Cross posted from DKOS and Booman.  All recomendations appreciated.  

There seems to be a now near universal consensus ranging from the moderate left to the far right that world economies need to be "stimulated" by large scale state borrowing and expenditure to avoid a global economic meltdown.  The only issue in dispute seems to be where the stimulus moneys should go.  Should they go to - in order from Right to Left - :

1. Buy toxic assets - thus restoring the banks who own them to solvency and then letting business go on more or less as as usual.  Taxpayers are sure to lose big time even if there is a recovery in asset values, and fraudulent banking practices will have been rewarded.

2. Bail out banks in return for share capital.  This is generally done at inflated prices to help tide the banks over and avoid wiping out existing shareholders completely (to restore "confidence" to the market!) but at least there is some prospect of taxpayers getting some of their money back.

3. Force mergers and acquisitions to "rescue" insolvent entities.  Problem is that this creates even bigger "too big to fail" entities which then require even bigger bail-outs - see Citigroups take-over of Wachovia which turns out to have been in better shape than Citigroup itself...

4. Bail out "too big to fail" real economy entities like GM, Ford and Chrysler - without addressing the reasons those entities were failing in the first place - even in the good times.

The above solutions seem to be largely about trying to save Capitalism as we know it, keeping existing shareholders somewhat sweet and "confident in the markets", keeping existing managements in place, and doing nothing very much structural to prevent similar problems elsewhere or even re-emerging in the same place after the initial bail-out moneys have been expended.

Indeed if the ultimate refuge is to be "too big to fail", the logical solution is for corporations to engineer a series of mergers and acquisitions to ensure that the taxpayer can always be held to ransom.  So what are the alternatives?

Promoted by afew

Thanks to all who commented on the draft LTE. The Irish Independent has published our revised version today as follows: Time to put the EU house in order - Letters - Independent.ie

Brian Cowen is on the record as saying that the Lisbon Treaty, if passed, would have helped the EU to deal with the world economic crisis more effectively.

Opponents have challenged this assertion, arguing that there is no evidence the Lisbon Treaty would have had much effect either way.

However, would a full-time President of the European Council (as provided for under the Lisbon Treaty) have sat on his hands whilst Sarkozy fiddled?

Then we had the spectre of the EU Commission threatening sanctions against Ireland for breaking the EU Stability and Growth Pact when it was abundantly clear that many EU member states would have to do likewise in order to ameliorate the crisis.

Meanwhile, the EU Parliament was its usual ineffectual self -- it too was to get more powers under the treaty.

Eventually the European Central Bank saw some sense and reduced its interest rates having increased them as recently as August.

Could it have been more out of touch with the reality on the ground?

The reality is that the EU has been moribund since 2005, when two countries out of the 27 members rejected the original Constitutional Treaty -- much like the USA has been a lame duck post-Iraq. But at least the USA, under Obama, now seems to be about to renew itself. Meanwhile, the EU remains paralysed.

Do we believe that Ireland, acting alone, can solve our banking and economic crisis?

It's time we put the Lisbon Treaty behind us, thus creating a full-time president of the EU Council, and giving the European parliament more power.

Then we need to get on with the task of developing a more coordinated and cohesive EU response to the enormous challenges facing us all in the current world recession.

Government set to decide on second Lisbon vote - The Irish Times - Sun, Nov 16, 2008

The Government will make a decision on holding a second Lisbon Treaty referendum before a meeting of EU ministers next month, the Minister for Foreign Affairs said today.

Micheál Martin said the Government will table proposals at a European Council meeting next month to deal with the impasse following the Irish electorate's rejection of the treaty in a referendum last June.
--------snip

"We want to be at the heart of European decision making," he said. "That would enable us to have some impact on decisions into the future and that would strengthen our hand in negotiations on agriculture and budgets and so forth."

Mr Martin said the Government has yet to make a decision on holding a second referendum. "The Government will make that decision in advance of the December meeting," he said.

-------snip

Earlier this week, Mr Martin dismissed speculation about forcing Ireland from the European Union if voters reject the treaty a second time.

The so-called "Norwegian option" of reducing Ireland to associate member status has been floated by senior German foreign ministry officials as a means of clearing the way for the ratification of the treaty.

--------snip.

"We are at a turning point in our relationship with Europe and, as a Government, we will offer advice that future generations are better at the heart of Europe than at the margins," said Mr Martin.

"But the Germans are very committed to Lisbon, they are not leaving us in any doubt about that."

The Norwegian suggestion was, he said, "not in any room of consequence".

So take that, you nasty "senior German foreign ministry officials"!

Promoted by DoDo

The Irish Government's popularity rating has sunk to unprecedented depths in recent weeks due to a number of crazy cutback decisions. First, there was the attempt to cut Medical Cards (entitlement to fee public heath care) from over 70 year olds, then there was the decision not to go ahead with the provision of anti-Cervical cancer injections for 12 year old girls - a decision certain to increase mortality from Cancer. Average class sizes in Irish schools, already amongst the highest in Europe, are to be increased. Special provision for immigrant or special needs students is to be cut. A huge number of charitable and advocacy groups are to have their budgets slashed, their doors closed, or their operations absorbed into an inert Civil Service.

All of this is happening because a huge "black hole" has appeared in the Government's finances chiefly because of the end of the building boom - with its huge stamp duty and VAT revenue windfalls - and a collapse of corporate profitability and consumer expenditure - expenditure which had largely been funded by an explosion in private debt.

On the cost side, social welfare payments are spiraling as unemployment rises at an unprecedented rate.  Meanwhile the cost of living is going through the roof because of increases in Student registration fees (50%), road toll charges (50%), utility bills and private health insurance.  And whilst all this is happening, the EU Commission, living in another world, is proposing to sanction Ireland for a prospective breach in our public sector deficit obligations under the The Stability and Growth Pact.

So what is to be done?

NB In view of comments below I affirm that this Diary does not solicit money or any service. It is purely for the purposes of information and discussion. No intellectual property was harmed in the writing of this diary.

This started out as a comment inspired by What Happens If Wind Energy Gets Successful in the U.S.A.?

This is probably a really stupid comment, but would it be an idea for ET to sponsor a wind-turbine - somewhere where feed in tarifs are available - and where start-up capital requirements are minimal.  Most of us here aren't exactly rich, but we do need to provide for our futures/pensions etc. and so a Chris Cook style cooperative whereby we jointly sponsor and fund a turbine would have a definable long term return.  I have to invest for my pension anyway - and would much rather do it for something positive rather than in speculative shares or "financial products".  How about an alternative sustainable energy investment fund?

To which ChrisCook:

A little thought as to legal structure is necessary (mustn't be in breach of financial services law) but I don't think that's much of a problem with a partnership framework agreement, actually...

and (in his usual understated way) THE Twank:

Me likey!  Where do I sign up?

responded enthusiastically.

Frank Schnittger:

I'm happy to post a short lead in piece, but I would need Chris, Jerome and Crazy Horse to provide the major legal, financial and technical inputs.

So how about it guys.  Could this be a realistic,  doable and reasonably secure project for people who don't have the funds (and the inclination) to engage in speculative investment or to enrich the coffers of ravenous high overhead financial institutions but are prepared to put their meager savings into a responsible project offering a small but reasonable return? If banks no longer have the capital to fund such projects, can we help fill the vacuum?

I'm prepared to put a not inconsiderable (for me) amount into such a project to get it off the ground.  If it works, we can always add a second turbine...

So how about it Jerome, Chris and Crazy Horse?  You're the experts.  As you know I get impatient when we just talk.  Is this a project we could all get our teeth into and actually deliver in a reasonable space of time?  I am instructed by: THE Twank:

Well get 'em out of bed, fer Christ's sake!  :)

William Kristol is a leading neoconservative activist and founder of the neoconservative Project for the New American Century.  He is the son of Irving Kristol the founder of neoconservatism and was once dubbed "Dan Quayle's brain" upon being appointed the Vice President's chief of staff.  Neo-conservative credentials don't come much higher than that.

He has just written a hilarious column in the New York Times were he chronicles the development of his thoughts on Obama's (unexpected and unexceptional - for him) election victory as Obama gave his Victory address in Grant Park in Chicago and his first press conference as President Elect.

Cross-posted from Daily Kos and Booman.  All recommendations appreciated.

Behind his winning rhetoric of Change, Obama has managed to maintain a remarkable opacity about what he would actually do as President, particularly when it comes to the USA's preeminent role in world affairs.  Sure he will try to get troops out of Iraq sooner rather than later and redeploy some of those resources to Afghanistan. Sure he is more predisposed to  multilateralism and diplomacy rather than starting more wars - for example with Iran.  True, he won't be a climate change denier, a free market deregulater, a cold warrior, or a bombastic proponent of the "New American Century" where all other powers are supposed to supplicate to the shining city on a hill. But what will he actually do, and do his early appointments give us any clues?

The first thing to be said is that he brings a new world view to the office - one explicitly opposed to the neoconservative neo-imperialism so characteristic of the Bush regime.  Obama's African heritage, his Kansas roots, his Indonesian schooling, and his Hawaiian youth all help to give him a sensitivity and appreciation of the world outside continental USA. His actual foreign policy experience may not be much greater than Sarah Palin's, but at least he doesn't believe that living next to Russia and Canada constitutes a qualification for high office.

We've had a lot of debates here about possible Bradley effects, Shy Tory effects , refusals (to be interviewed), Cell-phone only households, early voting, likely voter models, and differential ground games and GOTV campaigns on the likely accuracy of opinion polls.  Certainly some of these phenomena may have effected the accuracy of individual polls which have been widely divergent on occasions.

However when you aggregate thousands of polls into one database the results seem to be altogether more accurate. fivethirtyeight.com alone has the results of over 2 Million interviews in its database and trends can be observed where consistent methodologies have been applied even if there remains some statistical noise and systemic bias in particular types of polls.

Pollster.co has just published a comparison of the provisional actual election results with the last opinion polls taken just before the election.

The time has come to start matching the reality to the dream.  What are your predictions for the US Elections and how do these compare to the professional pollsters and pundits - and most importantly, how do these compare to the actual results when they are eventually declared?

Realclearpolitics is calling it 52/44% popular vote resulting in an electoral college split of 338/200 to Obama. Pollster.com has an almost identical vote split prediction of 52/44% but predicts a 364/174 electoral college vote (EV) split. www.fivethirtyeight.com predicts a more conservative 52/46% popular vote split and an Obama Electoral College advantage of 346/192 now amended to 349/189.

So why do I think all these highly professional pollsters have got it wrong?

Dear Editor,

There are eight daily nationwide tracking polls in the US Presidential Election (polls which interview every day and average their results over 3 to 5 days), 3 further daily national "snapshot" polls, and about 15 further State-wide polls on a typical day, all of which produce widely varying results.  Yet your correspondents persist in writing "stories" based on one poll, frequently commenting on statistically insignificant movements within the margin of error of that poll.

The only "story" here is that there is a lot of what statisticians call random noise exhibited by polls taken in isolation.  If you want to write a truly analytical piece you have to combine the findings of a lot of polls and look for trends as is done on "poll aggregation sites" such as Pollster.com, Fivethirtyeight.com, and Real Clear Politics.com, and even here you will find a lot of disagreements because some polls are commissioned by Democratic or Republican leaning pollsters working for clients with an interest in their outcome.  For the record, those statistically combined polls currently have Obama leading by a remarkably stable 6-9% over the past two weeks.

However even this is not the full story, because, as Al Gore found out, the US President is not elected by the popular vote directly, but by the outcome of 50 separate state-wide elections each of which tend to have a "winner takes all" approach to the allocation of their electoral votes in the electoral college made up of  a total of 538 electors.  (The exceptions are New Hampshire and Nebraska).  Thus winning a state by a 20% margin benefits you no more than winning it by 1%, and thus all the action centres on the larger states with more electoral votes and which are close to 50:50 in their Democratic/Republican voting tendencies - typically Ohio, Florida, Missouri and Pennsylvania.

It is Obama's lead in these states which is absolutely crucial to the outcome, and he would currently have a 375 to 163 "blow-out" or landslide victory in the Electoral College if the average of these polls are correct and the vote were held today.  33 states do indeed allow allow early voting, and about one third of all votes are expected to be cast before election day.  So many of those who tell pollsters they support a particular candidate have in fact already done so, and Obama leads even more strongly amongst those who say they have voted early.

There are many additional factors which can make any individual poll inaccurate.  Each pollster employs a different model to achieve a representative random sample of the population and adjusts his results by different assumptions of what constitutes a "likely" voter.  Many pollsters do not call cell-phone only voters at all (resulting in a 2-3% anti Obama bias according to some research findings) and some use non-representative internet panels or computerised "robo-calls" rather than human interviewers.  

And finally there is the much debated and disputed "Bradley Effect" which postulates that some voters say they will vote for Obama, but actually will not for reasons of racial or other prejudice which they do not want to reveal to the pollster.  All the recent  evidence in state polls indicates that there isn't a current "Bradley" effect, but this will be the first time this theory will be extensively tested in a reasonably close Presidential election where it might actually make a difference.

So please, please, please, Editor, if your correspondents must write about opinion polls, don't let them take your readers for fools and write about individual polls as if a 2% swing has any significance whatsoever.  Even sophisticated statistical models combining the results of hundreds of polls can be wrong by much more than that.  There is only one poll which matters and even on a quiet news day there is much of real significance which can be reported on.

OK, its time to bring this baby home.  I have resisted attempts at final prediction because I have been around long enough to see some extraordinary turn-arounds late in election campaigns.  I have seen opinion polls get things spectacularly wrong. I have seen October surprises and apparent Bradley effects. I have seen elections stolen by voter suppression and outright vote counting fraud.

Too often it has just been the blind optimism of the partisans who presumed their apparently self-evident  world-views were shared by the voters. I have always looked for hard data to support any prognostications made.  I entitled my first Diary in this series Who is really going to win the US Election? in an attempt to focus on the data available rather than the wishes or political preferences of bloggers here.  It was supposed to be about who would win the election, rather than who should.  

Money Central - Times Online - WBLG: Ten people who predicted the financial meltdown

The financial events of recent weeks have filled many of us with shock and panic. Surely no one could have predicted that we would be in this mess? Well, actually, they did. Here are ten people who saw the financial meltdown coming...

1. Vince Cable - deputy leader of the Liberal Democrats

2. Christopher Wood - chief strategist of CLSA, a broking firm in the Asia-Pacific Market.

3. Founders ofwww.stock-market-crash.net - website aimed at investors

4. Henry Weingarten - astrologer

5. Nouriel Roubini - economics professor

6. Nikolai Kondratiev - Russian Marxist economist

7. Founders of Housepricecrash.co.uk - property website

8. Lord Oakeshott - Liberal Democrat Treasury spokesman

9. Stephen Roach - senior executive at Morgan Stanley.

10. Ron Paul - Republican Congressman

 Discuss.

The Celtic Tiber has been replaced by the Grey Panther as 15,000 older people converged on Dail Eireann (the Irish Parliament) from all over Ireland in protest at a Government decision to remove automatic entitlement to free health care services for over 70 year olds - despite the fact that the Government had already capitulated and more or less reversed the decision.  As the grey panthers were going home they were replaced by 15,000 students protesting a large increase in third level College fees. With the Irish economy forecast to decline by 2.5% in 2008 and 4% in 2009, things can only get worse. The Government budget deficit is expected to exceed 8% of GDP next year, and unemployment is forecast to double. Although the Irish public sector Debt/GNP ration has declined to c. 25% in recent years, it has been replaced by private sector debt which has doubled from 100% of GNP in 2003 to 200% in 2008, with net private external liabilities rising from 12% to 67% of GNP.

Has there been a finer endorsement of Obama by anyone - never mind by a Republican?

I'm beginning to feel I'm outstaying my welcome here on ET with all these US Presidential race diaries, but at least you have the consolation of knowing that this will be the last one - on the debates at least.  You'd want to be a real politics junkie to watch these things in the middle of the night, but I am fascinated by the politics of persuasion and how these things are played out in the media.

For those who just want the bare facts these are as follows:

1. The pundits on CNN thought this was McCain's strongest performance and thought he won the first half hour at least.  They thought McCain showed real passion whilst Obama was flat and professorial.

2. They began to temper their views somewhat when the results of their own focus group (of undecided voters) and viewer survey came in which both gave the debate to Obama by clear margins.

3. The CBS and Media Curves viewer surveys came up with similar findings.

4. Conclusion:  There is nothing in the debate which will significantly alter the existing trend of a gradual movement of undecideds to Obama.

However I believe there is something much deeper going on here, something which cannot be captured in a few headline phrases.  If you really want to know you're going to have to follow me below the fold...

In The blow-out begins? on 1st. October I chronicled the growing evidence that Obama was not only likely to win, but that he might very well do so by a wide margin. Now, two weeks later, those trends have been confirmed. Despite the concerns of geezer in Paris and others about the the Bradley effect, all the evidence available indicates that Obama is on course for a blow-out victory in November.

That is not to say, of course that the Democratic nightmare of an October Surprise will not happen.  Theories abound, from another Obama Bin Laden video-tape (which is reputed to have swung the election in Bush's way in 2004) to a Cheney inspired nuclear attack on Iran.  However there is almost no historical precedent for an 8% lead in the national polls to be overturned at this late stage in the campaign, and all the evidence indicates that McCain now has a mountain to climb.

Whatever the merits of recent Government interventions to try and save the international banking sector there is one dog that just didn't seem to bark.  Whilst the Fed and US Treasury Secretary Paulson negotiated major Government interventions in the US, Individual EU member Governments were left largely to fend for themselves.  Sarkozy did call a meeting of German, British and Italian heads of Government, but has yet to call a meeting of the European Council. That Franco/German/British/Italian summit produced only aspirational agreements in any case, and next day Merkel approved unilateral deposit Guarantees having just criticized Ireland for doing so.

Although our very own Jerome has characterised the ECBs's performance as virtually flawless, it too seems to have had some difficulty getting it's head out of its arse.  How can it be right to refuse to reduce interest rates by even 25 points on one day and then agree to a coordinated global interest rate reduction of 50 points a few days later?  Of course the problem is largely one of the ECB's mandate, which appears to be almost exclusively to manage interest rates to keep inflation at or slightly below 2%.  But what does it matter whether the inflation rate is 2, 3 or 4% when the financial world is collapsing around its ears?

The risk now, with the real economy following the financial sector into recession is one of deflation rather than inflation in any case, but what bone headed institution targets inflation alone when the real economy is in danger of major collapse?  The Lisbon Treaty may not have contained much of direct relevance to this crisis, but would a full time President of the European Council have sat on his hands for so long?

Obama won the second debate in Tennessee last night even though it was in McCain's favoured town hall format.  Post-debate polls said that Obama won the debate by a 54 to 30% margin (CNN) whilst a CBS poll of uncommitted voters gave Obama the win by a 40% to 25% margin.  Obama also improved his favour/unfavourable rating from 60/38 to 64/34 whilst McCain's rating remained unchanged at 51/46.

The differences between the candidates were not so much partisan as generational.  McCain looked every year of his age as he wandered around the stage (often in the background as Obama spoke) whilst Obama's youth, energy, focus and poise seemed to embody the future.  Once again McCain came across as the somewhat curmudgeonly old grandpa who has seen it all, done it all, knows it all, and is not slow to tell you all about it ad nauseum.  "My friends, I know how to do this" seems to be his mantra - with the clear implication that Obama, Bush, the Republican Leadership, and all Democrats don't have his experience, wisdom, and knowledge.  His somewhat condescending attitude towards Obama once again came across in a reference to Obama as "that one" and in a refusal to shake hands afterwards.

This time Obama was a lot less deferential, made no mention of McCain's experience or service, and was much quicker to rebut any charges that McCain made.  McCain spent a lot of time attacking Obama, and every time he did so the graphic representation of the focus groups reactions turned sharply downward.  This group was looking for positive proposals rather than negative criticisms of the other side's character, experience, judgment or proposals.   It makes you wonder about the effectiveness of negative advertising on uncommitted voters.

The Obama campaign have just released an ad reminding voters of McCain's close connection with the Keating Savings and Loan financial scandal when savers lost Billions because McCain and 4 other senators had managed to pressurise the regulator into not issuing enforcement proceedings against Keating.  The full video is available here

The Irish Government is reported to be seeking up to €1 Billion per annum from the Irish banks whose deposits it has guaranteed against loss.  This contrasts with the $700 Billion the US Government will be paying banks for their most toxic assets.  So who got the better deal?

The answer to this question partly depends on how much of the $700 Billion the US Government can recover from the mortgages it buys, but much more importantly depends on whether the Irish Government is ever called on to pay out on those guarantees should one or more of the Irish Banks become insolvent.  Given that those guarantees could rise to €500 Billion - almost three times Ireland's GDP - it is clear than Ireland itself could end up defaulting on Sovereign Debt if a doomsday scenario were to unfold.

Bailing out failing banks with taxpayers money is always going to be unpopular - especially if those banks are seen to have indulged in imprudent investment or to have fueled the property boom which has resulted in so many people being mortgaged to the hilt in order to buy a home. The outcome for both the US and Irish Government responses depend on property markets ultimately recovering sufficiently to restore the value of underlying assets and the remaining banks to solvency.  For both Governments it is an unprecedented direct involvement in their economies and turns their citizens into involuntary investors into their country's future economic well being.

It is not capitalism as we know it, but is it socialism or a completely new form of direct state participation in the risks and rewards of economic activity?  What is the balance of risk and reward should things turn out well, or if things were to go distinctly pear shaped in the future?