The Last Chance Saloon

The European experiment and the US economy both face zero hour.

This morning Germany and France claim to have reached a common position on a second bailout of Greece. However, unsurprisingly, no details have been released.

Notwithstanding the economic viability/credibility of this "accord", European leaders are holding a crisis summit today in Brussels in the vain hope that a solution that will save the Euro experiment will be found.

Meanwhile, across the Atlantic, as the politicians on Capitol Hill hold the US and world economy to ransom whilst they continue to bicker; the Federal Reserve is pro-actively preparing for the US to default on its debt.

Politicians on both sides of the Atlantic have failed the people that they claim to represent. As and when the Euro collapses and (quite probably) when the US defaults, the politicians will then engage in an exercise of passing the plate of blame whilst the people of the world suffer from the economic effects of their failure to show leadership.

This is the last chance saloon for the world economy, sadly the fate of the world economy is in the hands of politicians.

48 Hours To Save The Euro

The Telegraph reports that Chancellor Angela Merkel seemed in little hurry on Tuesday to resolve the Euro crisis.

There will be no "spectacular step" at the Justus Lipsius building on Thursday; just a "controlled process of gradual steps and measures", she said with unflappable calm.

All very well, if the markets were operating at "EU political speed". However, unlike the politicians, the markets have realised some time ago that there are only two solutions for the crisis:

1 The collapse of the Euro, or

2 The complete fiscal and political integration of the EU.

Merkel's statement will confirm to the markets that in fact there is no way that option 2 is possible. Hence, it is but a matter of time before the Euro collapses.

The Mad Hatter's Tea Party

The world economy stands on the precipice, thanks in no small part to the dishonesty and incompetence of politicians around the globe.

Europe faces the collapse of the Euro; as countries such as Greece, Italy, Portugal (which has just "discovered" a Euron2BN budget hole), Spain and Ireland are going to default on their debts.

Meanwhile in the USA, politicians (thanks in no small part to the pig headed intransigence of the Tea Party) continue to fail to raise the debt ceiling.

Wall Street has at last woken up to the very real danger that the politicians will fail the country, and fail to raise the debt ceiling in time, before the USA defaults on its debts. With no signs of progress from Capitol Hill Wall Street is now falling.

Welcome to the Mad Hatter's Tea Party!

The Greek Tragedy - Politicians Dither

As the results of the "stress tests" on European banks are digested, the markets have started the week in negative territory.

Aside from the fact that the "stress tests" appear to have been very "biased" in favour of a positive result, and the fact that Greece is quite clearly going to default, markets are particularly spooked by the fact that the EU continues to dither over what to do about the ongoing crisis.

Splits at the heart of Europe have developed over whether to cut Greece lose, or support it.

Realistically the EU faces two choices; either abandon the Euro experiment as it currently stands, or opt for full speed fiscal and political union.

Given that the latter requires significant political will, and given that the leaders of Europe cannot agree, it is clear that full-scale union will not happen.

Therefore the markets know full well that, at the very least, countries such as Greece will leave the Euro.

Helaba Throws Hissy Fit

German bank Helaba has stated that it will pull out of the EU's bank stress tests this week, in order to avoid public failure.

By stating that the bank will fail the stress test the bank has ensured that there will be a run on the bank (and probably others in Germany), thus causing the bank to fail.

Helaba were very foolish to make this statement, clearly they do not understand how markets work.

It is clear that the EU experiment is now reaching "crunch time" where it either falls apart, or moves towards full and complete centralised control of taxes, budgets, laws etc.

Greece Lowest in The World

Fitch has cut Greece's credit rating by three levels to CCC.

This rating gives Greece the lowest grade for any country in the world.

Default is now a certainty.

Ireland Downgraded To Junk

Moody's has downgraded Ireland's rating to junk, from Ba1 from Baa3. They are of the view that Ireland will need a secondary bailout.

Ireland now joins Portugal and Greece in the non investment grade hall of shame.

Unsurprisingly the European Commission has issued a statement "regretting" Moody's decision. However, as with all ratings agencies' predictions of doom, there is a very real danger that they become self fulfilling prophecies. The fact the the EC "regrets" it is irrelevant.

Corporate Culture Run Amok

The Telegraph reports that three investors in News Corp (Amalgamated Bank, the Central Laborers Pension Fund and the New Orleans Employees Retirement System) have filed a lawsuit against the company citing a corporate culture that "had run amok".

The possibility that News Corp paid money to the police in Britain could prompt an official investigation by US authorities into the company under anti–bribery rules. Needless to say there is now mounting pressure for News Corp to be run by people who are not part of the Murdoch family.

The lawsuit states:

"Throughout his tenure, Murdoch has treated News Corp like a family candy jar, which he raids whenever his appetite strikes."

News Corp now needs to ask itself, instead of ditching papers would it not be best to ditch the Murdochs?

The Long Hot Financial Summer

Italy is now in the firing line of the markets, as fear of Europe wide contagion spreads.

Meanwhile the clock is ticking on the debt ceiling farce in the US as a result of the childish and partisan stand off between the Republicans and Democrats.

It's going to be a long hot summer in the markets!

ECB Raises Rates

The European Central Bank (ECB) has raised interest rates by a quarter point to 1.5%, citing its fear of inflation (over recession) as the rationale for the decision.

The ECB's actions have, needless to say, pushed the financially beleaguered Eurozone nations such as Greece and Portugal further towards the precipice.

Cynics are of the view that the ECB's actions deliberately designed to force the weaker nations from the Eurozone.

Whatever the rationale, the decision in the face of the ongoing recession, is utter madness and will end in tears.

The EU "Does a Canute"

I am more than amused to see that the EU has taken mighty umbrage at the downgrades by the ratings agencies of Greece and Portugal.

Indeed the EU is so annoyed with the ratings agencies that Jose Manuel Barroso, the European Commission president, all but declared that it was an Anglo Saxon conspiracy by all ratings agencies.

All very nice for the soundbites, maybe. However, he conveniently forgot that Fitch is in fact French.

The EU and its whinging ministers have as much chance of turning the ebbs and flows of the markets as Canute did the sea. Unless the EU understands that point, the EU experiment is doomed to fail.

Portugal Goes The Way of Greece

Moody's have cut Portugal's credit rating by a "whopping" four notches, from Baa1 to Ba2, with a negative outlook.

There are now expectations in the markets that Portugal will need a Greek style second bailout.

Self fulling prophecies are very dangerous!

The Great Energy Rip Off

Energy companies regularly use rising wholesale prices as a justification for why they raise energy bills for customers.

However, the calculations by which the "justify" their price increases are utterly incomprehensible. As such OFGEM have hired forensic accountants to scrutinise the wholesale fuel prices paid by the "Big Six" energy companies.

Given that OFGEM can't understand the pricing structure of the energy industry, how are we poor saps (the end users) meant to understand it?

Q: Why do the energy companies make it so complicated?

A: RIP OFF!

The Tragedy of Joining The Euro

Standard & Poor's (S&P) have stated that the French plan to allow Greece to voluntarily change the terms on some of its debts would constitute a default "under our criteria", albeit a selective default (as the change would only apply to French banks).

Couple this with the privatisation plans and changes required to the tax system etc, in order to ensure that it receives a second bailout, Greece has all but relinquished sovereignty over its own affairs.

That is the price for wanting to be part of the Euro club, and for committing fraud in order to join it!

IDS Backing Britain

Iain Duncan Smith, the Work and Pensions Secretary, has called for business leaders to take on young people coming off welfare and "not just fall back on labour from abroad".

That's all very well, and all very patriotic. However, it ignores the elephant in the room concerning the quality of British youth.

The Telegraph quotes The Director General of the British Chambers of Commerce, David Frost, who said business leaders knew there was a problem with youth unemployment but they could not afford to ignore cheaper skilled foreign workers.

He said businesses expected "young people to come forward to them who are able to read, write, communicate and have a strong work ethic and too often that's not the case.

There's a stream of highly able eastern European migrants who are able to take those jobs and that's why they're taking them on.

They are skilled, they speak good English and, more importantly, they want to work."

IDS has also ignored another issue, namely the fact that membership of the EU (in theory) entitles British people to move freely around Europe looking for work and vice versa.

Is he calling for us to leave the EU?