Ben Bernanke, the Federal Reserve Chairman, has given the first ever Fed press conference.
In it he said that quantitative easing will end in June.
Quoted by the Telegraph he said:
"Why do more?"
However, as the Dollar continues to fall and debt continues to increase, the only large scale buyer of US debt on the market is the US government. As such, quantitative easing is destined to continue in some form or another.
Thursday, April 28, 2011
Wednesday, April 27, 2011
Greece In Danger of Defaulting
Figures reported by Eurostat on Tuesday show that the Greek deficit (10.5% of GDP in 2010) is worse than the 9.6% estimated by Brussels in February.
As pressure mounts, the yield on Greek debt continues to rise (15.5% on 10 year bonds); thus increasing the likelihood of the Greek government restructuring its debt.
Any restructuring of the debt (even if allowed by the EU) will in effect be regarded as a default on that debt.
As pressure mounts, the yield on Greek debt continues to rise (15.5% on 10 year bonds); thus increasing the likelihood of the Greek government restructuring its debt.
Any restructuring of the debt (even if allowed by the EU) will in effect be regarded as a default on that debt.
Tuesday, April 26, 2011
China To Overtake US
The IMF has issued a prediction that the Chinese economy will overtake the US economy by 2016.
The forecast, based on "purchasing power parities", shows that China's gross domestic product (GDP) will rise from $11.2 trillion in 2011 to $19 trillion in 2016, while US GDP will rise from $15.2 trillion to $18.8 trillion.
China's share of the global economy will rise from 14% to 18%, whilst the US share will fall to 17.7% over this period.
To add to America's economic woes, Standard & Poor's have downgraded US sovereign debt.
The forecast, based on "purchasing power parities", shows that China's gross domestic product (GDP) will rise from $11.2 trillion in 2011 to $19 trillion in 2016, while US GDP will rise from $15.2 trillion to $18.8 trillion.
China's share of the global economy will rise from 14% to 18%, whilst the US share will fall to 17.7% over this period.
To add to America's economic woes, Standard & Poor's have downgraded US sovereign debt.
Wednesday, April 20, 2011
EU Signs Its Own Death Warrant
The EU, despite the fact that its member states are implementing austerity budgets, is to ask its members for an additional 4.9% (£5.5BN) for its 2012 budget.
It is clear from this absurd demand that the European Commission has lost touch with reality.
The member states, even if they wanted to pay more, are in no position to do so.
The EU has, by this crass and greedy demand, signed its own death warrant.
No one will shed a tear when this bloated, corrupt, undemocratic and inefficient organ is consigned to the trash heap of history.
It is clear from this absurd demand that the European Commission has lost touch with reality.
The member states, even if they wanted to pay more, are in no position to do so.
The EU has, by this crass and greedy demand, signed its own death warrant.
No one will shed a tear when this bloated, corrupt, undemocratic and inefficient organ is consigned to the trash heap of history.
Tuesday, April 19, 2011
Cameron Blocks Brown
It seems Gordon Brown's hopes for heading up the IMF may have been dashed by David Cameron.
Cameron said that he will block Brown's bid, as the IMF required someone "extraordinarily competent".
Cameron said that he will block Brown's bid, as the IMF required someone "extraordinarily competent".
Friday, April 15, 2011
ECB Loses Touch With Reality
The Telegraph reports that Moody's have downgraded Ireland's debt rating by two notches to Baa3, adding a "negative" outlook.
The cause of the negative outlook?
The ECB's increase in rates!
As has been noted before on this site, the ECB is living on another planet when it comes to the current financial turmoil in Europe. Increases in rates (to appease the gods of monetarism) will cause more problems for the Euro; as those countries in financial ruin (eg Ireland, Greece, Spain and Portugal) cannot afford to pay the current rates on their debts, let alone higher ones.
Until the ECB is taken in hand, by those who live in the real world, this situation will worsen.
The other solution is for Ireland et al to leave the Euro.
Maybe this is what the ECB is hoping for?
The cause of the negative outlook?
The ECB's increase in rates!
As has been noted before on this site, the ECB is living on another planet when it comes to the current financial turmoil in Europe. Increases in rates (to appease the gods of monetarism) will cause more problems for the Euro; as those countries in financial ruin (eg Ireland, Greece, Spain and Portugal) cannot afford to pay the current rates on their debts, let alone higher ones.
Until the ECB is taken in hand, by those who live in the real world, this situation will worsen.
The other solution is for Ireland et al to leave the Euro.
Maybe this is what the ECB is hoping for?
Wednesday, April 13, 2011
Prudential Payout
The Telegraph reports that the Prudential is writing to 39,000 customers to tell them it issued incorrect valuations of their pension funds up to seven years ago, and offering them a total of £4M in "correction payments".
The Prudential said most of the affected policyholders would receive payments of less than £100, but 9,000 will get up to £500 while 100 others will be paid £2,000 or more.
Apparently, the mis-pricing errors affected Scottish Amicable unit-linked pension plans between June 2004, and December 2008.
Prudential, according to the Telegraph, assumed that ScotAm did the same but discovered as part of a routine audit that this was not the case.
There are a few questions popping into my head about this eg:
1 Why has a "routine" audit only now discovered an error dating back to 2004-2008?
2 Why is a "routine" audit being carried out on transactions that are several years old?
3 Why did Prudential "assume" that ScotAm followed the same procedures?
4 Did Prudential not perform a due diligence on ScotAm when the business was transferred several years ago?
I suspect that more will come out on this issue, and that the story will not quietly fade away.
The Prudential said most of the affected policyholders would receive payments of less than £100, but 9,000 will get up to £500 while 100 others will be paid £2,000 or more.
Apparently, the mis-pricing errors affected Scottish Amicable unit-linked pension plans between June 2004, and December 2008.
Prudential, according to the Telegraph, assumed that ScotAm did the same but discovered as part of a routine audit that this was not the case.
There are a few questions popping into my head about this eg:
1 Why has a "routine" audit only now discovered an error dating back to 2004-2008?
2 Why is a "routine" audit being carried out on transactions that are several years old?
3 Why did Prudential "assume" that ScotAm followed the same procedures?
4 Did Prudential not perform a due diligence on ScotAm when the business was transferred several years ago?
I suspect that more will come out on this issue, and that the story will not quietly fade away.
Tuesday, April 12, 2011
Inflation Falls
The Office for National Statistics (ONS) report that consumer price inflation (CPI) fell to 4% in March, contrary to the expectations of "experts" who were looking for a figure of around 4.4%.
Retail price inflation (RPI) also fell to 5.3%.
The reason for the fall is being attributed to the price war being waged between supermarkets, which has pushed down the cost of food and drink. Additionally, the rise in VAT has probably now worked its way through the system.
It would be folly indeed, given the poor sales figures being reported by the high street stores, for the Bank of England to raise interest rates in the near future.
Retail price inflation (RPI) also fell to 5.3%.
The reason for the fall is being attributed to the price war being waged between supermarkets, which has pushed down the cost of food and drink. Additionally, the rise in VAT has probably now worked its way through the system.
It would be folly indeed, given the poor sales figures being reported by the high street stores, for the Bank of England to raise interest rates in the near future.
Monday, April 11, 2011
Gordon Brown's Mea Culpa
The Telegraph reports that Gordon Brown has admitted that he made a “big mistake” in the way he tackled financial regulation before the banking system collapsed.
As noted many times before on this site, the tripartite regulatory system set up by Gordon Brown failed primarily because no one body that belonged to it (ie Bank of England, Treasury and FSA) was deemed to actually be in charge of it.
Brown's admission is somewhat late in the day to be of any value!
As noted many times before on this site, the tripartite regulatory system set up by Gordon Brown failed primarily because no one body that belonged to it (ie Bank of England, Treasury and FSA) was deemed to actually be in charge of it.
Brown's admission is somewhat late in the day to be of any value!
Friday, April 08, 2011
Portugal Asks For Help
Portugal has finally succumbed to pressure and, late on Thursday, asked the EU for an Euro 80BN bailout.
The European Union is to negotiate the terms with Portugal, once they have decided the scope at a two-day summit in Budapest.
The problem is that Portugal's caretaker government is unlikely to be able to pass the austerity measures that will be the conditions of the bailout.
The European Union is to negotiate the terms with Portugal, once they have decided the scope at a two-day summit in Budapest.
The problem is that Portugal's caretaker government is unlikely to be able to pass the austerity measures that will be the conditions of the bailout.
Wednesday, April 06, 2011
Moody's Downgrades Portugal
The ratings agency Moody's has cut Portugal's long-term rating to Baa1 from A3. To add to Portugal's woes, there are reports that Portuguese banks are threatening to stop buying government debt.
All of this comes as today Portugal tries to raise about Euros 1BN on the bond market in order to service its debts (before it tries to refinance them in the summer).
Thus the pressure is mounting, on whoever is running the country, to go cap in hand to the EU to ask for a bailout. Were this to happen the conditions of the bailout will be onerous in the extreme, and not likely to be acceptable to the people of Portugal.
All of this comes as today Portugal tries to raise about Euros 1BN on the bond market in order to service its debts (before it tries to refinance them in the summer).
Thus the pressure is mounting, on whoever is running the country, to go cap in hand to the EU to ask for a bailout. Were this to happen the conditions of the bailout will be onerous in the extreme, and not likely to be acceptable to the people of Portugal.
Tuesday, April 05, 2011
The Sinking Euro Ship
The Economist Intelligence Unit has issued a report which states that there is a one in seven chance that Europe's ongoing debt crisis will cause member nations to abandon the Euro.
However, the report manages to muddy the waters by also stating that there is a 50% probability that the eurozone will get through the crisis.
Given how close to economic meltdown some member states (eg Ireland, Spain, Portugal and Greece) are, and that the wealthy states (eg Germany) are thoroughly fed up with propping them up I would suggest that the one in seven probability is massively understated.
It should also be noted that the ECB is likely (despite all reason and commonsense dictating that it shouldn't) to raise interest rates this Thursday. Any increase in rates will worsen the economic situation, and make it even more likely that member states will abandon the ill fated Euro experiment.
However, the report manages to muddy the waters by also stating that there is a 50% probability that the eurozone will get through the crisis.
Given how close to economic meltdown some member states (eg Ireland, Spain, Portugal and Greece) are, and that the wealthy states (eg Germany) are thoroughly fed up with propping them up I would suggest that the one in seven probability is massively understated.
It should also be noted that the ECB is likely (despite all reason and commonsense dictating that it shouldn't) to raise interest rates this Thursday. Any increase in rates will worsen the economic situation, and make it even more likely that member states will abandon the ill fated Euro experiment.
Monday, April 04, 2011
Is Goldman Sachs Value For Money?
Goldman Sachs (described by some as a giant blood sucking vampire squid) is facing a call from four orders of catholic nuns to review whether the $69M pay awarded to chief executive Lloyd Blankfein, and other senior executives, is excessive.
The Sisters of Saint Joseph of Boston, the Sisters of Notre Dame de Namur, the Sisters of St. Francis of Philadelphia and the Benedictine Sisters of Mt. Angel own shares in the company, and have tabled the proposal for next month's AGM.
Mr Blankfein should have no trouble in allaying the fears of the nuns, as he once said that Goldman's was doing "God's work".
The Sisters of Saint Joseph of Boston, the Sisters of Notre Dame de Namur, the Sisters of St. Francis of Philadelphia and the Benedictine Sisters of Mt. Angel own shares in the company, and have tabled the proposal for next month's AGM.
Mr Blankfein should have no trouble in allaying the fears of the nuns, as he once said that Goldman's was doing "God's work".
Friday, April 01, 2011
Under Pressure
The results of the stress tests on Irish banks published yesterday show that the banks require a further injection of Euro 24BN, if they are to avoid collapse.
Allied Irish Bank will need the largest cash injection (Euro 13.3BN).
The money will be sourced from a draw down on the EU bailout package, and will signal the effective nationalisation of the banks.
This is all very well. However, the fundamental problems remain (no matter who owns the banks), namely the size of the debts and the fact that the Irish state does not have the money to cover the debts in the event of a further meltdown.
This action is merely putting off the day of reckoning.
Allied Irish Bank will need the largest cash injection (Euro 13.3BN).
The money will be sourced from a draw down on the EU bailout package, and will signal the effective nationalisation of the banks.
This is all very well. However, the fundamental problems remain (no matter who owns the banks), namely the size of the debts and the fact that the Irish state does not have the money to cover the debts in the event of a further meltdown.
This action is merely putting off the day of reckoning.
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