Despite that fact that the Euro and the members of the Eurozone are in financial freefall, the International Monetary Fund (IMF) has urged the EU to "complete the project of monetary union".
Hungary (which is not in the Eurozone) managed to add fuel to the fire by stating (via a senior politician) that it was near-bankrupt, the Euro is so mistrusted by the markets that this announcement caused it to fall further.
As if this was not enough, talks between President Sarkozy of France and Angela Merkel (the German Chancellor) have been postponed.
David Cameron will tell the EU, albeit very politely, to "fark off" wrt the request by the little known lightweight president of the EU (Herman Van Rompuy) to see the UK's budget before it is presented to parliament.
The Euro is destined to become a failed experiment, whether the IMF and certain Euro lightweights like it or not.
Tuesday, June 08, 2010
Monday, June 07, 2010
There Are Bad Times Just Around The Corner II
David Cameron has warned that the cuts that the government envisages making are going to be deep and painful, and that they will dramatically affect the way that we live our lives.
The Tories have quite rightly blamed Labour for the mess, and are shrewdly using this mess as an opportunity to push forward their social/political agenda (eg revisions to benefits and pensions).
Tomorrow George Osborne will announce a "once-in-a-generation" revolution that will involve a public consultation exercise on what people expect from public services, and where they think the cuts should fall.
Thursday, June 03, 2010
Europe Tries To Shoot The Messenger
The EU is less than pleased to see its pet project (the Euro) so badly mauled by the markets. As such they are looking to lay the blame at people's doors (anyone excpet for those who are responsible for the debt and fraud within the Eurozone).
Prime candidates for retribution are the ratings agencies, who have downgraded certain countries' credit rating.
As such the EU intends to fine the big three credit ratings agencies, and create a new state-backed competitor.
The agencies will be subject to a new European supervisory body with the power to issue fines and suspensions.
Shooting the messenger never works, and the credibility of a state backed ratings agency will be doubted from the very start.
Idiots!
Prime candidates for retribution are the ratings agencies, who have downgraded certain countries' credit rating.
As such the EU intends to fine the big three credit ratings agencies, and create a new state-backed competitor.
The agencies will be subject to a new European supervisory body with the power to issue fines and suspensions.
Shooting the messenger never works, and the credibility of a state backed ratings agency will be doubted from the very start.
Idiots!
Wednesday, June 02, 2010
BP Falls
As BP continues to fail to plug the oil spill in the US, its share price continues to fall. It has lost approximately 30% of its value in 6 weeks.
Eric Holder, the US Attorney-General, has announced that there will be a criminal and civil investigation to be conducted by the FBI and other federal agencies.
It is likely that if/as the share price continues to fall, BP will become a takeover target. Cynics are also suggesting that its US operations, despite (or maybe because of?) a very publicly hostile US administration, will become US owned.
As the old saying goes, never miss an opportunity to use a crisis to your own ends!
Eric Holder, the US Attorney-General, has announced that there will be a criminal and civil investigation to be conducted by the FBI and other federal agencies.
It is likely that if/as the share price continues to fall, BP will become a takeover target. Cynics are also suggesting that its US operations, despite (or maybe because of?) a very publicly hostile US administration, will become US owned.
As the old saying goes, never miss an opportunity to use a crisis to your own ends!
Tuesday, June 01, 2010
Euro Faces The Perfect Storm
Those whom the gods wish to destroy, they first make mad.
It seems that that the European Central Bank (ECB) has been affected by a bout of madness, by making an announcement that will further undermine its beloved Euro and the financial stability of the main countries in the Eurozone.
The ECB has announced that banks in the Eurozone face having to write off another Euro 195BN in bad loans over the next 18 months. The banks have already written off Euro 238BN.
Meanwhile, Greece has been urged by Centre for Economics and Business Research (CEBR) to leave the Euro and allow the revived Drachma to float downwards (thus absorbing some of the pain of its financial turmoil). Rumours are that discussions are already underway in Berlin, as to how a "graceful" exit can be achieved. Needless to say, "graceful" exit or not, German and French banks face serious losses as and when Greece exits.
Finally, as if for good measure, the President of Germany (President Köhler) has resigned; throwing Chancellor Merkel's government into chaos, and undermining Germany's political/financial stability and strength within Europe.
The Euro is going to face a very long, hot and uncomfortable summer.
It seems that that the European Central Bank (ECB) has been affected by a bout of madness, by making an announcement that will further undermine its beloved Euro and the financial stability of the main countries in the Eurozone.
The ECB has announced that banks in the Eurozone face having to write off another Euro 195BN in bad loans over the next 18 months. The banks have already written off Euro 238BN.
Meanwhile, Greece has been urged by Centre for Economics and Business Research (CEBR) to leave the Euro and allow the revived Drachma to float downwards (thus absorbing some of the pain of its financial turmoil). Rumours are that discussions are already underway in Berlin, as to how a "graceful" exit can be achieved. Needless to say, "graceful" exit or not, German and French banks face serious losses as and when Greece exits.
Finally, as if for good measure, the President of Germany (President Köhler) has resigned; throwing Chancellor Merkel's government into chaos, and undermining Germany's political/financial stability and strength within Europe.
The Euro is going to face a very long, hot and uncomfortable summer.
Friday, May 28, 2010
Eurozone Faces Politcal Turmoil
As I have long predicted, the Eurozone's concept of "one size fits all" wrt interest rates is leading to political chaos.
Eurozone countries, that are having to enact austerity measures in order to stay within the Euro, are facing growing domestic resistance to the cuts being imposed. At the very least Europe is set to be hit by wave after wave of strikes this summer coupled, most likely, with street demonstrations and chaos.
The policy of "one size fits all" can never possibly be expected to work across 16 divergent economies unless, by some miracle, they are all in sync. On rare occasions (eg by luck or fraud) sync can occur. However, the norm is that 16 economies will be out of sync.
Those economies that tether themselves to the Euro and, by definition, interest rates set by the ECB are denying themselves the ability to manage their way out of their economic doldrums by way of currency devaluation. All that they have left is the heavy handed tool of fiscal austerity.
It is hardly surprising that the citizens of the Eurozone are revolting against the dictatorship of the Euro.
Eurozone countries, that are having to enact austerity measures in order to stay within the Euro, are facing growing domestic resistance to the cuts being imposed. At the very least Europe is set to be hit by wave after wave of strikes this summer coupled, most likely, with street demonstrations and chaos.
The policy of "one size fits all" can never possibly be expected to work across 16 divergent economies unless, by some miracle, they are all in sync. On rare occasions (eg by luck or fraud) sync can occur. However, the norm is that 16 economies will be out of sync.
Those economies that tether themselves to the Euro and, by definition, interest rates set by the ECB are denying themselves the ability to manage their way out of their economic doldrums by way of currency devaluation. All that they have left is the heavy handed tool of fiscal austerity.
It is hardly surprising that the citizens of the Eurozone are revolting against the dictatorship of the Euro.
Thursday, May 27, 2010
Biblical Plague Hits Greece
It would seem that the gods are sending Greece a warning today, by way of a plague of frogs that have managed to close a main road.
I suspect that gods have seen that the wheels are already beginning to fall off the IMF/EU bailout wagon, sent to rescue Greece from its own self inflicted follies of fraud and living to excess.
It is reported that Greece is trying to renegotiate the terms of the pension reform stipulated under the terms of the bailout.
Greece wants the EU and IMF to agree that full pensions should be payable after 37 years of contributions instead of 40, as set out in the deal, and allow the reform to be implemented later than agreed.
It seems that Greece hasn't quite grasped the fact that the bailout deal has not been warmly welcomed by the EU member states (most notably Germany). Any attempt to renege on the deal, especially as the ink is barely dry on the paper, will send the markets into tailspin.
I suspect that gods have seen that the wheels are already beginning to fall off the IMF/EU bailout wagon, sent to rescue Greece from its own self inflicted follies of fraud and living to excess.
It is reported that Greece is trying to renegotiate the terms of the pension reform stipulated under the terms of the bailout.
Greece wants the EU and IMF to agree that full pensions should be payable after 37 years of contributions instead of 40, as set out in the deal, and allow the reform to be implemented later than agreed.
It seems that Greece hasn't quite grasped the fact that the bailout deal has not been warmly welcomed by the EU member states (most notably Germany). Any attempt to renege on the deal, especially as the ink is barely dry on the paper, will send the markets into tailspin.
Wednesday, May 26, 2010
Interest Rates
The OECD are calling for UK interest rates to be raised by the year end.
What's the betting that, if they are raised, the rates for savers are not raised?
What's the betting that, if they are raised, the rates for savers are not raised?
Tuesday, May 25, 2010
Euro Heads For Parity
The Euro is heading for parity with the Dollar, as markets become increasingly unnerved by:
1 The likelihood of Greece ever repaying its debt
2 The severe austerity packages being introduced in Europe (Italy has just announced a 3 years Euro24BN austerity plan), and
3 The rolling takeover by the Bank of Spain of certain small banks.
Markets, once they build up sufficient momentum, are difficult to stop. The Euro's days may be numbered.
1 The likelihood of Greece ever repaying its debt
2 The severe austerity packages being introduced in Europe (Italy has just announced a 3 years Euro24BN austerity plan), and
3 The rolling takeover by the Bank of Spain of certain small banks.
Markets, once they build up sufficient momentum, are difficult to stop. The Euro's days may be numbered.
Monday, May 24, 2010
The Shabby Habit - How Low Will a Bank Go?
Given the lousy, but very well deserved, reputations of many banks it is hard to find a story that actually plumbs new depths wrt how badly they treat their customers.
However, the Times reports that Santander has plumbed new depths in the way it mistreated one of its customers over the theft of £10K from her Abbey bank account.
"Emma Woolf, a longstanding customer of the bank, had £10,000 withdrawn from her account without her knowledge, but Santander, formerly known as Abbey, refused to refund the money and instead suggested that her fiancé, Jonathan Groman, had stolen the cash.
The bank relented and returned the money more than a year later only when the police arrested a Santander employee for fraud, after finding financial documents of customers in her home. But the bank agreed to pay back the cash only if Ms Woolf signed a confidentiality agreement. The bank also refused to apologise to Ms Woolf and Mr Groman."
It seems that the banks have yet to realise that the rules of the game have changed, and that they are no longer "respected" or "trusted" as they once were.
However, the Times reports that Santander has plumbed new depths in the way it mistreated one of its customers over the theft of £10K from her Abbey bank account.
"Emma Woolf, a longstanding customer of the bank, had £10,000 withdrawn from her account without her knowledge, but Santander, formerly known as Abbey, refused to refund the money and instead suggested that her fiancé, Jonathan Groman, had stolen the cash.
The bank relented and returned the money more than a year later only when the police arrested a Santander employee for fraud, after finding financial documents of customers in her home. But the bank agreed to pay back the cash only if Ms Woolf signed a confidentiality agreement. The bank also refused to apologise to Ms Woolf and Mr Groman."
It seems that the banks have yet to realise that the rules of the game have changed, and that they are no longer "respected" or "trusted" as they once were.
Friday, May 21, 2010
Germany Backs Bailout
Germany's lower house of parliament has approved the country's contribution to the Euro750BN rescue deal for the eurozone.
The upper house is expected to follow suit.
Ironically some are openly postulating that it may not be Greece that leaves the Euro first, but Germany.
The upper house is expected to follow suit.
Ironically some are openly postulating that it may not be Greece that leaves the Euro first, but Germany.
Thursday, May 20, 2010
Germany Cocks It Up
It appears that yesterday's unilateral declaration of war by Germany on "naked" short selling, which predictably sent the Euro tumbling, was rather more of a cock up than first thought.
Stephanie Flanders reports that Bafin, the German regulator, allowed news of the ban to leak on Tuesday, before the Germans had been able to brief other governments.
Suffice to say, such cock ups will not inspire confidence and the Euro will doubtless take another battering.
Indeed the whole exercise, as the Telegraph notes, has been somewhat pointless:
"The practical effect of the German ban is virtually zero, as these markets are largely based not in the eurozone, but in London, New York and Hong Kong. What's more, the new BaFin rules are so riddled with exemptions as to make the whole exercise meaningless."
I would emphasise that markets are not rational, but operate on three fundamental principles:
- Greed
- Fear
- Momentum
All that Germany has achieved is to scare people, and enhance the momentum towards selling off the Euro.
Stephanie Flanders reports that Bafin, the German regulator, allowed news of the ban to leak on Tuesday, before the Germans had been able to brief other governments.
Suffice to say, such cock ups will not inspire confidence and the Euro will doubtless take another battering.
Indeed the whole exercise, as the Telegraph notes, has been somewhat pointless:
"The practical effect of the German ban is virtually zero, as these markets are largely based not in the eurozone, but in London, New York and Hong Kong. What's more, the new BaFin rules are so riddled with exemptions as to make the whole exercise meaningless."
I would emphasise that markets are not rational, but operate on three fundamental principles:
- Greed
- Fear
- Momentum
All that Germany has achieved is to scare people, and enhance the momentum towards selling off the Euro.
Wednesday, May 19, 2010
Euro Panic Stage Sets In
I see that the "panic stage" that I warned of only two days ago has already set in.
However, it is not the markets that panicked first, but the politicians (whose panic has in turn spooked the markets).
Germany hit the panic button and "declared war" on speculators, including a ban on "naked" short-selling.
German Chancellor Angela Merkel warned of "incalculable" consequences if the Euro fails.
Needless to say the action of banning shorting, and warning of dire consequences if the Euro fails scared the hell out of the markets.
For why?
1 It is clear that the EU intends to curb free market activities, thus attacking the profits of the financial companies that operate in Europe.
2 Predicting dire consequences focused world markets' attention on the perilous state of the eurozone.
Quote:
"This challenge is existential. And we have to rise to it. The euro is in danger. If we don't deal with this danger, then the consequences for us in Europe are incalculable."
This is a remarkably foolish own goal by the Germans, which has kick started a market panic and sell off of the Euro.
However, it is not the markets that panicked first, but the politicians (whose panic has in turn spooked the markets).
Germany hit the panic button and "declared war" on speculators, including a ban on "naked" short-selling.
German Chancellor Angela Merkel warned of "incalculable" consequences if the Euro fails.
Needless to say the action of banning shorting, and warning of dire consequences if the Euro fails scared the hell out of the markets.
For why?
1 It is clear that the EU intends to curb free market activities, thus attacking the profits of the financial companies that operate in Europe.
2 Predicting dire consequences focused world markets' attention on the perilous state of the eurozone.
Quote:
"This challenge is existential. And we have to rise to it. The euro is in danger. If we don't deal with this danger, then the consequences for us in Europe are incalculable."
This is a remarkably foolish own goal by the Germans, which has kick started a market panic and sell off of the Euro.
Tuesday, May 18, 2010
Greece Receives Euro20BN
Greece has received Euro20BN, being the first tranche of the IMF/EU Euro110BN bailout package.
This temporarily may relieve pressure on the Euro and on Greece. However, it is merely buying time and delaying the inevitable exit by Greece from the Euro.
This temporarily may relieve pressure on the Euro and on Greece. However, it is merely buying time and delaying the inevitable exit by Greece from the Euro.
Monday, May 17, 2010
Euro Hit by Austerity and Debt Worries
The Euro is continuing to fall, as markets fret over debt and austerity issues within the Eurozone.
The Euro750BN EU/IMF rescue package has, as I noted last week, produced nothing more than a dead cat bounce.
Once the cats have firmly returned to earth, the next stage in market adjustment will be the "panic" stage (ie a sustained sell off of the Euro).
Like it or not, in order for the Eurozone to succeed in the long term, the 16 members' economies have to be in sync. Aside from the idiocy of Greece fraudulently fixing the numbers in order to gain entry, the "happy coincidence" of 16 such widely diverse economies ever being in true sync simply is never going to happen.
One centrally fixed interest rate/monetary policy will not fit all 16 members. The result of the economic imbalance between member states will be social and political meltdown, as already seen in Greece, in the weaker members of the Eurozone.
Der Spiegel have published an interview with Jean-Claude Trichet, the European Central Bank president, in which he says that Europe's economy "is in its most difficult situation since World War II or perhaps even since World War I."
One by one the weaker members (PIGS) will be forced out of the Euro.
Quite frankly, from their perspective and indeed from the perspective of the "core members" of the Eurozone (France and Germany), that will be the best possible thing that could happen for everyone.
The Euro750BN EU/IMF rescue package has, as I noted last week, produced nothing more than a dead cat bounce.
Once the cats have firmly returned to earth, the next stage in market adjustment will be the "panic" stage (ie a sustained sell off of the Euro).
Like it or not, in order for the Eurozone to succeed in the long term, the 16 members' economies have to be in sync. Aside from the idiocy of Greece fraudulently fixing the numbers in order to gain entry, the "happy coincidence" of 16 such widely diverse economies ever being in true sync simply is never going to happen.
One centrally fixed interest rate/monetary policy will not fit all 16 members. The result of the economic imbalance between member states will be social and political meltdown, as already seen in Greece, in the weaker members of the Eurozone.
Der Spiegel have published an interview with Jean-Claude Trichet, the European Central Bank president, in which he says that Europe's economy "is in its most difficult situation since World War II or perhaps even since World War I."
One by one the weaker members (PIGS) will be forced out of the Euro.
Quite frankly, from their perspective and indeed from the perspective of the "core members" of the Eurozone (France and Germany), that will be the best possible thing that could happen for everyone.
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