| Ron Paul only GOP candidate to publicly denounce SOPA; What is SOPA and Why Won't it Work? Posted: 18 Jan 2012 08:06 PM PST Yahoo! News reports Ron Paul only GOP Candidate to Publicly Denounce SOPA GOP presidential candidate and Texas Rep. Ron Paul came out Wednesday in support of the "blackout" efforts taking place across the Web protesting pending anti-piracy legislation many have decried as an Internet censorship effort.
Paul made a statement through a Facebook status update, saying:
"My campaign, and the entire freedom movement, would not be as strong as they are today without a free Internet, and that's just one of the reasons why the establishment hopes to censor it with SOPA and PIPA. I'm proud to see so many taking a stand today. Contact your representative and senators and tell them to oppose these disastrous bills."
Mitt Romney, Rick Santorum, Rick Perry and Newt Gingrich – at least on Facebook and Twitter — were silent on the issue, and instead devoted their social media platforms to further campaign against one another.
Paul's son, Kentucky Sen. Rand Paul, also came out Wednesday pledging to filibuster PIPA, which Senate Majority Leader Harry Reid has promised to bring to the Senate floor on January 24. What is SOPA and Why Won't it Work? SOPA is the Stop Online Piracy Act. The name may sound nice, but here are some choice comments from Wikipedia. Impact on Online Freedom of Speech
Opponents have warned that SOPA would have a negative impact on online communities. Journalist Rebecca MacKinnon argued in an op-ed that making companies liable for users' actions could have a chilling effect on user-generated sites such as YouTube. "The intention is not the same as China's Great Firewall, a nationwide system of Web censorship, but the practical effect could be similar," she says. The Electronic Freedom Foundation (EFF) warned that websites Etsy, Flickr and Vimeo all seemed likely to shut down if the bill becomes law.
Policy analysts for New America Foundation say this legislation would enable law enforcement to take down an entire domain due to something posted on a single blog, arguing, "an entire largely innocent online community could be punished for the actions of a tiny minority."
Additional concerns include the impact on common Internet functions such as linking or access data from the cloud. EFF claimed the bill would ban linking to sites deemed offending, even in search results[32] and on services such as Twitter.[33] Christian Dawson, Chief Operating Officer (COO) of Virginia-based hosting company ServInt, predicted that the legislation would lead to many cloud computing and Web hosting services moving out of the US to avoid lawsuits.[34] The Electronic Frontier Foundation have stated that the requirement that any site must self-police user generated content would impose significant liability costs and explains "why venture capitalists have said en masse they won't invest in online startups if PIPA and SOPA pass."[35]
Weakening of "safe harbor" protections
According to critics of the bill such as the Center for Democracy and Technology and the Electronic Frontier Foundation, the bill's wording is vague enough that a single complaint about a site could be enough to block it, with the burden of proof resting on the site. A provision in the bill states that any site would be blocked that "is taking, or has taken deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute a violation." Critics have read this to mean that a site must actively monitor its content and identify violations to avoid blocking, rather than relying on others to notify it of such violations.
Web-related businesses
An analysis in the information technology magazine eWeek stated, "The language of SOPA is so broad, the rules so unconnected to the reality of Internet technology and the penalties so disconnected from the alleged crimes that this bill could effectively kill e-commerce or even normal Internet use. The bill also has grave implications for existing U.S., foreign and international laws and is sure to spend decades in court challenges."
Internal networks
A paper by the Center for Democracy and Technology claimed that the bill "targets an entire website even if only a small portion hosts or links to some infringing content."
Impact on web-browsing software
The Electronic Frontier Foundation expressed concern that free and open source software (FLOSS) projects found to be aiding online piracy could experience serious problems under SOPA. Of special concern was the web browser Firefox, which has an optional extension, MAFIAAFire Redirector, that redirects users to a new location for domains that were seized by the U.S. government. In May 2011, Mozilla refused a request by the Department of Homeland Security to remove MAFIAAFire from its website, questioning whether the software had ever been declared illegal.
Potential Effectiveness
Edward J. Black, president and CEO of the Computer & Communication Industry Association, wrote in the Huffington Post that "Ironically, it would do little to stop actual pirate websites, which could simply reappear hours later under a different name, if their numeric web addresses aren't public even sooner. Anyone who knows or has that web address would still be able to reach the offending website."
An editorial in the San Jose Mercury-News stated, "Imagine the resources required to parse through the millions of Google and Facebook offerings every day looking for pirates who, if found, can just toss up another site in no time."
John Palfrey of the Berkman Center for Internet & Society commented, "DNS filtering is by necessity either overbroad or underbroad; it either blocks too much or too little. Content on the Internet changes its place and nature rapidly, and DNS filtering is ineffective when it comes to keeping up with it."
Policy analysts for New America Foundation say this legislation would "instigate a data obfuscation arms race" whereby by increasingly invasive practices would be required to monitor users' web traffic resulting in a "counterproductive cat-and-mouse game of censorship and circumvention would drive savvy scofflaws to darknets while increasing surveillance of less technically proficient Internet users." Never-Ending Witch Hunt In short, SOPA is nothing but an never-ending witch hunt proposal that would allow the shutting down of websites, including mine, Zero Hedge, Max Keiser, Town Hall, ML-Implode, Calculated Risk, Naked Capitalism, Patrick, the Big Picture, and other alternative news sites on the most flimsy of reasons without doing anything to curb online piracy. In the title to this post, I used the phrase "won't work" rather loosely. By "won't work" I meant the bill will not achieve the stated goal of stopping piracy. It may indeed "work" in the sense it would allow government to shut down sites for political reasons on trumped-up charges. Close analysis shows the bill is really nothing but more "big brother" legislation and another attack on freedom of speech. Ron Paul is on the right side of this issue. Once again, he is the only one. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Greek Bond Talks Edge Toward 68% Haircut Deal; Will the Deal Be Accepted? Posted: 18 Jan 2012 11:40 AM PST Former ECB president Jean Claude Trichet said there would be no haircuts. There were. The first Greek haircut was 21% and it was insufficient. The second Greek haircut deal was 50% and that too was insufficient. On each failed attempt, the ECB and EMU poured more money into Greece. There is now about €200bn of Greek debt held by banks, hedge funds and other investors up from about €50bn a couple years ago. A third renegotiation is now underway, rumored to be a 68% haircut. Clearly there would have been far fewer ramification on banks if Greece would have defaulted long ago. Such is the stubborn arrogance of ECB, and EMU officials. Unless another haircut is approved Greece, and still more money is poured into Greece, it will default on March 20 when a €14.5 billion bond repayment is due. The Financial Times reports Greek bond talks edge closer to deal Talks broke down last week with holders of close to €200bn of Greek debt after some eurozone officials called for a sharply lower coupon, or interest payment, on new bonds.
The latest proposal called for a step-up coupon starting at about 3 per cent and rising to 4.5 per cent as the bond approached maturity, one banker said. Another said the average interest paid during the life of the bond would be 4.25 per cent, a rate "that the banks would be happy with".
The deal would amount to a 68 per cent loss for bondholders in net present value terms, according to people familiar with the talks. Banks will be happy with a 68% loss? I rather doubt it. Will the Deal Be Accepted? Peter Tchir at TF Market Advisors had some interesting comments on the likelihood of the "success" of the PSI (private sector initiative) in his post Greek PSI - Headlines And Reality The Greek PSI is once again (still) hitting the headlines. Here is what I think the most likely scenario is (80% likelihood).
Some form of an agreement will be announced. The IIF will announce that the "creditor committee has agreed in principle to a plan." That plan will need to be "formalized" and final agreement from the individual institutions on the committee and those that weren't part of the committee will need to be obtained. The headline will sound good, but will leave a month or so for details to come out. In the meantime every European and EU leader (or employee) with a press contact will say what a great deal it is. That it confirms that Europe is on the path of progress and that they are doing what they committed to at their summits.
The rating agencies will call it a DEFAULT, because it is. ISDA won't call it a Credit Event because it isn't. The EU leaders will call it a haircut or PSI, because they have an aversion to saying the word DEFAULT (and to the truth). There will be some concern that calling it a DEFAULT by the rating agencies will trigger some actions. It won't. The ECB will allow banks to overrule the declaration of the rating agencies. They will say that Greece remains current on some bonds, that Greece will make payments on new bonds, so this DEFAULT situation is temporary and can be ignored for purposes of accounting, mark to market, collateral, etc.. It will avoid the chaos that would ensue, so they will go with the flow.
Then all talk will turn to Portugal. Why should Portugal continue to pay on their existing debt, when Greece just cut a great deal? And Ireland? The reality that Greece will NOT be an isolated case, but will be the norm will hit, and we will see the market give back the gains and sink lower on the realization that the banks recognizing losses is just beginning. The key to understanding the negotiation mess is private investors (hedge funds) who bought bonds at a steep discount and at the same time bought credit default swaps for protection have everything to gain by forcing a credit event. Tchir suggests they will be bought out. Certainly they will have to be bought out or the deal will collapse. If they are bought out, everyone who does hold out is far better off than those who accept the deal straight up. This is what all the tension is about. Greek deal disrupted by bondholders gambling on default It is often hard to tell which article is more current when reading conflicting opinions, but please consider Greek deal disrupted by bondholders gambling on default "Significant numbers" of Greek bonds may have migrated from financial institutions participating in the voluntary Private Sector Initiative (PSI) to others betting that the country will default, throwing the negotiations into peril, a senior economist has warned EurActiv.
It is also impossible to gauge how much of this 'bond migration' has taken place since the PSI negotiations began last year – because of a lack of transparency on the markets – according to Sony Kapoor, the managing director of economic think tank Re-Define.
The deal on the table involves persuading creditors to turn in their bonds and receive new ones that have half the face value and mature many years in the future. The Greek authorities say €206 billion of bonds are subject to the exchange; if all the creditors agree, they'd get €103 billion in new bonds back.
But there is a conflict between those bondholders – represented in the negotiations by the IIF – who are serious about accepting a voluntary write-down, and others betting on a default.
Kapoor said that the interests of bondholders who are hoping to free-ride on a voluntary agreement [some of whom hold credit default swaps] – is irking the bondholders willing to participate in the agreement, and was a major reason for the breakdown in negotiations last week.
"It is a classic collective action problem," he said. "Collectively a voluntary agreement is in the interests of some of the bondholders. But if 90% of bonds were volunteered and 10% did not, Greece is not likely to default and these 10% may have a bumper payoff," Kapoor added, explaining why those willing to join the agreement are exasperated with the others.
A spokesman for the IIF refused to comment to EurActiv on speculation that bonds were migrating in significant numbers to institutions hedged with credit default swaps. The spokesman said: "The first priority now for the negotiators representing major institutional investors is to see if it is at all possible to do a deal. If there is one, then the next phase is to see if as many as investors as possible can participate."
Meanwhile, the Fitch ratings agency announced Tuesday that Greece would default on its debt, although it said that such a default was likely to take place in an orderly manner.
"It is going to happen. Greece is insolvent so it will default," Edward Parker, the managing director of Fitch's sovereign group for Europe, the Middle East and Africa told Reuters on the sidelines of a conference in Stockholm. Will the Third Haircut be Sufficient? Whether the deal is accepted or not I side with that "Greece is insolvent so it will default". But did Fitch mean a "credit event" default or a "voluntary" non-credit event default? Here is the deal. The Greek economy is absolutely dead. Austerity measures are going to impart still more pain. Capital flight is underway. Few of the reforms Greece has agreed to have even been implemented. The idea that Greece will reduce its deficit under these circumstances seems silly. Moreover Greek elections are coming up, possibly "sometime in April", according to the prime minister. Thus, whatever is agreed to now in terms of austerity measures, reforms, asset sales, privatizations etc. by this caretaker government will all have to be fought over yet another time. Eventually, some politician or set of politicians will have had enough of this process. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Finnish Minister Pours Cold Water on Merkozy Treaty; 4th Treaty Draft Underway; ECB Considers Alternatives to Bond-Buy Program; Unresolvable Questions Posted: 18 Jan 2012 08:39 AM PST Inquiring minds are reading several recent articles on the EU Observer. ECB Considers Alternatives to Bond-Buy Program Please consider ECB mulling alternatives to bond-buy plan The European Central Bank is exploring alternatives to its controversial bond-purchase programme but has yet to decide on any replacement policy tool, ECB Governing Council member Ewald Nowotny told a German website in comments published on Tuesday.
Nowotny, who is also Austria's national central bank chief, said there was scepticism on the policymaking Council about the bond-buy programme "because we fear the market imperfections that we want to correct with this could emerge in another area."
"We are discussing possible alternatives. But this discussion is not so far developed that we can dispense with the SMP (bond-buying programme)," Nowotny told the Wall Street Journal's German website.
Bundesbank chief Axel Weber quit in protest at the programme last year and another heavyweight German ECB policymaker, Juergen Stark, also resigned over the plan.
The ECB more than tripled its bond purchases last week to the highest level since late November, spending 3.77 billion euros as a calm start to the New Year gave way to an intensification of the euro zone debt crisis.
The bond purchases face renewed scrutiny after Standard & Poor's mass euro zone rating downgrades on Friday, though the ECB has resisted political pressure from within and beyond the euro zone to step up the programme on a major scale. Alternatives? There are No Alternatives The ECB has a choice. Buy bonds or don't buy bonds. If the ECB continues to buy bonds, more and more of the risk will be put on the back of Germany. However, if the ECB stops buying bonds, interest rates will soar. This ponzi scheme will blow up sooner rather than later and that is precisely why the euro end-game is at hand. For details please see Time to Prepare for a Meeting of "Monetary Cardinals". Finnish Foreign Minister Pours Cold Water on Merkozy Treaty Please consider Finnish minister pours cold water on fiscal treaty Criticising the EU for its "terrible hurry" to sign and adopt the new rules and for circumventing "all the normal parliamentary procedures," Tuomioja wrote in his blog on Monday (16 January) that the treaty will overlap with existing EU laws on economic discipline - the so-called 'six-pack.'
The new treaty will "just confuse decision-makers, undermine the EU commission's role and create new divisions within the EU" he said.
"The whole contract is at best unnecessary and at worst harmful, and Finland has reason to oppose the whole treaty and at least remain outside it."
One of the measures to be applied by the new treaty - a "structural deficit" of 0.5 percent of GDP - would be a "completely nonsensical straitjacket" that would only deepen recession and increase unemployment, he added.
In his opinion, the whole agreement is a concession made to Germany so that the EU's paymaster lets the European Central Bank intervene more forcefully to stem sovereign debt problems from spreading to more euro-countries.
"We should not be taking orders from anybody," Tuomioja said. The article points out that Tuomioja is a " junior member in Finland's ruling coalition and his views do not reflect the position of the whole government". However, I point out that should the proposal be put to a voter referndum, it would fail. Politicians, acing in their own best interests are likely to ratify the treaty. 4th Treaty Draft Underway, Numerous Questions Remain Please consider Handful of questions remain on EU fiscal treaty A fourth draft of the slim document - meant to copperfasten budgetary prudence in the EU - is to be circulated on Thursday (19 January), but most of the outstanding issues have been left for finance ministers to sort out in the hope the pact will be ready in time for an end-of-the-month EU summit.
One open question is determining the link between the permanent bail-out fund (the ESM) and the new intergovernmental pact. Germany - the main driver behind the treaty - is keen to have the intergovernmental agreement say only countries that have ratified it will be permitted to make use of the fund.
But according to an account on Monday evening (16 January) by Italian Socialist MEP Roberto Gualtieri - one of the European Parliament's observers at the negotiating table - other countries fear this would once again create uncertainty in the markets.
Also open is how many euro countries need to ratify the treaty before it enters into force. The number has yo-yoed from the initial suggestion of nine, then to 15 and then back to 12. Germany wants a high number so that all struggling eurozone countries get on board.
On top of this, there is disagreement about wording in an article on economic policy co-ordination (Article 9). Opposing camps differ on whether to make mention of growth-enhancing measures and if so, on the nature of the reference.
Member states are also at odds on future eurozone summitry. An eternal question in EU politics, it concerns who has a right to be in the inner circle. Wording on the role of the European Parliament, the president of the European Commission and non-euro states still needs to be finalised.
"It's a very important point which has been left open," Gualtieri noted at an EU parliament hearing on Monday.
MEPs will be looking for the fourth draft to mention eurobonds in the introduction to the document - EU deputies are keen on the idea of mutualising eurozone debt, but it is fiercely opposed by Germany.
"There is a proposal by the commission - if it is accepted - of making reference in the recital of a path toward stability bonds. This would be at least an improvement in respect of a text that [is] only concentrated on fiscal stability without anything on growth and solidarity," Gualtieri added. Unresolvable Questions Excuse me for pointing out the obvious but that is one hell of a lot of issues to be decided at the last minute. One has to laugh if not loudly mock the idea that Eurobonds under a new name of " stability bonds" are going anywhere given Germany's stance. As for the number of nations it takes to ratify the treaty, pray tell why isn't the number 17, the exact number of nations in the Eurozone. Can someone point out a ratified agreement that "majority rule" dictates such matters? If not, then why does not every nation have to agree to such a change? Would such a treaty change pass in a German referendum? I think not because it would open the door for majority rule eurobonds. By the way, the above discussion explains why Merkel wants a high number as opposed to a simple majority. Even still, there is no guarantee every other country would not someday vote against Germany, just as 26 nations voted against the UK in a recent proposed change to the EU treaty. Merkel is bright enough to understand this. However, like all politicians she does not really care about governance. She is more concerned about her legacy. She does not want the Eurozone to collapse under her watch. Understand that and you can easily understand the horrendous compromises with French President Nicolas Sarkozy that she has made, as well as her pathetic agreement to a proposal that risk's selling Germany down the river later via a majority rule construct. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| IMF Proposes Trillion Dollar Lending Expansion Posted: 18 Jan 2012 03:14 AM PST Here's a dead on arrival proposal: IMF Proposes Trillion Dollar Lending Expansion Most European stocks rose, erasing earlier losses, as the International Monetary Fund was said to propose a $1 trillion expansion of its lending resources. Asian shares and U.S. index futures advanced.
The IMF is proposing an expansion of its lending resources to safeguard the global economy against any worsening of Europe's debt crisis, according to an official at a Group of 20 nation. The lender is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to the official, who spoke on condition of anonymity because the talks are private. China Rejected Bailout Request Already For starters, China already rejected bailout requests by Europe. China's vice foreign minister has ruled out using the country's vast foreign exchange reserves to bail out Europe, as the debt-laden continent tries to stave off the risk of a massive default.
"The argument that China should rescue Europe does not stand," vice foreign minister Fu Ying told an EU-China forum.
"We cannot use foreign reserves for... rescuing foreign countries. We need to ensure safety, liquidity and profit for the foreign reserves." Moreover, Brazil, Russia, India, and Japan have their own problems. The US is not going to contribute more and was not even asked. Nonetheless S&P futures spiked about seven fast points overnight on the news. That the IMF feels the need to make such a request should not be anything to cheer about. Indeed, there has been so much orchestrated "good news" that I can't help wondering if the bottom is about to fall out of the market. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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