Watchman Newsletter

Hamas: Israel has two options - death or leaving Palestinian lands

Haaretz (Link) (December 25, 2010)

The head of Hamas’ armed wing warned Israel on Saturday against launching any new military action in the Gaza Strip, accusing Israel of attempting to escalate the situation. The statement came after days of renewed rocket fire on Israeli communities and Israel Defense Forces strikes in Gaza.

Hamas would not rest until Israel was ousted from Palestine, said Ahmed al-Jabari, leader of the Izz a-din al-Qassam Brigades, adding that Israel had two options – to leave Palestinian territories or face death. He said that Hamas resistance would continue as long as Zionists remained in Palestine.

Also Saturday, Al-Qassam Brigades spokesman Abu Obeida warned Israel to refrain from any further aggression in the Gaza Strip, at a news conference in Gaza to mark the second anniversary of Operation Cast Lead, a three-week IDF incursion aimed at halting rocket fire on Israel’s southern communities from the strip.

“We are now stronger than before and during the war, and our silence over the past two years was only for evaluating the situation,” Abu Obeida told the news conference. “We won’t face the current attempts of the enemy to escalate the situation with silence.”

Fresh humiliation for eurozone as China says it will bail out debt-ridden nations

Daily Mail UK (Link) (December 23, 2010)

China has said it is willing to bail out debt-ridden countries in the euro zone using its $2.7trillion overseas investment fund.

In a fresh humiliation for Europe, Foreign Ministry spokesman Jiang Yu said it was one of the most important areas for China’s foreign exchange investments.

The country has already approached struggling European countries with financial aid, including offering to buy Greece’s debt in October and promising to buy $4billion of Portuguese government debt.

Today Portugal had its credit rating downgraded by the Fitch Ratings agency amid mounting concerns over the country’s ability to raise money in the markets to finance its hefty borrowings.

Fitch said it was reducing its rating on the country’s debt by one notch to A+ from AA- and warned that further downgrades may be in the offing by maintaining its negative outlook.

‘To have any discernible effect China will have to buy a lot more than 5 billion euros if they expect to have any impact on the negative sentiment surrounding Europe,’ said Michael Hewson, currency analyst at CMC Markets.

China’s astonishing economic growth has put it on track to overtake America as the world’s economic powerhouse within two years, a recent report claimed.

Has The Financial Collapse Of Europe Now Become Inevitable?

The Economic Collapse (Link) (December 22, 2010)

What in the world is happening over in Europe?  Well, it is actually quite simple.  We are witnessing the slow motion collapse of the euro and of the European financial system.  At this point, many analysts are convinced that a full-blown financial implosion in Europe has become inevitable.  Ireland, Spain, Portugal, Italy, France and Belgium are all drowning in an ocean of unsustainable debt.  Meanwhile, Germany and the few other “healthy” members of the EU continue to try to keep all of the balls in the air by bailing everyone out.  But can Germany keep bailing the rest of the EU out indefinitely?  Are the German people going to continue to be willing to hand out gigantic sacks of cash to fix the problems of other EU nations?  The Irish were just bailed out, but their problems are far from over.  There are rumors that Greece will soon need another bailout.  Spain, Portugal, Italy and France have all entered crisis territory.  At the same time, there are a whole host of nations in eastern Europe that are also on the verge of financial collapse.  So is there any hope that a major sovereign debt crisis can be averted at this point?

One would like to think that there is always hope, but each month things just seem to keep getting worse.  Confidence in European government debt continues to plummet.  The yield on 10-year Irish bonds is up to 8.97%.  The yield on 10-year Greek bonds is up to an astounding 12.01%.  The cost of insuring French debt hit a new record high on December 20th.

Bond ratings all over Europe are being slashed or are being threatened with being slashed.  For example, Moody’s Investors Service recently cut Ireland’s bond rating by five levels.  Now there is talk that Spain, Belgium and even France could soon all have their debt significantly downgraded as well.

But if the borrowing costs for these troubled nations keep going up, that is just going to add to their financial problems and swell their budget deficits.  In turn, larger budget deficits will cause investors to lose even more confidence.

So how far are we away from a major crisis point?

Europe: The New Plan

Stratfor Global Intelligence (Link) - Peter Zeihan (December 21, 2010)

Europe is on the cusp of change. An EU heads-of-state summit Dec. 16 launched a process aimed to save the common European currency. If successful, this process would be the most significant step toward creating a singular European power since the creation of the European Union itself in 1992 — that is, if it doesn’t destroy the euro first.

Envisioned by the EU Treaty on Monetary Union, the common currency, the euro, has suffered from two core problems during its decade-long existence: the lack of a parallel political union and the issue of debt. Many in the financial world believe that what is required for a viable currency is a fiscal union that has taxation power — and that is indeed needed. But that misses the larger point of who would be in charge of the fiscal union. Taxation and appropriation — who pays how much to whom — are essentially political acts. One cannot have a centralized fiscal authority without first having a centralized political/military authority capable of imposing and enforcing its will. Greeks are not going to implement a German-designed tax and appropriations system simply because Berlin thinks it’s a good idea. As much as financiers might like to believe, the checkbook is not the ultimate power in the galaxy. The ultimate power comes from the law backed by a gun.

Citigroup warns of fresh wave of bank failures in Europe

The Telegraph UK (Link) - Ambrose Evans-Pritchard (December 21, 2010)

Citigroup has warned of a fresh wave of bank failures and sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis.

Prof Willem Buiter, the bank’s chief economist, said the eurozone was paralysed by a “game of chicken” between the European Central Bank and EMU governments.

Both sides are trying to shift responsibility on to the other for shoring up southern Europe and Ireland, raising the risk of contagion spreading. “The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual,” he said.

Vatican Bank hit by financial scandal... again

The Independent (Link) - Victor Simpson and Nicole Winfield (December 19, 2010)

This is no ordinary bank. The ATMs are in Latin, priests use a private entrance, and a life-sized portrait of Pope Benedict XVI hangs on the wall. Nevertheless, l’Istituto per le Opere di Religione (the Institute for Religious Works) is a bank, and it is under harsh new scrutiny, including money-laundering allegations that led police to seize €23m (£19.5m) in Vatican assets in September. Critics say the case shows that the “Vatican Bank” has never shed its penchant for secrecy and scandal.

The Vatican calls the seizure of assets a “misunderstanding” and expresses optimism that it will be cleared up quickly. But court documents show that prosecutors say the Vatican Bank deliberately flouted anti-laundering laws “with the aim of hiding the ownership, destination and origin of the capital.” The documents also reveal investigators’ suspicions that clergy may have acted as fronts for corrupt businessmen and the Mafia. The documents pinpoint two transactions that have not been reported: one in 2009 involving the use of a false name, and another in 2010 in which the Vatican Bank withdrew €650,000 from an Italian bank account but ignored bank requests to disclose where the money was headed.

The new allegations of financial impropriety could not have come at a worse time for the Vatican, already hit by revelations that it sheltered paedophile priests. The corruption probe has also given new hope to Holocaust survivors who tried unsuccessfully to sue the Vatican in the US, alleging that Nazi loot was stored in the bank.

2010’s world gone wild: Quakes, floods, blizzards

My Way (Link) - Seth Borenstein & Julie Reed Bell (December 19, 2010)

This was the year the Earth struck back.

Earthquakes, heat waves, floods, volcanoes, super typhoons, blizzards, landslides and droughts killed at least a quarter million people in 2010 - the deadliest year in more than a generation. More people were killed worldwide by natural disasters this year than have been killed in terrorism attacks in the past 40 years combined.

“It just seemed like it was back-to-back and it came in waves,” said Craig Fugate, who heads the U.S. Federal Emergency Management Agency. It handled a record number of disasters in 2010.

“The term ‘100-year event’ really lost its meaning this year.”

And we have ourselves to blame most of the time, scientists and disaster experts say.

Even though many catastrophes have the ring of random chance, the hand of man made this a particularly deadly, costly, extreme and weird year for everything from wild weather to earthquakes.

Poor construction and development practices conspire to make earthquakes more deadly than they need be. More people live in poverty in vulnerable buildings in crowded cities. That means that when the ground shakes, the river breaches, or the tropical cyclone hits, more people die.