Erudite Ambrose Evans-Pritchard sums it up:

Greece’s euro membership has now led to a warped economy. The current account deficit is 15pc of GDP, the eurozone’s highest by far. Indeed, the deficit ($53bn) is the sixth biggest in the world in absolute terms — quite a feat for a country of 11m people.

Year after year of high inflation has eroded the competitive base of the economy. This is an insidious and slow effect, and very hard to reverse. Tourists are slipping away to Turkey, or Croatia. It will take a long time to lure them back.

The underlying rot was disguised by the global credit bubble, and by the Greek property boom. It is now being laid bare.

Greece has a public debt of 93 per cent of GDP, well above the Maastricht limit. This did not matter in 2007 when bond spreads over German Bunds were around 26 basis points, meaning that investors were willing to treat all eurozone debt as more or less equivalent.

It matters now. The credit default swaps on Greek sovereign debt were trading around 250 today (compared to 52 for Germany, 62 for the US, 120 for the UK, and 178 for Italy). It has moved into a class of its own.

This is potentially dangerous because Greece needs to tap the capital markets for 40bn euros next year to roll over debt and fund the budget deficit, as well as 15bn euros or so in bond issuance by banks under the state’s new guarantee.

The Economist is bullish about online advertising, though not exactly sure which kind of online advertising.

A friend wrote to ask for swift advice for a Paris visit with g-friend. My answer, the distillation of 4 years of fond memories, is always basically the same, so I’ll bookmark for future use:

Dude — I envy! Lunch at Minh Chau, amazing Vietnamese close to Pompidou, cheapest luxury in Paris. Drinks in the PM at George on top of Pompidou for great, relatively cheap view. See museums during the sequential night openings — Louvre, Musee du Paris, Tokyo, Pompidou — basically private showings. (I hate layout of Orsee day or night.) Our favorite spot for dinner is Brasserie Balthasar, full of young and old folk, rapscallion waiters. (Read Paris to the Moon for overview of the place — Gopnik claims it was ruined, but we saw no difference pre/post.) Flea market is good — be ready to brawl with pickpockets. Walk through the Palais Royale and the Luxembourg gardens when the pale winter light is unredeemably Parisian. Walk up the Eiffel Tower and along the Champs Elysee at night. Ramble in the Marais. Take pictures. Finally a literary must: reread The Sun Also Rises. Forget you’re reading a cliche — you’re reading a weirdly woven piece of tragic literature. Watch the number of times “money” is mentioned.

Here’s a stunning comparison of Huffpo’s new valuation versus that of publicly traded TheStreet.com. Thank you T!

As friends who read this blog know, I’m pessimistic about the economy. My pessimism sank to new lows last night as I read John Cassidy’s New Yorker overview of Bernanke’s flailing in the face of the crisis. A tiny excerpt:

The most serious charge against Bernanke and Paulson is that their response to the crisis has been ad hoc and contradictory: they rescued Bear Stearns but allowed Lehman Brothers to fail; for months, they dismissed the danger from the subprime crisis and then suddenly announced that it was grave enough to justify a huge bailout; they said they needed seven hundred billion dollars to buy up distressed mortgage securities and then, in October, used the money to purchase stock in banks instead. Summing up the widespread frustration with Bernanke, Dean Baker, the co-director of the Center for Economic and Policy Research, a liberal think tank in Washington, told me, “He was behind the curve at every stage of the story. He didn’t see the housing bubble until after it burst. Until as late as this summer, he downplayed all the risks involved. In terms of policy, he has not presented a clear view. On a number of occasions, he has pointed in one direction and then turned around and acted differently. I would be surprised if Obama wanted to reappoint him when his term ends”—in January, 2010.

The article assumes there was (or is) a solution to the minefield we’ve dropped into the middle of.

Fun to see my Twitter habits graphed. Turns out my prime time for twittering is Wednesday at 8am. I’d love to see the same type of graphic for my e-mail habits.

Arianna pulled off a miracle, raising $25 million in the most brutal funding environment since the invention of VC. She should take Paulson’s job and help bail out the banks next.

Michael Greenberg in NYRB:

members of the Cambridge Psychological Society were asked to reconstruct a meeting of the society that had taken place two weeks before. The average person was barely able to recall 8 percent of what had happened, and almost half of this was incorrect, peppered with the recollection of events that had never occurred or that had occurred elsewhere.

Huffpo is apparently on the verge of raising $15 million from the likes of Oak Investment Partners to replenish the political web publisher’s nearly depleted coffers.

Word was the site needed to raise at least $5 million by January to make it another year.

If I were investing in a political site, I’d want to see three months worth of post election traffic data to get a baseline for projections. And if I were investing in a publisher at a time when ad revenues are in an as-yet-undetermined downtrend, I’d do my best to delay buying for another month or three. And if I knew my negotiating partner was a few days from the abyss, I wouldn’t be catching the express train to conclude a deal. Why not walk?

So Arianna has got to be a hell of salesperson to get VCs to accomodate her burn-driven timeline in this dire environment.

Arianna’s feat is triply impressive because VCs rarely invest in publishers. While tech companies can grow exponentially (for a period), a publisher’s growth is linear.

The key words are at the end of the video (below) are “ad infinitum.”

Credit default swaps (wikipedia article) sound like pretty abstract stuff, but it’s huge (>$60 trillion) and deadly. And when they start exploding they explode ad infinitum.

Unfortunately, none of the credit default swap risks are offsetting (since almost never done with the same counterparty). They are cumulative. The weakest player’s insolvency becomes everyone’s insolvency. The CDS infinite loop may be the unstoppable nuclear reaction that destroys all concepts of money, credit and trust that our economy, culture and society rest on.

It’s possible that the collapse in insurance company shares (MET, PRU, HIG) and certain banks (C) versus the relative stability of the Dow Industrials (green), reflect CDS risk.

And the fact that gold prices have been relatively stable for three months even as all other commodity prices tumbled also suggests an undercurrent of positioning for risk. At the edges, society is already starting to price for this instability. Cans of spam, shotguns and gold coins are in high demand. (Is there also a quiet run on penicillin and water filters?)

Sounds crazy, right? The collapse of a giant edifice of reason and rationalization is, by definition, crazy.

Untangling credit default swaps from Marketplace on Vimeo.

Also here’s an overview from This American Life.