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Saturday, July 31, 2010

My Challenge To John Redwood

I left this comment on John Redwood's blog, in reply to 'New Banks Please'.
http://www.johnredwoodsdiary.com/?p=6753.

REPLY ON WHY BANKS WON'T LEND MONEY

The business of banking is to lend money.    This is always collateralised.  Mostly on property.  Banks will not seek  lending business collateralised on property if they believe that property is set to fall, which they do.

A house on average is worth £180k.   Banks insist on a 25% deposit and will only lend £135,000 - but if this house is repossessed and sold at auction, it will only fetch £120,000.  The bank is already losing money on repossessions.  If Property prices fall by 40% as they have in the US, the auction prices can tumble yet further to maybe £70,000.

Until the market has fallen, banks will not lend as they are already burning with huge liabilities which they fear will expose them to insolvency.

Even more so can the same be said about lending to businesses.  If sales turnovers get hit by a second leg of a recession, which seems increasingly likely with consumer confidence tumbling in the US and in Europe, the ability to service overdrafts, and business collateral will be shredded.

Again the second leg of the recession which will be far worse than the first has to happen before the economy can rebuild.  Share prices will probably halve and commodity prices, back to where they were before the bubble took off.  Look at a 30 year chart for any stockmarket or commodity to see where we currently are - the later stages of a huge credit bubble. (http://www.mrci.com/beta/index.php?option=com_mcdata&view=wrapper&source=/pdf/dji.pdf)

The good news is that economies always rebuild, but delaying the recession with huge bail-outs and trying to avoid the inevitable default of Greece and others is a waste of time and precious resources.  The Euro will collapse and there will be shock waves.  But delaying it will only make the situation worse, and the bust more violent.

Bankers are not dumb, and they know all this.  Vince Cable is trying to turn around a tsunami.  It will crash soon enough.  He should instead be getting people off the beaches, telling people to get into cash while they have time.

FREEDOM

John Redwood, blog-owner, is aware that wrong things are being done.  He said in Parliament that the new European Policing Powers amount to a loss of sovereignty.

He knows that he and all other Conservatives promised a referendum would take place in such circumstances.  Is he going to fight and make the proposal for a referendum?  Or is he going to be a lackey?

These things are remembered a long time.  If he is a man of principle, and he is, his principles should and will dictate the decision he is about to take, not temporary convenience.  Our freedoms are far more precious than money.  This is the moment to start fighting.


Open Europe -


The Home Secretary, Theresa May, this week announced that the UK will opt in to negotiations on the controversial European Investigation Order (EIO). This will give EU police forces the right to request that UK police seek out and share evidence on criminal suspects. The decision to opt in poses fundamental questions about safeguards for civil liberties and whether police resources will be put under undue pressure as a result. It was also the first major test of the Coalition Government's policy of deciding on EU justice and home affairs legislation on a "case-by-case basis". Furthermore, it certainly casts doubt on the Conservatives' pre-election pledge to repatriate EU powers over policing and criminal justice.














May has already admitted that there are parts of the EIO that the Government doesn't like. But, under the rules of the Lisbon Treaty, the final decision will be taken by qualified majority voting in agreement with the European Parliament, meaning that the UK will be powerless to veto unwanted elements or any new additions added by MEPs, for example. Once opted in, the UK cannot opt out if the proposal takes on a form with which it doesn't agree. Conservative MP John Redwood, speaking in the Commons debate, made the point that if the UK is not able to withdraw from the EIO, if the final product is "different to what was advertised", then opting in must surely represent a loss of sovereignty. (Hansard, 27 July)


UPDATE -


I left the above comment on this topic yesterday on John Redwood's blog, which he did not publish (too much pessimism about the banks for John's tastes.  He is very careful as a rule to sound as optimistic as possible.).  I left another comment today under his new post on sovereignty.
http://www.johnredwoodsdiary.com/?p=6746


I wonder if he'll publish me this time.  I merely said that as he called the new EU Police Powers a loss of sovereignty, this must surely trigger the referendum promised in the Party's manifesto.


Friday, July 30, 2010

Redwood Demands Referendum On Loss Of Sovereignty















OK, David Cameron.  Here is your chance.


You promised there would be a referendum offered to the British people on any loss of sovereignty to the EU.  Here we have just such a thing being proposed.


Open Europe -


The Home Secretary, Theresa May, this week announced that the UK will opt in to negotiations on the controversial European Investigation Order (EIO). This will give EU police forces the right to request that UK police seek out and share evidence on criminal suspects. The decision to opt in poses fundamental questions about safeguards for civil liberties and whether police resources will be put under undue pressure as a result. It was also the first major test of the Coalition Government's policy of deciding on EU justice and home affairs legislation on a "case-by-case basis". Furthermore, it certainly casts doubt on the Conservatives' pre-election pledge to repatriate EU powers over policing and criminal justice.











May has already admitted that there are parts of the EIO that the Government doesn't like. But, under the rules of the Lisbon Treaty, the final decision will be taken by qualified majority voting in agreement with the European Parliament, meaning that the UK will be powerless to veto unwanted elements or any new additions added by MEPs, for example. Once opted in, the UK cannot opt out if the proposal takes on a form with which it doesn't agree. Conservative MP John Redwood, speaking in the Commons debate, made the point that if the UK is not able to withdraw from the EIO, if the final product is "different to what was advertised", then opting in must surely represent a loss of sovereignty. (Hansard, 27 July)












John Redwood speaks politely.  But in truth, this is make or break.


Is Cameron to be trusted ? 

















It looks not.


http://synonblog.dailymail.co.uk/2010/07/cameron-goes-native.html


Redwood should push for the promised referendum.   If he doesn't, his credibility will be reduced, after stating he believes this situation comes within the terms of the referendum promise.  A summer rebellion is brewing.  It had better happen now.  It can either be a short violent battle, or a medium term grind.   A lot will hang on Labour MPs being willing to support.  If the government can be defeated, it would be a turning point.


Damn all those fools who voted UKIP, and kept the numbers of Conservative backbenchers down.  This is the only battle that counts.

















The Coalition Is Dead. Long Live The Coalition


Guiseppe Di Lampedusa, author of The Leopard

The despair of traditional Conservatives seeing Cameron selling us out to the EU is growing.  A good example of its expression is this from Gerald Warner on Telegraph blogs -

http://blogs.telegraph.co.uk/news/geraldwarner/100049234/if-the-tory-grassroots-do-not-waken-up-soon-david-cameron-and-nick-clegg-will-liquidate-their-party/

EXTRACT -

For Dave, on the other hand, it is not just business: it is personal. He has contracted a visceral loathing for traditional Tories, for the Turnip Taliban, for the “dinosaurs” in failed Cameronian candidate Joanne Cash’s terminology. Why has he succumbed to this emotional spasm? It can hardly be Gordon Brown-style chippiness, on the part of this rich Etonian descendant of William IV. Of course not: it is a different syndrome entirely, but one which produces identical results. It is the pseudo-conservative “wisdom” of Tancredi, the character in Giuseppe di Lampedusa’s The Leopard who says: “If we want things to stay as they are, things will have to change.” Dave has succumbed to Tancredi Syndrome.

Gerald Warner sees the end of the Conservative Party along with the Lib Dems, and the clique that rules will secure its position through sell-out to the EU.

But there are other possibilities.

Labour backbenchers are no less disenchanted with their party leadership, and their left-wingers share many of the goals of Conservative 'right-wingers' - such as the need for nuclear power in Britain's energy mix.  These two elements are beginning to cooperate to defeat the 'coalition's barmier and less acceptable notions.  The trend could accelerate into another, as yet unimagined coalition, one between the Conservative backbenches and Labour's backbenches, operating openly against their respective leaderships.

Coming economic events will bring about a greater anger against the incumbents than the expenses scandal generated.  The momentum is building and will find its expression.  Cameron and Clegg will be swept away, but so too will David Miliband, lover of the Lisbon Treaty.

Leadership could revert to IDS, who strikes the right tone for an economic crisis of gigantic proportions that the coming collapse of the Euro will bring in its wake.  He would be trusted by the Labour backbench.  Cameron, Clegg and Miliband will be washed down the plughole after fixing their colours to the EU mast, as it slips beneath the waves.

The rulers of the country will be MPs speaking from behind the front benches coming from all angles.  It won't be brokeback but breakneck.  They won't know what's hit them.

(Incidentally I coined the phrase 'breakneck not brokeback' which has been copied extensively in the last two days)

EARLIER

http://the-tap.blogspot.com/2010/07/conservative-right-wing-seeks-alliance.html

Hungary Tells EU To Bugger Off

We are so used to hearing of bad economic stories emanating from central and eastern Europe that it is nice to read the opposite occasionally, in this case coming from Hungary.   This from The Economist -

Current account in surplus. Employment rising, economy growing. Central bank reserves healthy. Budget under control. Compared with the chaos of a couple of years ago, that’s not too bad.


http://www.economist.com/blogs/easternapproaches/2010/07/hungary_and_imf_0

No one can say that Hungary has everything sorted as we would like, and the corruption there is as lively as in many other developing nations across the globe.   The interesting thing is that even with many Hungarians suffering badly from a decline in the value of the Florint against other western currencies like the Swiss Franc and the Euro,  after borrowing in those, the government has decided not to pussy foot around with the EU and the IMF.

it seems as though the Hungarians (or to be more accurate, the prime minister, Viktor Orbán) deliberately broke off talks with the Fund in order to grandstand as the champions of national interest against wicked outsiders. That’s troubling. Even Mr Orbán’s biggest fans don’t say that he is a great economist. He was last prime minister in 2002, when he presided over a ruinous spending splurge. He has not given an interview to The Economist for some time, but my impression is that he relies on a narrow base of advisers, and has perhaps not fully appreciated how much the world has changed, financially and politically, since then.

My suspicion is that the real argument is not with the IMF but with the EU


It seems that cocking a snoop at the EU is becoming popular in Hungary, as well as in Slovakia and the Czech Republic, as demonstrated by recent election results in those two countries.  Ordinary people are getting sick of powerful corrupt officials getting vast pay-offs.  This type of corrupt politician is now strongly associated in the minds of voters with the EU and all its works.

The Economist again -

Voters in the region used to shrug their shoulders and vote for the lesser of two established evils. Now they seem willing to risk something new. The common factor is disgust. They live decent, hardworking lives. As customers, they expect high standards for the goods and services they consume. And then they see big black cars with tinted windows barging along badly maintained roads, carrying people whose success owns more to connections and kickbacks than to talent. If I were rich, I would organise some exchange visits between tea-partiers in America and their civic-minded counterparts in ex-communist Europe. I think they would get on rather well.


ELECTIONS


Orban was only elected as recently as April 2010, as head of a centre right coalition.  It's amazing how in three short months, the Czech Repubic, Slovakia and Hungary have all elected three centre right regimes, all making strongly eurosceptic noises.  It's not only in the PIIGS that the EU is failing, it seems.  Its authority is crumbling even where economies are sound.  The fury of the One World Government will no doubt be visited on HUngarians, and their new Prime Minister will be taught a lesson.  The likely outcome of that will be that Hungarians will trust the EU and the IMF even less.  Inflicting economic duress has never been a great way to persuade peoples to sacrifice their independence.


http://www.newsrealblog.com/2010/04/12/48295/

Thursday, July 29, 2010

Britain (and Europe's) Economy Are Stuck

Take a typical British house today costing £160,000.  To buy you need a deposit of 25% or £40,000.  Banks know that property prices could crash as they have in the USA,  by 40% from their peak prices.  In the UK prices are only down by about 10% so far.  If prices fell further, banks who repossess would still face a potential loss even after taking a 25% deposit.  Repossessed houses sell for far lower prices at auction.

Result - banks are unwilling to lend.

Take the situation after a crash has happened, where the same house might be valued at say £120,000.  A deposit of £30,000 would be far easier to raise for a buyer.  The bank would know that the house price cannot fall much further, and would feel safe lending the money, as the deposit would cover any fall in value.

As banks are not lending because prices are likely to fall, it will be better for the fall to happen and get it out of the way.  Economies always bounce back after a crash.  The problem is now that no one is buying, and few can sell.  It's a classic situation where a price fall would benefit all parties.  Even sellers would know where they stood, instead of holding out for an unachievable price for years on end.

Why doesn't everyone agree overnight to cut house prices by one third?   Who would lose?  The seller could get a better house cheaper as well.

The crash is coming anyway.  Why not get on with it?  All these stress tests and bail-outs are only delaying tactics.  I own a few houses, but I don't care.  Less inheritance taxes to pay.

Reports show that banks have less money .........

Open Europe -


The Telegraph notes that a new report from credit rating agency Standard and Poor's has found that European banks have amassed €30 trillion in liabilities and now face a serious funding threat over the next two years as emergency support is withdrawn. Total liabilities are €23 trillion for the eurozone and €8 trillion for the UK, Sweden, and Denmark. The report notes: "ECB loans have contributed to a shortening of liability maturities. The result is a growing funding mismatch for the European banking industry".








French daily La Tribune also cites a report issued by the ECB showing that "negative spillover effects from the [eurozone] sovereign debt crisis appear to have worsened banks' ability to obtain funding".

In his column in FT Deutschland, Wolfgang Münchau argues that with a stricter definition of 'core capital', German regional banks (Landesbanken) would have failed the stress tests and writes: "I don't have the slightest doubt that the German banking system is in pure economic terms not solvent any more".



....and that consumers are less willing to borrow.

WSJ - Latest news on coming decline -


According to the survey, consumers are sharply more pessimistic about the economy in general and about their own financial situation in the coming year.
"Given that consumer confidence measures are normally good predictors of what the economy itself will do a few months later, the continuing slide in the index makes a double-dip recession look more of a possibility as each month goes by," said Nick Moon, managing director for Gfk NOP.
Fears over jobs and earnings also led to the first monthly decline in U.K. house prices in five months, according to U.K. lender Nationwide.
Its monthly survey showed house prices fell 0.5% on the month and rose 6.6% on the year in July. That compares with June's unchanged monthly outturn and 8.7% annual increase. Economists had expected no change for the month and a 6.9% year-on-year gain.
"A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources," said Martin Gahbauer, Nationwide's chief economist, adding that the outlook for house prices remains mixed.
But Bank of England lending data for June reported a second straight decline in the number of mortgage approvals--to 47,643, the lowest level since February. A slowdown in the amount homebuyers borrowed point to further price falls as well as fewer sales.
  

Meet The Milibands - Drac and Frank





Come on, photoshoppers!

How come these two ogres get away with it?  They look a bit kinda transylvanian, wouldn't you say.  I'm not being anti-semitic, just frank.  In fact I'm partly Jewish myself.   I know politics is merely showbiz for ugly people, but surely there are limits!!!

Wednesday, July 28, 2010

Quantitative Fantasy Doesn't Work

In 2009 governments reached for the cheque book and issued billions of so-called quantitative easing, to re-fund the balance sheets of insolvent banks.  Many people thought that this act of money-printing would alone lead to higher inflation.  But as the money was already lent out, and the point at issue was that the assets purchased by the borrowers no longer covered their debts, there was little increase in the money supply to push inflation.

On the contrary, while Wall St was bailed out, folks on Main Street found a sharp reduction in people willing to lend them money, and indeed most decided to pare down their debts anyway and start saving for once.  Money supply in the US is estimated to be falling by over 7% per annum, as banks and businesses lend less and less to each other, and people worry about job security.  Governments can issue money, but. if risk perception keeps people from lending and borrowing, there is little the government can do about it.

The current strategy is not to issue yet more money which has not fixed the problem, but instead to work on the market psychology, to try to persuade participants not to perceive risk.  The European Bank Stress Tests were merely an opinion offered by the EU that property prices will not fall in value in the next two years, so that European banks can value their loan books at full value.

Ergo European banks are not at risk.  

Ergo people might as well buy risky assets, borrow and lend to each other once more, thus recreating economic growth and saving government revenues and politicians' reputations.

The only problem is that reality is not stacking up with the lovely fantasies being propagated.  Property prices are unlikely to rise, or stay level across Europe.  Consumers are less confident in the US and Europe than they were, despite all these reassurances.  In fact the best way to get markets moving once more would be to allow prices to fall.  That way people would want to invest once more at prices they see as reasonable, not at credit boom inflated levels.

The insolvency of banks who lent too much is not an obstacle to recovery, but the path. A dose of reality would command far more respect than the issuance of false information from authorities desperate to avoid taking a financial bath.


WSJ -  Reality could also be sensed lurking around a data produced by the European Central Bank. This shows that lending to businesses slowing down and lending criteria tightening in the second quarter of the year. The key factors in leading the banks to tighten their credit policy, explains the ECB, are constraints on the banks' own access to funding and their own liquidity management.
Mr. King echoed the problem. "The gradual improvement in credit conditions that was evident earlier in the year seems to have come to a halt in recent months," he said.
Against this background, to race to ratchet up the capital and liquidity requirements on banks would be foolhardy. So the restraint at Basel is to be welcomed but not seen as a signal of good times ahead.
Basel 3 is being presented as yet more economic goodies from the candy store.   The second credit crunch approaches. 

Quangocrat Byles Set Up Gove

Byles lost control of his quango

The Mirror carries a story which attempts to ridicule Michael Gove.  Instead, it proves that Gove was set up by conspiratorial staff.   The article shows that the quangocrat who set up Gove knew exactly what he was doing.  He is now joining in the attempts to publicly humiliate Gove.

http://www.mirror.co.uk/news/top-stories/2010/07/28/michael-gove-s-snub-over-advice-led-to-gaffe-115875-22445435/

Tim Byles, Chief Executive of the Partnership for Schools body, which organises building projects, revealed yesterday he had urged Mr Gove to delay and doublecheck before he published. But the Education Secretary, becoming known as the most gaffe-prone member of the Government, ignored him.


With 'friends' like Byles, who needs enemies?  It's your job Byles to get the data right on your £500,000 a year salary.  And Gove's to present the policy.  Is that too difficult for you?  Then resign.  OK?   If we paid chickenfeed, we'd deserve chickens, but on your salary, we expect information to be given correctly.  I am sure your friends at The Mirror could find a place for you.  Writing Obituaries might suit, your own not Gove's.







American Voters Say 'Throw Em Out' As Anger At Public Salaries Grows

I joined a health club two weeks ago in the UK, as they had such a good deal on offer, and spending too much time on computers is not good for you.  After swimming a few laps, as I ease off in a jacuzzi or a sauna, I hear people talking.  Every day the talk amongst the other members is always the same, banks and money.  They are angry that while minimum lending rates have tumbled, retail rates have surged.  They are even more angry that they can't borrow much anyway without sizeable deposits, and that there is no work.

It's not a big sample, maybe six or so people over two weeks, but it is like a stuck record, and such a change from the confident almost arrogant Britain I left behind just a few years ago.

The recent stockmarket boomlet seems odd against this background,  with shares in Britain's FTSE rising 10% in two weeks, pushed up by rather unconvincing European bank stress tests, and reports of company profits rising.  The key to future prosperity, though is not how much companies have been able to cut costs, but consumer confidence.  And the story on that, if what I am hearing at the swimming pool each week, is that is in free fall.

This report from the USA shows that the confidence of consumers there too is diving.  The political effects according to the writer of a coming hard recession, will be to fell all incumbents.  Obama, Sarkozy, Merkel, Cameron will all be one term leaders.  There will be a far greater likelihood of countries electing women as their leaders from hereon.  Small parties will benefit, and society will polarise into camps which blame each other for the economic malaise.

Whether those theories are correct or not, the key element will be a growing anger, as people demand that the jobs of the privileged pubic servants who earn far higher salaries than those in the private sector are axed.  When people see how much has been borrowed by government and its agents during the credit boom, and as panic sets in, people will get angrier still.

In the USA these are the facts....






  • 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
  • 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
  • 24 percent of American workers say that they have postponed their planned retirement age in the past year.
  • Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
  • Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
  • In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
(Business Insider, 7/15)
... Then people tend to get agitated when they learn that some part-time city employees are earning $100,000 a year.
Yes, it's another "can you believe this?" financial story of a California town -- specifically, a suburb where one in six live in poverty. The struggling taxpayers in this community have been footing the bill for outrageous city worker salaries. Investor's Business Daily (7/26) reports that:
"...3 officials quit city jobs in poverty-stricken Bell, Calif., amid an outcry over their combined $1.6-mil salaries. Residents threatened to oust the mayor and 3 city council members who still make $100,000 a year for part-time work."
The city manager of Bell, which is southeast of Los Angeles, earns a reported salary of $787,000 a year.
Public outrage was expressed at a recent city meeting. The basic message: "Throw 'em out!"
This episode comes at a time when the National League of Cities, National Association of Counties, and U.S. Conference of Mayors are teaming up to get the federal government to pick up the tab for local government payrolls. These three groups, says Reuters, are aiming "to press Congress on pending legislation that would give them $75 billion over two years to preserve jobs."

With the November mid-term elections only a few months away, this level of public anger at government officials could dominate the outcome at the state and national level.

The same trends are starting in Britain and Europe.  Brits are normally phlegmatic and don't bother much with politics, but their trust and disinterest in public affairs has been badly abused, and the coming slowdown will be so severe that the slogan 'throw 'em  out' won't be long in coming over here.  I'll be watching out to see if it crops up in jacuzzi talk in the weeks ahead.

FT -  The broadly market-friendly newsflow came to an abrupt halt, however, as the Conference Board said its confidence index had fallen to 50.4 in July, a five-month low, from an upwardly revised 54.3 in June. The expectations component of the report dropped to 66.6 from 72.7.


Consumer confidence falling by near 10% in a month gives the picture well enough.  They say that 90 is needed for a healthy economy.  We might be looking at 40s in another two or three months from here.



Tuesday, July 27, 2010

Greece Hides 10% Of Workforce On Secret State Payroll

The reports coming from Greece as she tries to come to terms with her economy do raise a smile.  The IMF and the EU are encouraged by the 45% cuts in spending by central government, but the problem is that central government has little idea what goes on in local government.  No one in Greece has any idea, for example, how many state employees there are, and the government has authorised that a count take place.

Officially there are 700,000 out of a working population of 4.5 million.  But since the count started, another 50,000 have been 'discovered ' so far.  It is estimated that there could be over 1,000,000 in total to be 'found'!

WSJ -
Nikos Magginas, a senior economist at the National Bank of Greece, said- 


"As far as the central-government budget is concerned, the government is on target. But in the broader public sector there are a lot of gray zones and the troika will try to figure out where the hemorrhages are."


Specifically, the focus of the mission will be big deficits in the country's national health-care system and public hospitals, as well as spending by municipalities and local governments. Many of Greece's local governments have operated with deficits for years, and analysts fear their spending may rise further ahead of local elections set for October.
There are also concerns about Greece's deficit-ridden pension funds, some of which already have spent all, or close to all, of their allotted outlays for the year and will require transfers from the central government.
In a sign that Greece's government is still struggling to get a handle on the country's massive public sector, Athens last week announced it was extending a two-week survey aimed at counting public-sector employees. The census, which began in early this month, will now run until July 29, according to government officials, and has so far registered some 747,000 employees on government payrolls.

No one knows the exact number of public-sector workers in Greece. Until recently, finance-ministry officials estimated the entire public-sector work force, including central-government employees, local government employees and workers in state-owned companies, at around 700,000. But other estimates range as high as 1 million or more. Greece has a total labor force of about 4.5 million workers.


I bet the Germans will be pleased when they hear all this.  If they can hide up to 500,000 workers, I wouldn't doubt they could hide a few billions of debt here and there as well, either in banks or in local authorities.

See  http://the-tap.blogspot.com/2010/07/greek-10-year-bond-rates-soar.html

SEE Ambrose Pritchard Evans who points out that the stress test assumptions are based on fantasy, with property prices rising, despite collapsing credit.

Extract -


As analysts sift through the wealth of new detail from the tests, they are baffled by the chaotic criteria.





"We have a ludicrous worst-case scenario that Greek house prices fall by 2pc in 2011: when you first read it you think their must be a typo," said David Owen from Jefferies Fixed Income.

Austria's worst-case is a 2.7pc rise in house prices, or zero for Poland, and -2pc for Italy. Mr Owen said these assumptions would be demolished by a serious recession. Yet the tests assume that all eurozone states would contract at the same rate in a downturn. In reality, Club Med states and Ireland would almost certainly fare worse since they are already coping with the triple effects of debt-deleveraging, lost competitiveness, and fiscal tightening.

Markets are not reading the small print, just enjoying the rise in prices, no doubt nudged along by a little intervention here and there, while the EU rushes to grab any new members it can lay its hands on, before the real crisis hits home.  With credit collapsing, property prices are falling and banks' liabilities becoming exposed.  The process of bank insolvency has hardly started.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7911318/Spain-shines-on-stress-test-Germany-flunks.html

http://eureferendum.blogspot.com/2010/07/greeks-baring-rifts.html

Monday, July 26, 2010

EU Believes All Is Well



Greeks don't want austerity.  Italians don't want truth, and Germans don't want to be bossed around by EU officials.  Nothing inside the EU has changed with the results of the weekend's bank stress tests  Europeans are as European, and different from each other and unmergeable as ever they were.  The trick is to con everyone that the Euro and the EU are doing fine, and all players want to do that as long as they can.  Greeks like the bail-outs.  Italians don't want to have to face up to their debts, and Germans don't want the humiliation of being seen to have made mistakes.  No one is ready for a crisis.  Yet a crisis is still approaching, and is only delayed by the issuing of yet more debt to eurozone countries and banks that are not creditworthy.

The WSJ sums it up as follows -

The fact that only seven banks failed to pass is less relevant than the fact that the five Italian banks tested only squeaked by, as did Postbank, one of Germany's largest, and that Germany's eight landesbanken received a passing grade only because they "have yet to record a substantial part of total estimated write-downs," according to the International Monetary Fund. That relieves the pressure on a sector that German finance minister Wolfgang Schäuble says needs "an urgent reform."



 These regional banks are an important source of funding for Germany's small businesses. If they fail, the locomotive of the European economy might have a lot less fuel.



Song writers Rodgers and Hart were right that "the self deception that believes the lie" results in "no more pain, no more strain," at least for a while. But not permanently. It seem that the eurocracy has deceived itself into believing that all is well — it is, after all, easier to deceive others if you first deceive yourself. So the Committee of European Banking Supervisors, or CEBS, professes to find the results of the tests "rather reassuring" even though almost half of the banks that passed the test continue to "incorporate [in the required capital] a significant amount of government support." 
They've bought themselves a little more time.  That's all.

Wolfgang Munchau FT -


If you tried to test the safety of cars or children’s toys using the same method the European Union applied in its stress tests on banks, you would end up in jail. How so? Simply because the testing mechanism was calibrated to fix the result. The purpose of the exercise was to ensure that the only banks that failed it were those that would have to be restructured anyway.
At the same time, the supposedly clever idea was to demonstrate to the outside world that the rest of the banking system remained sound. The purpose of this cynical exercise was to pretend that the EU was solving a problem, when in fact it was not.
It is too early to judge whether the ploy worked. But from the informed reaction on Friday night, I suspect not. Expectations were not very high. But the EU undershot the lowest of them.

Conservative Right Wing Seeks Alliance With Labour MPs To Stop Brokeback Coalition

Opposition to AV is simmering away on the Conservative backbenches, while Labour opponents prepare amendments to be proposed.  A LAB/CON alliance between the left and right against the centre is taking shape on changes to the voting system, and could well sink the whole thing.

Next up, nuclear power versus wind farms.  This topic is a long standing hobby horse of Roger Helmer MEP, who is shocked by the inability of anyone to stop the removal of Britain's energy security in favour of bloody windmills.  These generate pathetic quantities of power at huge cost, while despoiling the countryside, and killing birds.

He's spotted a similar political trend approaching on energy, to that affecting the chances of AV.  Now that the Blair/Brown hegemony is smashed, their weird polices which were imposed on supine Labour MPs are suddenly coming under review, as if a large stone has been turned over and little insects are rushing around in daylight never seen before.

Labour MPs are noticing that the country is fast running out of reliable electricity supply.  Helmer's point is why is environmemtalist Energy Minister Huhne's views on windmills being given priority?  This could be the next occasion that an alliance between Conservative right wingers and Labour MPs sets the policy for the nation, and not the love-in alliance between Cameron and Clegg, the so-called Brokeback Coalition.

He writes -

The Coalition means working together.







By Roger Helmer MEP.
The former Labour government, after years of prevarication, had finally come round to accepting the need for new nuclear capacity – at least to replace old capacity coming to the end of its life, and perhaps to increase the overall contribution of nuclear to the UK’s generating needs.
But today we have Chris Huhne, former Lib-Dem MEP and now, bizarrely, the Energy Secretary in the coalition, telling us that we need more wind power, and insisting there will be no public support for nuclear.
Conservatives who sacrificed their shoe-leather canvassing for Conservative candidates last May did not expect to end up with a green Lib-Dem zealot as Energy Secretary, and they did not do it to see a massive increase in wind farms across our green and pleasant land. Huhne’s policies are untenable, and if he continues in this vein, his job will be untenable too. The phrase “criminally insane” springs to mind. Huhne may not be fiddling while Rome burns, but he is playing children’s games with wind-mills while Britain’s energy security is increasingly jeopardised.
In repeating his insistence that not a penny of public money should go to nuclear, Huhne omits to mention the vast subsidies that go to wind, in the form of Renewable Obligation Certificates – which unfairly bias the market for low-carbon generation in favour of wind and against nuclear.
In case you’ve forgotten the problems with wind, let’s summarise. Ideally we need generating capacity which is continuous and predictable, like coal or gas or nuclear. Tidal power is discontinuous, but it’s at least predictable. Wind is the worst option – neither continuous nor predictable. As some continental countries have found, increasing reliance on intermittent wind creates ultimately insuperable problems of grid management. And distributed generation creates the need for new investment in the Grid of around £10 billion, over and above the cost of wind farms.
Wind requires constant back-up – conventional capacity fired up and ready to go (known as spinning reserve). Maintaining this reserve means higher costs and higher CO2 emissions (and actually new conventional back-up capacity as well) – factors which wind advocates rarely take into account. Indeed they often talk in terms of rated capacity and omit to mention that on-shore wind typically delivers only around a quarter of rated capacity.
The Labour government had ambitious plans for wind, which many industry commentators said were simply unachievable. There isn’t the capacity to build and install new turbines at the rate envisaged. I am not aware that Huhne has addressed this problem.
Even if Huhne’s plan could be achieved, it would saddle the UK with unreliable high-cost electricity, creating a huge competitive disadvantage for the UK compared, say, to France, which is 80% nuclear.
And he forgets the fact that wind-farms despoil our countryside, create well-documented health problems for unfortunate local residents who have these monsters dumped on their doorsteps, reduce property values, and blight communities and homes and lives. What about localism, and our promises to pass more powers to local people? What about the power to say NO to wind farms?

Many people in the Labour Party (including the leader of their MEPs Glenis Willmott) support nuclear power. Most Conservatives I know support nuclear. Maybe Conservative and Labour MPs should have a pact to put nuclear first. Huhne needs to learn that being in coalition doesn’t give him and right to impose his ideological nonsense on the country at large.
comment on political betting
Is Helmer calling for a ConLab pact, now that would be interesting.


Huhne is that a Dutch name, only he does seem to be rather fond of Dikes.

Sunday, July 25, 2010

Gordon Brown Wants To Be IMF Head

gordon brown went to town
with his eye bags hanging down.
looking like a ghost, he said,'i'm toast.
i saved the world but lost my post.'

4 trillion pounds of national debt later, there are no sign of any regrets, far from it..........he still wants to splurge largesse.  perhaps they need a new santa claus this christmas.  if so, gordon would love the job.

http://blogs.notw.co.uk/politics/2010/07/brown-plans-his-own-memoirs.html

yet more mea non culpa from labour's all-time spending champions, while we all pick up the pieces.

the silly season required a silly poem to celebrate brown's silly interview.  and his forthcoming book -

http://www.heraldscotland.com/news/politics/brown-to-join-new-labour-s-post-defeat-publishing-rush-1.1043861?localLinksEnabled=false


EXTRACT - He said he came to terms with losing the General Election “quite quickly”, realising it was the end of an era.



Brown, 59, is considering a number of offers of academic work, such as visiting professorships, from universities in Britain and abroad.
It has been stressed, however, that if he decides to take up any of the offers they will be part-time, as he intends to continue as a constituency MP for the time being.

However, it has also been pointed out that if Dominique Strauss-Kahn, head of the International Monetary Fund, decides to challenge Nicolas Sarkozy for the French presidency in 2012, then he could vacate his position next year, leaving an opening for which Brown might find it hard to resist bidding.


OMG -  these New Labour  loons know no limit to their arrogance.   He's destroyed our economy.  Now he wants the whole world economy in his hands to create a global economic gotterdamerung.  We could end up with Blair as EU President, Brown as Head of the IMF, and Mandelson as Queen.