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Generational Dynamics Web Log for 30-Nov-2010
30-Nov-10 News -- Europe's financial crisis worsens after Ireland bailout

Web Log - November, 2010

30-Nov-10 News -- Europe's financial crisis worsens after Ireland bailout

Iran's nuclear facilities under terrorist attack

I was caught by the east coast internet outage on Sunday evening, so I was essentially a blind man, and could not write anything to be posted on Monday. I apologize for the inconvenience.

Europe's financial crisis worsens after Ireland bailout

"The crisis is intensifying and worsening," according to a financial expert quoted by Ambrose Evans-Pritchard in the Telegraph.

European leaders are bitterly disappointed that the latest bailout did not end the panic selling on bonds from Portugal, Ireland, Greece and Spain. But it's even worse. The fifth PIIGS country, Italy, is now targeted as well, as interest rates on bonds from Italy and even Belgium jumped to record highs. High interest rates (yields) indicate that investors are selling bonds because they believe that the probability of default is high.

Meanwhile, it seems that Ireland has not yet signed off on the bailout, and cannot until the parliament passes a severe austerity budget. But parties opposing the governing coalition are also opposing the austerity measures demanded for the bailout, so there may be problems getting the bailout signed off.

An analysis by the Financial Times (Access) indicates that, even with the bailout, Ireland has to choose between letting the government default or allowing a wave of bank failures in Ireland. The article recommends the latter, which indicates to me the people with money on deposit in Irish banks should be considering their options.

Things are getting so bad in Europe that politicians can't openly lie any more without people wondering if they're lying. So when politicians say that Ireland should be ok now, or that Spain and Italy don't need a bailout, the statements aren't blindly accepted as bible truth by the journalists and analysts.

Germany is at the center of all this, because the German economy is the only one that's still doing well, and it's the biggest economy in Europe. What this means it that it will be up to Germany to bail out all the PIIGS countries, and any other country that runs into trouble, and it's pretty clear that's not going to happen.

An analysis in Spiegel examines what will happen if the euro currency collapses. There are two scenarios considered. In one scenario, the euro is eliminated, and each country returns to the national currency it used in the 1990s. The article points out that some 50% of Germans would like to see the deutsche mark currency reinstated, and that an estimated 13 billion deutsche marks are still stashed away in people's mattresses and other hiding places.

In the second scenario, the euro would split into two currencies. The more stable euroland countries, including Germany, Austria and the Netherlands, would jointly introduce a "northern euro" or "hard-currency euro," based on budget discipline. The PIIGS countries would join a southern euro that could be devalued at any time.

The article points out that either of these scenarios would be disastrous for Germany. The costs to implement the new currency would be "staggering." But more important, the strong northern euro would make German exports so expensive that German exports would tank, and unemployment would skyrocket.

This last point is particularly ironic. Readers may recall that back in the days of the bitter discussions of the bailout of Greece, Germany was accused of being responsible for Greece's troubles, by having lent money to Greece so that Greece could purchase German exports. That trick would no longer be possible if a southern euro were devalued.

This situation is getting more and more dangerous each day. European countries are already becoming increasingly nationalistic and xenophobic, and a financial crisis is going to make that much worse. One need only recall that it was the collapse of Austrian and German banks in 1931 that led the rise of Hitler and Naziism and to World War II.

South Korea's president apologizes for North Korea's attack

The situation on the Korean peninsula is also becoming more dangerous each day, with nationalism on the rise between the two Koreas.

In a nationally televised address on Monday, South Korean President Lee Myung-bak vowed to make North Korea pay the price for it's provocations, according to the Korea Times.

Lee apologized to the nation for "failing to protect the lives and property of the people," and said:

"Our people learned a lesson from the attack that endurance and tolerance will spawn nothing but more serious provocations by North Korea.
For the past two decades, we’ve made efforts to resolve the nuclear issue through dialogue and cooperation. But the reality is that North Korea doesn’t stop provocative acts and is still developing nuclear weapons. ...
It’s time to act, rather than speak."

Lee promised retaliation -- naval and air strikes on North Korea -- in case of any further attacks by North Korea, but it's not lost on anyone that he said that after the sinking of the Cheonan warship last spring by a North Korean missile.

Meanwhile, Lee has apparently backed down again, in the face of North Korean threats. The U.S. and South Korea are currently conducting joint military exercises in the Yellow Sea, and the announced exercises were to include live fire maneuvers. But Associated Press reports that in a "sign of disarray," shortly after Lee's speech vowing to get tough on the North, the live fire maneuvers were canceled to avoid provoking the North.

The Korea Times is reporting that the North's official Korean Central News Agency (KCNA) said in a commentary that North and South Korea are already in a "semi state of war," and that "We don't want war, but are never afraid of one."

Now, there's something that distinguishes North Korea from most of the rest of the world. Almost everyone else in the world over age 40 is afraid of war, but not the North Koreans. I don't doubt that that's true, and it's one more reason why war cannot be avoided.

Iran's nuclear facilities under terrorist attack

As we've reported several times in recent months, the Stuxnet computer virus has spread to desktop computers around the world, and is designed to disable or destroy plants and installations using systems from Germany's Siemens AG. However, the originators of the virus, the intended target of the virus, and the method of disablement have not been determined.

Recent forensic analysis (reverse engineering) of the virus has revealed that Stuxnet is now believed to work by making quick changes in the rotational speed of the motors in centrifuges used to enrich uranium in nuclear plants. Rapid changes can cause them to blow apart, according to the NY Times.

In a surprise announcement on Monday, Iranian President Mahmoud Ahmadinejad confirmed that Stuxnet had, in fact, attacked the centrifuges in Iran's nuclear facilities that are being used to produce enriched uranium. The result is that thousands of centrifuges stopped productioin earlier this month, according to Wired. (Paragraph corrected - 30-Nov)

This announcement coincided with news that two of Iran’s top nuclear scientists had been ambushed Monday by assassins who killed one scientist and seriously injured the other. Ahmadinejad is naturally blaming Israel and the U.S. for the assassinations.

According to information from the intelligence service Debka, one of the scentists was iran's top expert on Stuxnet and cyber war, and the ambushes took place in the most secure district of Tehran, possibly indicating cooperation from the inside.

However, some sources indicate that the attack may be the work of Jundallah, a terrorist group that has committed several terrorist attacks in Iran that we've reported in the past. Jundullah is an al-Qaeda linked Sunni terrorist group, targeting the hated Shia Iran.

Additional links

On Sunday, voters in Switzerland pass a "Deportation Initiative" brought by the right-wing Swiss People's Party (SVP) that permits the expulsion of foreigners convicted of crimes ranging from murder to welfare fraud, without appeal. A year ago, the Swiss voted to ban the building of minarets. (See "Switzerland shocks itself by passing a ban on minarets.") This new sign of xenophobia is being called a new "populist surge" by senior European Union officials. CS Monitor

A year after the climate change conference in Copenhagen collapsed in humiliation for everyone, a new international climate change conference is opening in Cancun, Mexico, with low expectations. NY Times

(Comments: For reader comments, questions and discussion, see the 30-Nov-10 News -- Europe's financial crisis worsens after Ireland bailout thread of the Generational Dynamics forum. Comments may be posted anonymously.) (30-Nov-2010) Permanent Link
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Generational Dynamics Web Log for 30-Nov-2010 30-Nov-10 News -- Europe's financial crisis worsens after Ireland bailout

Europe's financial crisis worsens after Ireland bailout

South Korea's president apologizes for North Korea's attack

Iran's nuclear facilities under terrorist attack

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Generational Dynamics Web Log for 30-Nov-2010
30-Nov-10 News -- Europe's financial crisis worsens after Ireland bailout