Thursday Reads: Crisis in Cyprus, The End of the “Creative Class” Dream, the Grand Betrayal, and Other News

coffee break

Good Morning!!

There’s quite a bit of news on the Cyprus crisis this morning. But first, last night Joe Weisenthal posted this assessment of how bad things had already gotten: In Just Days A Modern Economy Has Been Set Back 50 Years, And It May Never Be The Same Again. That’s a quote from Ciaran O’Hagan of Société Générale in Paris. Weisenthal writes:

According to reports, Cyprus will try again tomorrow to cobble together some kind of bank bailout bill that can pass parliament.

Cyprus needs to raise another 5.8 billion euros, which it could do from some combination of deposit taxes, Russian money, and pension nationalization.

None of the options are good, but until it’s done, banks will likely have to remain closed, a situation that can’t go on much longer.

This is a stunning turn of events for a modern Eurozone nation.

This morning, the news broke that the European Central Bank (ECB) has given Cyprus an ultimatum. Bloomberg reports:

The European Central Bank said it will cut Cypriot banks off from emergency funds after March 25 unless the Mediterranean island agrees on a bailout with the European Union and International Monetary Fund.

“The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance, ELA, until Monday, 25 March 2013,” the Frankfurt- based ECB said in an e-mailed statement today. “Thereafter, ELA could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks.”

The Cypriot parliament this week rejected a proposed levy on bank deposits to raise 5.8 billion euros ($7.5 billion), which euro-area finance ministers backed as a condition for the country’s bailout. A bank holiday in Cyprus has been extended to March 25, giving policy makers until Monday to find a compromise to prevent a collapse of the country’s banks.

“With this statement, the ECB put even more pressure on European finance ministers and the Cypriot government to come up with a deal,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “But we’ll have to see whether they’ll actually follow through with their threat if there’s no deal by Monday and policy makers decide to further extend the bank holiday.”

Yesterday, Fed Chief Ben Bernanke said that the Cyprus crisis doesn’t threaten the U.S. economy, but you have to wonder what will happen if the Eurozone situation continues to worsen. Reuters:

Signs the euro zone’s economic downturn is deepening and worries over a possible financial meltdown in Cyprus sent world shares, oil and the single currency lower on Thursday.

The falls could have been greater but for earlier data showing a pick-up in Chinese factory activity and the commitment by U.S. Federal Reserve on Tuesday to stick with its ultra-loose monetary policy stance.

Wall Street shares reflected the precarious balance of risks indicating a flat performance when trading starts.

But the euro and European shares moved decisively lower, with the single currency briefly dipping below $1.29 to the dollar, following weak readings of the March Purchasing Manager’s Indexes (PMIs), which showed activity across the 17-nation currency bloc slowing from already weak levels.

The data revealed that German growth was starting to suffer from the euro zone’s renewed problems and again highlighted a widening chasm with France, the region’s second largest economy.

Joe Weisenthal put it in plainer English yesterday: Europe Is A Complete Disaster, And Its Luck May Have Just Run Out.

The crisis in Cyprus is a good opportunity to take a step back and remind ourselves how incredibly broken the Eurozone remains.

For one thing, the whole reason the Eurozone has these sovereign debt crises is because while the countries share a common currency, they don’t share a common Treasury. So it is literally possible for a country to just run out of cash. That can’t happen in a country like the U.S. or the U.K., which are capable of creating their own money.

And then even beyond that, the single monetary policy isn’t helpful. The periphery needs much more stimulus, whereas Germany is worried (perhaps fairly) about bubbles, as everyone rushes cash into its borders. Plus, Germany has virtually no unemployment, so it sees no need for stimulative measures.

Economist and professor David Beckworth looked at the big picture on Monday, pointing out how the system needs some serious structural reforms to function properly.

One reform is to alter ECB policy so that it actually tries to stabilize nominal spending for the entire Eurozone, not just Germany. Since it inception, ECB monetary policy has been biased toward Germany at the cost of destabilizing the Eurozone periphery. This could be fixed by having the ECB abandoned its flexible inflation target and adopt a NGDP level target. Another complementary reform, would be to create meaningful fiscal transfers in the Eurozone similar in scale and scope to the United States. Both of these options, however, would face stiff opposition from Germany. For the former would require temporarily higher inflation than Germany desires and the former would require large fiscal commitments for the Eurozone from Germany. Neither is likely to happen.

In terms of effects of all this on the U.S., I found this piece at the Guardian interesting: Can the US trust the EU after the Cyprus debacle? The author, Heidi Moore suggests that the crisis may threaten upcoming negotiations about an EU-US trade deal. Moore writes:

The upshot is that Cyprus has become a cautionary tale in the European Union‘s most failed and yet most consistent negotiation policy: bullying.

Cyprus is small and largely unable to fight back, either politically or financially. Its shabby treatment is consistent with how the EU has treated other countries when it perceives it has the upper hand, including Greece and Portugal. In each of those cases, some members of the EU have relied on cultural stereotypes to explain why financial negotiations had to turn against a country. In the case of Greece, leaders including Germany’s Angela Merkel painted the country as full of lazy, pension-reliant, sun-worshipping Mediterranean gadabouts to justify the need for austerity. It’s not just that it’s offensive, it’s false: before the crisis raised unemployment rates, you’ll find that Greeks, Italians and Spaniards all worked longer far hours than Germans every week. Somehow those inconvenient facts get lost in the economic finger-pointing.

These EU rationales are unflatteringly tribal, and ill befit a monetary union that is supposed to be sophisticated and rational. The German intelligence agency reportedly informed leaders that Cyprus was a haven for money-laundering,which was trotted out as a bizarre reason last week that taking money from Cypriot bank accounts was a perfectly legitimate option. Cyprus’s banks have high interest rates on savings, and it is a tax haven, which has attracted “hot money” from Russia and other countries. No one in Europe complained about that when it was helping the Cypriot economy, but now that a bailout is required, the equation has changed.

The character of EU negotiations – sloppy, disaster-prone, often bullying – is important to the US, too.

Moving on to (I think) less depressing news…

Chris Bowers' Twitter photo

Chris Bowers’ Twitter photo

Here’s a blog post from May 8, 2008 that you might recall. It was a triumphal piece by Chris Bowers at his now-defunct blog “Open Left” titled “Changing of the Guard.” Along with his predictions that Obama would govern in a completely different way than previous Democratic presidents, Bowers foresaw a “cultural shift”:

Out with Bubbas, up with Creatives: There should be a major cultural shift in the party, where the southern Dems and Liebercrat elite will be largely replaced by rising creative class types. Obama has all the markers of a creative class background, from his community organizing, to his Unitarianism, to being an academic, to living in Hyde Park to shopping at Whole Foods and drinking PBR. These will be the type of people running the Democratic Party now, and it will be a big cultural shift from the white working class focus of earlier decades. Given the demographics of the blogosphere, in all likelihood, this is a socioeconomic and cultural demographic into which you fit. Culturally, the Democratic Party will feel pretty normal to netroots types. It will consistently send out cultural signals designed to appeal primarily to the creative class instead of rich donors and the white working class.

Richard Florida speaking in Detroit a few days ago

Richard Florida speaking in Detroit a few days ago

Ah, yes…the “creative class,” by which Bowers meant young, supposedly cool (largely white) guys like himself (e.g., Ezra Klein) who would “revitalize” the Democratic Party with their “technocratic” and “not too far left” policies. The “Creative class” was a term invented by a writer and consultant with the odd name of Richard Florida. Florida wrote a book in 2004 called The Rise of the Creative Class, and has made a pile of money over the years by advising state and city governments about how to attract “hip” young “creatives” who will revitalize run down urban neighborhoods. But now even Florida himself has had to admit that his entire premise was a giant failure. Yesterday Joel Kotkin wrote about it at The Daily Beast.

Among the most pervasive, and arguably pernicious, notions of the past decade has been that the “creative class” of the skilled, educated and hip would remake and revive American cities. The idea, packaged and peddled by consultant Richard Florida, had been that unlike spending public money to court Wall Street fat cats, corporate executives or other traditional elites, paying to appeal to the creative would truly trickle down, generating a widespread urban revival.

Urbanists, journalists, and academics—not to mention big-city developers— were easily persuaded that shelling out to court “the hip and cool” would benefit everyone else, too. And Florida himself has prospered through books, articles, lectures, and university positions that have helped promote his ideas and brand and grow his Creative Class Group’s impressive client list, which in addition to big corporations and developers has included cities as diverse as Detroit and El Paso, Cleveland and Seattle.

Well, oops.

Florida himself, in his role as an editor at The Atlantic, admitted last month what his critics, including myself, have said for a decade: that the benefits of appealing to the creative class accrue largely to its members—and do little to make anyone else any better off. The rewards of the “creative class” strategy, he notes, “flow disproportionately to more highly-skilled knowledge, professional and creative workers,” since the wage increases that blue-collar and lower-skilled workers see “disappear when their higher housing costs are taken into account.” His reasonable and fairly brave, if belated, takeaway: “On close inspection, talent clustering provides little in the way of trickle-down benefits.”

Now who could have predicted that? Actually, one clever writer did. Alec Gillis at The Progressive in December 2009–before Obama was even inaugurated–wrote a piece called The Ruse of the Creative Class, in which he basically characterized Florida as a con man and fraud.

Today Chris Bowers has some kind of job at DailyKos. He sends out e-mails trying to get people to sign petitions–that kind of thing. And President Obama went on to hire lots of former Clinton staffers and spent much more time sucking up to Wall Street than catering to “the creative class.”

According to The Hill: Dick Durbin estimates the Grand bargain odds at near 50-50.

Durbin said he is personally open to further privatization of Medicare as long a private insurers are forced to “play by the rules” that Medicare uses to lower costs, and that he realizes some of his liberal friends “are not happy” with his position.

If Obama backs cuts to entitlements, Durbin believes enough Democrats would support the president to get a bill through Congress.
“If a president comes up with a reasonable approach which ends up giving years of solvency to Medicare. … I think that many Democrats will come around to that position,” he said. Obama’s imprint on the proposal would shield many members from grassroots anger, he said….

“I think chained CPI is a real possibility, only if it crafted in the right way,” Durbin said. The proposal would have to raise the minimum Social Security benefit to the poverty level, and provide the very old with a bump up in benefits, he said.

Durbin ruled out the kind of “premium support” system for Medicare that House Budget Committee Chairman Paul Ryan (R-Wis.) has proposed.

The good news is that Durbin claims Obama won’t cut “entitlements” unless the Republicans agree to revenue increases, and that’s not likely to happen.

I’ve got several more interesting reads that I’ll pass on link dump style, since this post is getting long.

The Hill: Mark Sanford’s South Carolina success stirs national Republican anxiety

The Boston Globe has a diagram of the possible suspects in the Gardner Museum heist. Quite a few of them are already dead–and not from natural causes in most cases.

Raw Story: Ed Schultz is royally pissed at Politico for claiming that his move from weeknights to weekends on MSNBC wasn’t voluntary.

Raw Story: Ohio attorney general on charging Steubenville harassers: We’re sick of the victim being victimized

The Wrap: CNN’s Poppy Harlow is very upset that people think she would slant her coverage toward the perpetrators in the Steubenville rape case. The problem is that is exactly what she did, even if it wasn’t a conscious choice. In fact what Candy Crowley did was much worse, IMO. After all, she asked the leading questions. So why isn’t CNN apologizing? I guess it’s because they’re arrogant. But what do they have to be arrogant about?

Talking Points Memo: Former MSNBC Host Dylan Ratigan Quit New York To Work On Hydroponic Organic Farm

Business Insider: Russian Dancer Calls World-Renowned Ballet Company A ‘Giant Brothel’

Now it’s your turn. What’s on your reading and blogging list today?

41 Comments on “Thursday Reads: Crisis in Cyprus, The End of the “Creative Class” Dream, the Grand Betrayal, and Other News”

  1. Pat Johnson says:

    Wow, a fabulous breakdown of the Cyprus crisis bb!

    It seems to me that our own Chris Hayes wrote a book recently covering the topic of the “creative class”, a book I had intended to order but never got around to doing so. My impression in reading the reviews is that he basically derided that premise. I think I may need another “visit” to Amazon to bolster his musings.

    Don’t get me started on Obama and the grand bargain. We may need cuts, and certainly a rise in revenues, but leave the social safety nets in place. Please.

    After 10 years of losing almost 1 trillion dollars on overseas adventures to gave us bupkus, now is the time to rein in other areas of the budget, primarily the military, and leave the rest of us alone.

    If this is the “best deal” he can get out of the GOP than just leave it as is until after the mid terms where hopefully reasonable people may be elected.

    • bostonboomer says:

      I didn’t know Chris Hayes had written about the creative class nonsense. I’ll have to check that out.

    • ecocatwoman says:

      I agree – great post bb.

      I have to admit that the whole EU/Cyprus et al discussions leave my head spinning. I’ve pretty much zoned out knowing that what happens will happen regardless of the level of my concern or attention. It’s akin to spending every waking hour trying to prevent a tornado or hurricane from hitting my neighborhood. Out of my control and, seemingly, nearly everyone else’s as well.

      • bostonboomer says:

        I understand. I just happened to find this story very interesting for some reason.

    • Fredster says:

      Chris Hayes…bleh.

  2. Delphyne says:

    BB – the link to Sanford has one too many http// in it….

  3. bostonboomer says:

    Post at TPM: a reader who is an air traffic controller explains how the sequester is going to affect air travel.

    Just one more reason why I’ll never fly again!

  4. bostonboomer says:

    TPM: GOP Conservatives Crave Debt Ceiling Standoff With Obama

    During a discussion with reporters Wednesday, a panel of 10 House conservatives openly craved another debt ceiling standoff with President Obama, urging GOP leaders to follow up on the chamber’s expected passage of the Paul Ryan budget by using the debt limit as leverage to achieve their ideological goals. Among the potential demands they mentioned were dollar for dollar cuts, rolling back Obamacare and major entitlement reforms.

    “Any increase in the debt ceiling needs to be tied with a solution to stop us from spending money we don’t have,” said Rep. Steve Scalise (R-LA), chairman of the influential and deeply conservative Republican Study Committee.

    “The real tough part of the Republican agreement [earlier this year at the Williamsburg retreat] is … to take the ideas, principles and vision of this budget and put it in our debt ceiling debate with the president this summer,” said Rep. Tim Huelskamp (R-KS). “This is going to be where the rubber meets the road. Are we actually going to simply talk about it or are we going to pass some laws that implement these changes.”

  5. Fannie says:

    Thanks for good reads this morning…………I really liked the turn around with Dylan Ratigan……….sounds so good, I’d love to turn my lawns into organic farms in raised boxes.

    Maybe we get that commune going and have a free range chicken farm to go with the organic farms……………….anything is possible.

    • bostonboomer says:

      That was refreshing, wasn’t it?

    • ecocatwoman says:

      I especially liked the link on Ratigan. I like him even though I only got to see his show a couple of times – just liked what he said & how he said it. I’m a fan of lefty firebrands, not unlike Schultz. The farm, using less water sounds like a great idea since, in the not too distant future, water will cost at least as much as gasoline per gallon at the rate the world is going.

      Speaking of Ed Schultz, the article says he’s left MSNBC. He announced he would be doing a show on Saturday & Sunday nights beginning, I think, in April. So what’s up?

      • bostonboomer says:

        It says he’s been freed from his weekday duties. His show is still going to be on Sat. and Sun. from 5-7PM.

        • ecocatwoman says:

          I’m going to re-read it. I could have sworn it said he left MSNBC. Whew, glad he’s still going to be on especially when there’s really nothing of value on TV at those times – for me at least. And I’ll still be awake!

      • Fannie says:

        You know Ed’s wife has had health issues, cancer. Like any family, they’ve been devastated, and we all know the support that is needed. Maybe this is their time to walk hand in hand, and smell the roses.

  6. bostonboomer says:

    Cyprus pins hopes on creation of solidarity fund as ECB threatens to cut off lending

    Nicosia plans to create a fund collateralized by state assets, possibly including natural gas revenues, church property and social security fund reserves. A proposal is due to be submitted to the House of Representatives on Thursday evening.

    A government official who declined to be named told Bloomberg that some kind of deposit tax was not being ruled out.

    Meanwhile, Finance Minister Michalis Sarris continued talks in Moscow, with Cyprus hoping there would be Russian interest in Cypriot banks or in contributing to the investment fund being created.

    Sarris told Cypriot state broadcaster that he would meet two Russian ministers on Thursday evening and that the main aim would be to convince Moscow to invest in the wealth fund to be set up by the Nicosia government.

    “We are asking for help clearly, but something that would make also economic sense for Russia,” Sarris told reporters earlier.

  7. bostonboomer says:

    HuffPo: Tom Coburn Amendment Limiting National Science Foundation Research Funding Passes Senate

    Sen. Tom Coburn (R-Okla.) submitted a series of amendments to the Continuing Appropriations Act of 2013, the Senate bill to keep the government running past March 27. One of those amendments would prohibit the NSF from funding political science research unless a project is certified as “promoting national security or the
    economic interests of the United States.”

    “Studies of presidential executive power and Americans’ attitudes toward the Senate filibuster hold little promise to save an American’s life from a threatening condition or to advance America’s competitiveness in the world,” Coburn wrote in a letter to NSF director Subra Suresh last week explaining his proposal.

    Coburn’s NSF amendment was approved by the Senate during a voice vote on Wednesday afternoon.

  8. bostonboomer says:

    Krugman writes, Cyprus: The Sum of All FUBAR

    He says it’s inevitable that the Cyprus banks will fail, causing depositors to lose their money.

    As a number of people have pointed out, Cyprus is arguably better positioned than Iceland to do an Iceland, because devaluing a reintroduced Cypriot currency could bring in a lot of tourism. But will the Cypriots — who haven’t even reconciled themselves to the end of their round-tripping business — be willing to go there?

    • RalphB says:

      That covers it pretty well. I wonder about all the other off-shore tax havens around the world. Maybe this could be a predictor of things to come for some of them, especially in the EU.

  9. bostonboomer says:

    Another Iraq War enabler offers his phony apology.

    David Ignatiius:

    Ten years ago this week, I was covering the U.S. military as it began its assault on Iraq. As I read back now over my clips, I see a few useful warnings about the difficulties ahead. But I owe readers an apology for being wrong on the overriding question of whether the war made sense.

    Invading Iraq to topple Saddam Hussein a decade ago was one of the biggest strategic errors in modern American history. We’ll never know whether the story might have been different if better planning had been done for “the day after,” or the Iraqi army hadn’t been disbanded, or several other “ifs.” But the abiding truth is that America shouldn’t have rolled the dice this way on a war of choice.

    Bla, bla, bla . . . Fuck you, David.

    • ecocatwoman says:

      I don’t recall any media voices questioning the run up to the Iraqi war. I questioned it, to friends, from the first time Bush floated the idea but I seemed to be a lone voice. Coverage of anti-war protests mostly went uncovered in the press. When there was a coverage, it was downplayed or derided. The list of complicit reporters could fill a book.

    • RalphB says:

      Fuck you, David is a righteous message. What I would like to see on this anniversary is more written about those people who got it right and a lot less from those who got it so wrong!

    • ANonOMouse says:

      Any journalist who missed that the Iraq war was a war of choice, and that the so-called evidence was all smoke-an-mirrors, wasn’t doing his/her job. The UN inspectors, including American’s on the inspection team, were warning that there was NO WMD in Iraq. Bush used 911 to avenge his daddy and to make a grab at the Iraq oil reserves. Many of us knew the truth and wrote Letters to the Editor, demonstrated and hounded our Representatives in an unsuccessful effort to stop the drum beat.

      When GWB and his acolytes began conflating Osama Bin Laden with Saddam Hussein, I knew the truth of Iraq would be ignored and lost in the shadows of 911. Many American’s, especially those on the right, still don’t know the difference between Osama Bin Laden and Saddam Hussein. I have a family member who commented the day after Osama Bin Laden was killed that she thought he was already dead. Dumb cluckers.

  10. janicen says:

    Thank you for posting the link to the Crowley/Harlow coverage of the Ohio rape verdict. I hadn’t seen it in its entirety and it is shocking. I think it shows just how ingrained victim blaming in rape cases is in our culture that neither Crowley nor Harlow think they did anything wrong.

  11. ecocatwoman says:

    Ralph, I thought you’d appreciate this from the wonderful Texan, Jim Hightower:

    • RalphB says:

      That was pretty good and toned down for him. Usually Hightower is a first class demagogue and has been since he lost his Ag Commissioner job years ago. He’s still better than our republicans but not my favorite democrat.

      • ecocatwoman says:

        Really? Although I don’t read him on a regular basis, I’ve liked the pieces I’ve read over the years. I truly miss Molly. She was a kick-ass gem.

      • RalphB says:

        Molly was super and an amazing person all around! Hightower can be but he can also let hyperbole become his enemy too easily.

  12. bostonboomer says:

    REPORT: Major Cyprus Bank Has Only A Few Hours Of Liquidity Left, And Is Limiting Cash Withdrawals

  13. ANonOMouse says:

    Good post BB…..Thank you.

  14. RalphB says:

    Darn. I missed International Happiness Day yesterday. The UN needs a better publicist.

    • bostonboomer says:

      So let’s celebrate it today. At least we don’t have to rush out and fight to get at the ATMs yet. It’s not snowing here, and JJ’s daughter is back in school.

      Life is good.

  15. ANonOMouse says:

    Here’s one of those “holier than thou” men of god (baptist mega-church preacher) who just can’t control expressing his hatred of women from the pulpit. He also can’t keep it in his pants. Apparently he views grown women as a danger to his manhood, so he committed the crime of statuatory rape by having a sexual relationship with teenage girl from his congregation and broke the 7th commandment of HIS church, adultery. I wonder if he blames the girl for his behavior? BTW this guy was just sentenced to 12 years in prison.

    Here’s the story of his conviction and sentencing

  16. purplefinn says:

    A minor point (4.00 / 1)
    but Obama is United Church of Christ, not Unitarian.

    Taken from comments under Chris Bowers’ post. Another commenter wrote that Obama’s mother was a Unitarian.

    Still a minor point. But that’s how some untruths have long lives. Repetition.