Food for thought if you have any interest in the potential impact of the European situation on US banks.  I have no opinion yet on the quantitative significance of this.  $518 billion, though, is not prima facie chump change.

At Bloomberg, a report by Yalman Onaran: Selling More CDS on Europe Debt Raises Risk for U.S. Banks. 

The best bit: "The banks say their net positions are smaller because they purchase swaps to offset ones they’re selling to other companies."

From Ron Suskind's "Confidence Men", via Brad DeLong's Grasping Reality:

[Elizabeth] Warren was caught off guard by Romer's intensity, and her thoughtfulness.... Question after question, the two engaged in an intellectual thrust-and-parry, until finally... Romer broke her stride. "Why is it always the women?" Romer said. "Why are we the only ones with balls around here?"

Hmm, maybe I shoulda voted for Hillary in the 2008 Democratic primaries... Except back then, I feared she had a lot of the centrist, believe-what-all-the-Serious People are saying, don't-fight-the-consensus tendencies that have turned out so badly for Obama, as witness e.g. her position before the Iraq war.

Maybe Elizabeth Warren should be running for something bigger than Senate...

Do read Brad's critical review of the book... very enlightening about the book and about administration policy.  (Also available at Brad's blog.)

George Soros on Europe's troubles and how to avert a crisis.

I don't think his solution of a new treaty creating a unified European Treasury, is going to happen before the European situation gets much worse.  I'm not sure a unified Treasury is required to deal with the current crisis, but I'm not confident Europe will be decisive enough in recognizing the fact that Greece will default, protecting and strengthening (taking over when necessary) affected banks, helping out Spain and Italy, avoiding counterproductive austerity and tight monetary policy, and so on.   Things look pretty bleak for the world and US economies over the next year.

From AP (11:30 AM Sept. 16)

U.S. Treasury chief Timothy Geithner is meeting with European finance ministers in Poland, which may suggest that the U.S. is growing more concerned about Europe's direction.

The U.S. is now pushing for a more decisive solution. On Friday, European leaders pushed back, saying they want to postpone a decision on more Greek payouts until October.

Perhaps the fact that the US is pushing Europe on this should be considered positive, but it also underlines the seriousness of the situation.

Interesting post by Ed Hugh at Fistful of Euros on austerity in Latvia... goes somewhat beyond the usual point that the "success" of austerity in the Baltic republics (in the sense that they are not considered to be in imminent danger of defaulting on their debt, and in the sense that GDP is again growing) has come at the cost of enormous drops in GDP (which the current growth in GDP has still not made up).  Krugman is also good on this, but Hugh's post goes into a lot of detail and argues that even in terms being able to pay their debt, things may not look so good in a few years.

What's basically been going on is "internal devaluation", i.e. massive wage and price deflation, in order to reverse the decline in competitiveness that followed Latvia's pegging its currency to the Euro.  This has been accomplished in part by austerity that has been extremely contractionary, and has resulted in a massive shift toward exporting by the Latvian economy, earning it foreign exchange with which to pay euro-denominated debt.   But the huge cost in macroeconomic contraction might have been partially avoided by devaluing instead of maintaining the peg (although massive devaluation, while macroeconomically stimulative through the export demand channel, may in some circumstances cause macro problems as well...).

I had held off on posting about Ireland because I read some pieces that suggested the final deal was going to involve Irish banks' bondholders taking some losses.  From RTE news, I read that:

The Minister [for finance, Brian Lenihan] also said that subordinated bondholders would be dealt with aggressively but said the European partners had ruled out making senior bondholders pay as it would have a spill over effect on the euro.

See also the Financial Times.  The IMF favored senior bondholders taking some losses, but the Europeans wouldn't accept it, and the Irish government caved.

What I was going to say was that the Irish problem is essentially about the fact that the Irish government decided, at the beginning of the crisis, to guarantee all of Irish banks' debts.  What they should now do is repudiate that guarantee...if not explicitly, than by refusing any bailout that doesn't, effectively, involve a partial writedown.  If they don't, it's likely the next Irish government will repudiate, if they can find a legal mechanism for doing so (and my guess is that they'll find *something*).  The current plan is basically asking all Irish citizens to tithe themselves for years to ensure that those who unwisely lent to Irish banks fueling the Irish real estate bubble, suffer no loss.  A real political winner if I ever heard of one.  Sinn Fein --- that's the party that was formerly the political wing of the Irish Republican Army---has already won a byelection, in Donegal, presumably over voter anger at the economic and debt situation.  Moreover, the plan will likely be contractionary in a Keynsian sense, making it still more onerous for Irish firms and workers to produce the surplus to render to the bondholders.

About two thirds of the Irish deficit is payments to uphold this guarantee of bank debt; the Irish deficit is not primarily a matter of excessive government spending otherwise.

More on Ireland and Europe from Ken Rogoff

...and on Ireland from Barry Eichengreen.  No accident, I suspect, that this blast was originally published in German at Handelsblatt.

Annoyed by the fact that the Cambridge, MA based National Bureau of Economic Research (NBER) charges $5 a pop (or requires an institutional subscription) to download its working papers (with some exceptions, such as for journalists, I decided to look into where they (and the people who publish there) get their funding, since I object to publicly funded research being published in venues that are expensive for the public to get access to.   Probably this is well-known to professsional economists (so if any read this thing, feel free to comment)---but the overall situation with NBER working papers seems to be that they are (primarily? entirely?) results of research done as part of NBER programs.  Perhaps that means, the research is NBER-funded as well?  NBER has a contract with the Commerce Department to officially determine when recessions and "stagnations" have begun, and ended.  I found it relatively difficult to figure out where NBER gets its money, since googling "NBER funding", "NBER budget" and the like tends to turn up NBER research on national budgets and general economics, not surprisingly.  I found this link to a page by an organization called SourceWatch interesting, though I don't have a lot of familiarity with the group.  Much of the discussion seems to concern pre-2001 funding, and the introductory paragraphs are confusing.  They consist mostly of quoted material, and it is unclear what is being quoted:  a New York Times article about the NBER or, as seems more likely, an article from an unnamed source, critical of the NYT piece and of the NBER's then-director Martin Feldstein?  In any case, the quoted material seems highly polemical even to someone as leftish on many things as I am.   And sure, Feldstein is too conservative for my taste, but he gets a lot of respect from me for recognizing, at least sometimes, that Keynesian theory can be relevant, and calling for substantial fiscal stimulus on Keynesian grounds early in this recession.  Nevertheless, this claim from SourceWatch is interesting:

"Between 1985 and 2001, the organization received $9,963,301 in 73 grants from only four foundations:

• John M. Olin Foundation, Inc.
• Lynde and Harry Bradley Foundation
• Scaife Foundations (Sarah Mellon Scaife)
• Smith Richardson Foundation"

All four of these are characterized (by SourceWatch, at least, in their own descriptions linked in the above quote) as very conservative, small-government/low-regulation foundations.  Actually they say the  Scaife foundation is no longer pushing this ideology since Sarah Mellon Scaife took over, but (I think) during the 1985-2001 period they were.  I wouldn't necessarily trust SourceWatch on this (e.g. they say the Olin Foundation gave $20.5 million to "right-wing think tanks" in 2001, then give a list that includes the Brookings Institution.   I'm fairly confident this is not a mistake, rather a combination of deadpan humor and a genuinely left-wing viewpoint that does see Brookings as part of the right-wing liberal establishment.  But Olin is well known as a conservative foundation, so the characterization of Olin, if not of Brookings, seems reasonable.

I'm still at a loss about the pay-for-working papers policy.  Perhaps this --- especially library subscriptions to it --- is a significant source of income to the NBER?   NBER's working papers are definitely a respected and prestigious series that I see cited a lot (and not just by conservatives--Paul Krugman's blog links them on occasion, as does Brad DeLong's). So they can likely get a significant amount of income that way.  It does seem that the goal of spreading knowledge of the results of NBER (oops, I mean covert promotion of right-wing economic ideology ) might be better served by making them free to the public.

Here's Freakonomics on the NBER and the shift in directorship from Feldstein to Jim Poterba.  (No opinion implied on the quality of Freakonomics books, blogs, or Steven Levitt, though.)  Still, it gives you an idea of the attitude of much of the economics profession toward the NBER.