The Stingy News Weekly (11/14/2010)
The slaying of the Celtic Tiger
"Ireland itself is a fiscal mess, thanks to a budget deficit that makes Greece's look like spare change. The real estate market is a disaster, and interest rates demanded by bond investors are so high that the exchequer effectively can't afford to finance the country. The Irish government has some breathing room Ė it doesnít have to return to the capital markets until next July. But if that bond auction fails, the country will almost certainly be broke and require a bailout from the European Union."
Are ETFs a Menace?
"The proliferation of ETFs, the report contends, raises at least three worries. First, these funds have overconcentrated the ownership of thinly traded stocks. Second, they have led to an escalating number of trading failures. Third, ETFs could trigger another massive market swing like the May 6 'flash crash.'"
Cultures of Impunity
"The Irish government now has to deal with the effective evaporation of a major source of revenue at the worst possible time Ė raising taxes on either individual taxpayers or businesses will further deepen the economic hole that the country is in. But even with drastic cutbacks in government spending, itís unavoidable. This particular bit of the Irish crisis is a direct result of the countryís grossly skewed taxation model. And itís left the country in a pretty horrible bind."
The High Cost of Free Parking
"Professor Shoup is the author of The High Cost of Free Parking, and points out that, 'just because the driver doesn't pay for parking doesn't mean the cost goes away.' In addition to making it harder to find a spot when you need one, 'free' parking exacerbates other problems, from pollution to traffic congestion. Using the power of market pricing, Shoup explains how to fix the parking mess in three steps."
Losing the Lender of Last Resort
"Now, of course, the default risk free asset is the government bond. Ultimately, the reasoning goes, a government can just print money if it needs to, so an investor can guarantee getting paid even if the value of that money is devalued. The problem is, that as Reinhart and Rogoff have shown, this ainít necessarily true."
Ireland is effectively insolvent
"Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term. From here on, for better or worse, we can only rely on the kindness of strangers."
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