anderson Cancer Center has posted a solicitation on May 19 for obtaining services for the expansion of patient room service kitchen. go to site md anderson cancer center

The Agency Requisition number is 503037/ME.

Open Date: June 10, 2.00 p.m.

Agency: UT MD Anderson Cancer Center (506)

“How Likely Is Greece to Default?”

“It Would Be a Downright Miracle If They Didn’t!”

The EU’s Web of Debt

The New York TimesIn and Out of Each Other’s European Wallets:

Like the alliances that drew one country after another into World War I, a default by a single nation would send other countries tumbling. If that message was lost on anyone, there was a reminder last Tuesday when Standard & Poor’s downgrade of Spanish and Portuguese debt hammered stock markets everywhere, including in the United States.

The first domino is Greece. It owes nearly $10 billion to Portuguese banks, and with Portugal already falling two notches in S. & P.’s ratings and facing higher borrowing costs, a default by Greece would be a staggering blow. Portugal, in turn, owes $86 billion to banks in Spain; Spain’s debt was downgraded one notch last week.

Via Mish, who writes:

The chart and story show some interesting facts

  • Italy owes France $511 Billion (20% of French GDP)
  • Portugal owes Spain a net of $58 billion
  • Spain holds nearly a third of Portugal’s debt
  • Spain owes France $220 Billion
  • Spain owes Germany $238 billion
  • Spain owes the UK $114 billion

Does anyone seriously think this debt can be paid back? If so, how? Instead, I suggest this is another clear sign of just how insolvent the global banking system is.

Albert Edwards’ uncheerful thoughts on the world economy

Zero HedgeAlbert Edwards: At 500% Net Liabilities To GDP, It Is Too Late To Prevent The Collapse Of The G-7; Greece Is Irrelevant, We Are All Now Insolvent:

For Greece, with on and off balance sheet liabilities at over 800%, it’s game over. For the Eurozone, with the same ratio at about 500%, it is also game over. For the US, at 500%+, it is, you guessed it (sorry Joseph Stiglitz), game over, but since we have the printers, it will simply take a little longer. Following up on yesterday’s popular post on prevailing delusions as captured by Albert Edwards’ colleague Dylan Grice, we present Albert’s latest outlook. Please don’t read this if you want to keep believing there is any hope left for the (developed) world.

In my opinion this will not be tolerated by the electorates in these countries. Unlike Japan or the US, Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain. Consigning the PIGS to a prolonged period of deflation is most likely to impose too severe a test on these nations. And the political “consensus” within the PIGS to remain in the eurozone could falter in the face of another of Europe’s unfortunate tendencies -the emergence of small extreme parties to take advantage of any unrest. My own view is that there is little “help” that can be offered by the other eurozone nations other than temporary confidence-giving “sticking plasters” before the ultimate denouement: the break-up of the eurozone.

I am persuaded by my colleague Dylan Grice’s analysis that, including unfunded liabilities, most governments are already insolvent with debt to GDP ratios closer to 500% of GDP instead of around 100% for most G7 countries . It is too late.

Nor were Dylan and I persuaded by recent comments from Nobel Prize Winner Joseph Stiglitz that it is absurd to suggest that the US and UK governments might default on their debts as they could just print money. Indeed. But a client pointed out to us that Weimar Germany did not default on its debts during its hyper-inflation. How reassuring!

Previously – Word of the Day: The Guidotti-Greenspan Rule (Economics)

England vs. France

Since I’m not up for much blogging, here’s some more Theodore Dalrymple, this time discussing his decision in 2004 to leave his ancestral home in England for France.

Escape from barbarity:
Read more of this post

European Vacation Benefits

Europeans get quite a bit more vacation time than Americans. I never considered that might be because of the effects of taxation. Via The Corner:

The problem, employers and economists believe, has a lot to do with the 63 percent marginal tax rate paid by top earners in Denmark – a level that hits anyone making more than 360,000 Danish kroner, or about $70,000…

…[T]he high taxes, mixed with his wife’s discomfort in Denmark, meant that a job offer in Qatar three years ago was all it took to pry [Thomas Sorensen] away from Copenhagen. Now, he is ensconced in Frankfurt, setting up a new business on the side and planning to pay no more than 25 percent of his income to the German state.

“When you are at 63 percent tax, you don’t look forward to the evaluation with the boss to get a raise,” Sorensen said. “You look for more vacation or a training course in the tropics – something that you get the full benefit of.”

So if you’re a Dane making the $70,000 figure, a 5% raise would be $3,500, but after taxes you’d only realize an extra $1,295, which amounts to a 1.8% raise. With that pitiful amount for a raise extra vacation time is much more attractive.

Wikipedia’s vacation entry lists minimum vacation times for countries around the world.

As a BTW, I’d prefer mandatory minimum personal days (to be used as sick days or vacation days at the worker’s discretion) to a minimum wage. Unlike a Federal minimum wage, personal days are automatically indexed to the local economy and the worker’s labor value.

I view personal days the way I view lunch breaks – as something necessary to a healthy and sustainable work environment. If you can’t take a day off when you’re sick you’re less likely to be healthy and more likely to fall behind financially. I say that as someone who never had a job with vacation benefits until I was in my late twenties. Having paid sick days and a little discretionary time off made a huge difference in my outlook on life and work.

Ten or so personal days a year would probably be about right as a minimum. According to the Wikipedia link 25% of U.S. workers receive no vacation days at all. The average number of vacation days for all U.S. workers is only 10, so that would bump up our numbers quite a bit considering all of the people who have more vacation days and sick days that that.

Germany’s Church Tax

Marko Kloos:

In Germany, you’re sorted into Catholic or Protestant (Lutheran), depending on the professed faith of your parents (who are either Catholic or Lutheran depending on the faith of their parents, and so on.) The state takes “church tax” out of your paycheck, which goes to the church of your denomination directly. You can opt out of church tax by leaving the church altogether, but that requires some paperwork and an official declaration, so it’s a bit of a hassle.

IDNNKT. According to Wikipedia,”Church tax is a tax imposed on members of some religious congregations in Germany, Denmark, Sweden, Finland, Austria and some parts of Switzerland.”

P.S. – Marko and his family are on their way to the new home in the Live Free or Die state. Marko, we hardly knew ye.