Here are my Top 10 links from around the Internet at 10 past 1 pm, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream.
1. Now Australia is worried too - Bloomberg reports Australia has announced a review of foreign farm ownership rules as it also worries about the buying demand from emerging economies such as China for protein-producing assets.
These are the sorts of concerns that weren't really addressed by the fudge agreed by the government here.
The risk is that investors and governments in emerging Asia use newly minted US dollars to buy land and other assets here and in Australia.
That would push up our currencies and destroy our non-commodity exporters.
This is the risk. We become 'landlocked' by our currencies' tight correlation with commodity prices and by our free-floating currencies.
That's why I think capital controls are necessary.
The Australian Bureau of Statistics will survey 171,000 agricultural businesses next year, Assistant Treasurer Bill Shorten said last night. The Rural Industries Research and Development Corp. will carry out a separate study on the history of foreign investment in the sector and the reasons behind it.
“This process will address some community concerns,” Shorten said in an e-mailed statement. “Whether there really are foreign ownership issues to be concerned by here or whether there is actually a gap developing between anxiety and reality is the key question.”
Nations are seeking extra farmland to meet a forecast 70 percent increase in food production expected in the next four decades. New Zealand in September tightened rules for major international purchases of farmland, requiring buyers to show how it would benefit the economy, amid a community backlash.
2. Privatising the profits and socialising the losses - RTE reports Ireland is receiving 85 billion euros of bailouts which it will use to nationalise its largest banks.
How long before the voters revolt. They are being used as cannon fodder to rescue the European and British banks.
The money will come from an €85bn facility provided by the EU and IMF and the remainder will be used to run the country on a day-to-day basis perhaps over a two to three year period. While the authorities are reluctant to fully nationalise AIB it will need significant new funds.
One option is that the State will be left with an 99.9% stake the bank in return for the new capital. It is also going to take some bad loans out of its AIB's UK subsidiary and try to sell the division again.
Bank of Ireland, currently 36% State owned, would become majority Government controlled, and authorities are hopeful of selling off EBS quickly.
3. Thinking the unthinkable - The world's biggest bond investor, PIMCO, suggests a run on Irish banks might be a possibility. Yikes. Bloomberg has the comment.
Ireland risks a “major bank run” unless European officials act quickly to calm the financial turmoil in the nation, Pacific Investment Management Co. (PIMCO) Co- Chief Investment Officer Mohamed A. El-Erian said.
“The numbers so far have shown that the Irish banking system has been bleeding deposits,” El-Erian said in Bloomberg Radio interview on “Bloomberg Surveillance” with Tom Keene.
“What you advise your sister in Ireland now is that you’d say take your money out of an Irish bank and put it in another bank headquartered elsewhere,” El-Erian said. “That’s what happened in Argentina and in emerging economies. People worry about their savings.’
4. New Deutschmark bloc? - Angela Merkel warned overnight that the euro faced an "exceptionally serious situation".
Some are now talking in this Guardian piece about a new Deutchmark bloc if the euro breaks up.
Jim O'Neill, chairman of Goldman Sachs Asset Management, warned that the Irish rescue package did not solve the problems at the heart of the single currency.
"Unless there's an underlying solution to not just the debt challenge, but also to … how European monetary union sits together involving all these domestic political partners, how can we forget about the problems lurking with Portugal and Spain," O'Neill said in a TV interview.
Other market experts were also concerned about the eurozone. Graham Turner of GFC Economics said the solution for weak members might be for Germany to walk away from the single currency. He suggested that Austria, Finland, the Netherlands and Germany could form a new deutschemark bloc which would allow the other 12 members of the eurozone to devalue and reflate their way out of the crisis.
"It has to be a better option than the present straitjacket of a single currency," said Turner.
5. Who's next? - Nouriel Roubini discusses on CNBC who might be next in any European contagion and asks who will bail out the IMF after it has bailed out the governments of peripheral Europe? Roubini also reckons Ireland and Portugal will have to leave the euro eventually.
"We have decided to socialize the private losses of the banking system. Now you have a huge increase in public debt—going from 7 percent to 100 percent of GDP. Soon it will be 120 percent." And, turning more broadly to the rest of Europe, "Greece is already at 120 percent."
Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt.
He says, "Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns."
Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems. Roubini characterizes super-sovereign intervention as merely kicking the can down the road. He says wryly: "There's not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone."
6. Insider trading probe - The mood of revulsion with Wall St practices is deepening as the latest insider trading probe of hedge funds and investment bankers widens to include the biggest and sharpest in Manhattan. Here's the WSJ's latest.
Money managers SAC Capital Advisors, Janus Capital Group Inc. and Wellington Management Co. have received inquiries in the ongoing insider-trading investigation on Wall Street. SAC, a giant hedge-fund manager run by Steve Cohen, received an information request, according to a person familiar with the situation. Janus Capital disclosed the inquiry on Tuesday in a filing. Federal investigators also requested general information from money manager Wellington Management Co. on Monday afternoon, according to a person familiar with the matter.
The inquiries come as a three-year insider-trading investigation shifts into high gear. On Monday, in coordinated raids in New York, Connecticut and Massachusetts, Federal Bureau of Investigation agents seized documents at the offices of Level Global Investors LP, Diamondback Capital Management LLC and Loch Capital Management LLC, The Wall Street Journal reported.
7. The mutinous Irish - Faisal Islam from Britain's Channel 4 is in Dublin to report on the crisis and captures some of the mood on the street.
The background to all of this is profound dissatisfaction with Ireland’s entire political class. The strength of feeling is incredible.
I have been stopped repeatedly in Dublin’s streets by apolitical locals who regale me with stories of which bank bondholder deserved to get burnt, and are mutinous about this political failure.
8. Read this to understand the rottenness in the heart of America which means it is effectively bankrupt both morally and financially.
It is a detailed story from the Miami Herald about a single case of a woman who is about to be evicted from her house after serial mortgage fraud by individuals and banks. The details are frightening and tragic.
All she wanted was $50,000 from the equity in her house to help pay the bills while looking for a job in nursing. What Imogene Hall got was a brutal lesson in the sometimes shady ways of the mortgage industry. It's a lesson learned by untold numbers of homeowners in Florida, epicenter of the foreclosure crisis gripping the nation.
``Everywhere I turn, someone else is scamming me,'' said Hall, a 49-year-old Jamaican immigrant who stands to lose her Miami Gardens home the Monday after Thanksgiving. ``All I do is work hard, and I get surrounded by thieves.''
A review of court records found evidence of misconduct at nearly every stage of Hall's experience. Consider:
• Johnson Cuffy, a former mortgage broker now serving an 11-year prison sentence for grand theft, handled Hall's refinancing in early 2006, using a strategy a state investigator described as ``outright mortgage fraud.'' He faces up to 30 more years in prison if convicted of 16 other mortgage fraud charges he's facing.
• The title agent who signed the crucial deed transfers that Hall's fraud claim rests on operated an unlicensed title company that stole more than $1.5 million from South Florida home buyers during closing proceedings between 2005 and 2007, according to Florida Supreme Court records.
• A man who listed his employer as a nonexistent Blockbuster Video store in New York somehow used Hall's home as collateral to secure a $230,000 loan from subprime lender Argent Mortgage.
• Hall's foreclosure was processed by the Florida Default Law Group, one of four Florida law firms being investigated by the state attorney general for using flawed documents to repossess homes from thousands of owners.
9. Kicking the can down the road - Ed Harrison at Credit Writedowns writes about how the only way that unsustainable economic situations are solved is through a crisis.
The way I see it, politicians are always focused on the short-term and that invariably means kicking the gas can down the road until it catches fire and you have to call in the fire department. Here’s the problem in Europe. The euro has acted as an internal gold standard to euro zone members in that it prevents governments from printing money and devaluing to escape economic hardship and it ensures that large fiscal imbalances cannot be sustained and eventually lead to crisis.
Now, the Europeans got themselves into the euro for just this reason – to create a more unified common market without governments free riding and weakening the currency. As a result, over the past ten years, the financial and trade relationships in Euroland have become deeply intertwined.
German banks operate in the Spanish mortgage market. French banks lend to the Greek sovereign. And Italian banks now own large parts of the German mortgage market. Of course, these ties go beyond the Eurozone to the UK, Sweden, Denmark, and Switzerland and well into eastern Europe too but its the euro zone with its restrictions on fiscal and monetary crisis where crisis has appeared first.
The EU has repeatedly tried to get through this crisis by making little fixes and tweaks without addressing the fundamental problems of excessive sovereign debt on the one hand and bank undercapitalisation on the other. They have their heads buried in the sand. Instead, politicians have argued that markets are acting like a speculating pack of wolves and creating crisis where none exists.
Well, the wolfpack is at the door and they are going to rip the Euro house to shreds unless the bank capitalisation and national solvency issues are addressed without trying to socialize the losses across the entire euro zone.
This CNBC video with fund manager Pippa Malmgren is enlightening on the European debt crisis
.
10. Totally relevant video - Now people are singing very prettily about the US dollar and QE II. We've had rapping so it make sense we should have a Renaissance style harpsichord-a-thon.
Can we re-Brettonate? You decide.
11. Totally hilarious video - For old times sake. Kim Jong Il: "Congratulations Team America you have stopped nothing."
52 Comments
Thought you might like this:
In the same way that everyone in the United States decided they “must” own a house, this belief was reinforced by continuously rising house prices. You can see how big a problem this became in big cities such as Beijing and Shanghai where the affordability ratio is horrible, so the property-value-to-income ratio in Beijing is pushing 15. In Shanghai it is over 12. If you look at the national average, it is over eight times.
TCR: Can you explain that ratio to our readers?
VK: You get the ratio by taking the property value and dividing it by annual disposable income.
Basically, if you spent all your money, after you paid your taxes, just to pay off the mortgage, it would take you 14 years – which means you didn’t pay for food, electricity, etc.
This ratio is important because it helps put the scale of the Chinese real estate bubble in its proper context. In Tokyo, at the peak of the massive Japanese bubble, the ratio stood at nine times. In Beijing it's already 14 times. In Shanghai it's over 12 times. The national average for China is pushing 8.2 times right now. So housing affordability is very, very low, and the housing prices are extremely high.
Here is another interesting piece of data: property investment in China in 2009 was 10% of GDP, up from 8% in 2007. In Japan, at the peak of its bubble, it did not exceed 9%; in the U.S. it never exceeded 6%.
A recent study found that 64.5 million apartments basically don’t use electricity because they are empty. Chinese people buy those condos, and they don’t rent them. Similar to new cars in the U.S. when taken off the lot, in China an apartment is worth less once rented out. So they just keep them unoccupied with the hope to flip them, and you know how that story ends.
TCR: Yes, after Japan’s real estate bubble collapsed, prices in the major cities fell by about two-thirds and have rebounded only very little from the post-crash lows.
Coutesy of John Mauldin quoting
Shadow over Asiaby David Galland, Managing Editor, The Casey Report
An interview with Vitaliy Katsenelson
In regard to number ...8...you have labelled Americans as morally bankrupt in the popping of a keyboard......
Might I suggest a little more thought when soiling on a Nation for the deeds of a few.......I'll remind you you'd be eating rice now .....if here at all.... if not for the efforts of those morally bankrupt citizens.
I find the remark offensive and request you censure it,..I am reporting the comment.
Get a life or go home. Either one will do. My wife's American and she ain't offended by reading this. You lamo
He got a point. Yanks saved our butt in ww2.
Good morning Justass....I see you have knee jerked your way into a little tete a tete Bernard and I have had that goes back aways....so your late on the pick up and understandably off the pace.
Just to help you out here.....I am home
and your wife is unlikely to be offended by much at all having spent any amount of time with person such as yourself.......her sensitivities will have been impaired accordingly.
if you wish to continue trading insults join the queue....the FAR QUEUE.
"...the only way that unsustainable economic situations are solved is through a crisis." Ed Harrison is right and this is exactly what is going on here in Noddy. English and Key will not act until they are forced to regardless of S&P comments....the rates need to rise to force the losses to be taken...this silly game of waiting for time to hide the Elephant has no end...the nearest English has come to saying so, is his comment about the recovery taking maybe another 8 years...he might as well say 18 years...
Putting up the ocr will drive home the losses on the banks and the overleveraged causing pain and job losses somewhere but at least it will bring to an end this 'state of nothing'....It will mean there is a real adjustment leading to the banks sucking a much smaller profit from the economy and allowing families to have some left over income.....why the hell can't the govt see this?
So, we need to ask S&P, Moodys and Fitch to put the boot in....they hold the key to shifting Key!
Christov
I'm sad you're offended. That wasn't the intention.
You are right we should be grateful for America's resolution and help during the Second World War. That was the greatest generation. They sacrificed for the future and saved. They did the right thing.
This one running America right now sacrificed the future to consume in the last 10 years.
Criticising the current American setup doesn't invalidate the achievements of FDR or the generation in charge then.
It created the Glass Steaggall Act and regulated the bankers into the box where they should be. That generation welcomed austerity and asked consumers to save rather than spend.
The Bushes, Clinton and Obama (and the elite behind) them did the exact opposite.
cheers
Bernard
I appreciate your response in context.....the headline could have gone a lot further to reflect the context of your intentions.
The World Bernard is becoming more and more morally bankrupt....it is the very nature of too many rats in the cage.....they will prey upon each other...
That said I'm off to lick my wounds a while.
Fair enough. We'll welcome you back.
cheers
Bernard
Don't stay down for the count , Christov ! The gloomsters will relish the prospect of you being away , so they can wax hickeysterically , with no one to say nay .
For what it's worth , I thought Bernard's derision of the USA was over the top ..... ........ But the silly fecker isn't a gentle non-judgemental soul , as you & I are .
Why can't these negative gloomsters comprehend the fact that positivity and hype will always vanquish reality?
Cos we failed to learn that covering the eyes made the monster go away!
Hmmmm , so what do we learn over-night from the good ole US of A : Consumer spending is up , incomes are up , and claims for unemployment benefits have fallen , again . Wow , good job that I didn't cover my eyes , or I'd have missed all that wonderfully good news .
And whats-up from Euro Land ? Well they're in a heap of poo ......... And all those fund managers who earlier in the year thought it was solved , have to pull the munny back across the Atlantic to America ................ That sloshing sound ain't the ocean , it's waves of moola , trillions of it , tsunamiing back to its rightful home .
And some plonker labelled America financially and morally bankrupt ........... Tisk , tisk : Shame !
Well guys it depends on where you learn your history. My version goes something like this.
USA wanted to enter into WWII but the public were against it. They contrived to starve Japan, an emerging and ambitious industrial power, of minerals thus forcing them to invade to get them. USA always knew that it would eventually lead to war with Japan. Japan for its part never intended a prolonged battle with the USA, but hoped to fight them to a stalemate and force a treaty, which would have included their access again to minerals. They came very close to their goals in the battle of midway.
Yes America saved us, but only from they got us into in the first place.
Their military police were also brutal towards NZ citizens during their residence here. Napier in particular had some rather distasteful skirmishes.
good comment, scarfie. it's obviously a lot more complex than that, but yours is a good summation.
Hugh, the real cost paid during that war is answered in this chart;
http://en.wikipedia.org/wiki/File:World_War_II_Casualties.svg
Bernard, Heard your comments on national radio yesterday re. the euro and ireland. You were wrong in your analysis on both counts for the following reasons;
1) the euro has boosted the economies of the participating countries, it should be adjudged by almost any measure, a sucess
2) however a single currency can be weakened (during crises) all to easily if there hasn't been consistent/persistent movement towards ever closer economic and political integration and (in the case of the EU) a stronger Euro. parliament and weaker Euro. council. Much blame can be apportioned to the british who did all theycould to prevent a stronger parliament at Maastricht in 1993.
3) inherently weak economies e.g Italy and others were able to join (at the outset) because of the lack of resistence from a strong centralised centre ! In the end both germany and France went along with the crock because tthe second tier economies had the power to significantly delay the currency's introduction
4) your comments re. ireland and german appropriate interest rates is lazy thinking. The lack of a willingness on the part of the Irish govt. (and nearly every other western economy incl.NZs) over the last 15 years to use micro policy to reign in runaway credit, lies at the root of the problem. Interest rates in the UK were at 3 times those of the euro zone for most of that period yet failed to stop runaway house price inflation. Western european (exception France) pursuing utdated monetarist, ultra neo con nonsense policies have been the cause of this downturn (and they persisted with those policies because they they believed in most cases that easy credit would payoff at the ballot box).
5) and at an individual level, look no further than good old fashioned greed ! speculation in the housing market has caused enormous harm in nz and created a spiv economy !
And please ! could people stop refering to Key as a "banker", the man was a currency trader !
by the way its widely understood in that profession that if you are still a curr. trader after 5 yrs, you are not going anywhere. its perceived as the lowest rung on the ladder, an entry point no more !
Westie,
1. "the euro has boosted the economies of the participating countries." Good luck with that when you wander into a pub in Ireland or a tapas bar in Spain and say it.
2. Blaming the British for the Euros problems is a little disengenuous.
3. Germany may well wish now it hadn't let into the peripheral laggard/parasite countries.
4. Ireland's property boom and bust was bigger than Britain's precisely because its interest rates were lower. I bet they wish they'd had UK interest rates over that time now.
cheers
Bernard
i just finished re-reading Liar's Poker - the Michael Lewis book about life inside Salomon Brothers. What surprised me was how then (1980's) as now, so many very bright people work in finance and yet they have no idea of the bigger picture and end up getting devoured by the tiger whose tails they are riding.
The growth of finance industries in the last 30 years has done far more harm than good and surely needs to loose it's position of prominence before we can become prosperous again. When the US (and us for that matter) were rich it was mr ford, mr deere, mr rockefeller etc who were paying the middle class a good wage to produce a good product. As messrs goldman, sach and tindall have filled out houses with paper and plastic junk we have gone downhill.
I guess the question is will the finance die off, as most parasites do, or will it be killed off by a shirty public?
Everyone who wants to understand the bubble should read "The Big Short" by Michael Lewis - it is even more important than his earlier books.
It all makes all the more sense if you have followed Hugh's press releases, read the Demographia Reports, etc.
These smart hedge fund guys probably used the Demographia Reports to work out which housing markets to "short" via derivatives.
The more I study urban economics, the more significance I see in "median multiples". Median multiples ARE "the truth" to which all the players are answerable.
It's all about INCOMES and what THEY can support.
If you ignore the median multiples, you're a b----y idiot.
I heartily agree on 'The Big Short'. It is the book everyone who wants to understand the financial crisis should read.
cheers
Bernard
Bernard,
1) the single currency gave both Ireland and Spain enormous growth opportunities that have been (partially) squandered by their respective governments. An unwillingness on the part of those governments to reign in the growth of credit (that seemed to ensure electoral success in perpetuity) lay at the root of the problem.
2) Thatcher and then Major (slightly less europhobic) did all they could to nobble the European Union. The British tactic has been (for the last 50 yrs with the exception of Heath) to "broaden the union to prevent a deepening of the union" ie consistently making the case for an increase in the number of member countries whilst at the same time preventing a strengthening of its parliament and other institutions (except the council) and the development of a strong constitution ! They were very successfull ! However the parliament and certain other insttit. if they had been present/strong/influential would have had a strong self interest in making sure the new currency had firm foundations
3) Kohl and Mitterand knew they had little choice
4) wrong again, its more to do with the relative size of the two economies, Ireland's being far smaller and a lot less broad at the base, distorted much more readily.
You need to travel beyond the USA a little more frequently Bernard, I hear the same stuff you are offering when I'm over there !
The EU is all about France and Germany at its most basic. Do not underestimate the French, they are masters at these games. The EU was part of French grand policy to seek to partner with, and therefore influence and control, the western half of Germany. The other part was to develop and maintain an independent nuclear deterrent.
This all worked fine until German re-unification, Germany and France were well matched and the union was good for both parties. The price of German unification was the loss of the cherished Mark and the creation of the Euro. Up to now this has worked ok but now Germany has spent 20 years sorting itself out and has now regained its rightful place as a major nation. This however creates a massive imbalance of power within the EU.
Just to finish,
I did economics at university probably round about the same time you did bernard and was served up the same "new monetarist reality" ala the chigago school, as orthodoxy, the last word ! Buddy, its bollocks !
Westie
That "Chicago School"'s got alot to answer for .... I think it's the same institution that wrestled planning away from architects and engineers - and into the hands of "schooled" policy-makers/bureaucrats. That school in it's most radical of proposals, even suggested a "fourth" arm to government - the executive, the legislature, the judiciary... and the planners!
:-)
somebody had to - architects and engineers feel bigger when they bigger, and bigger couldn't be kept going.
Read The Lorax, Kate.
1971.
Architects clamour for the Onceler's business, engineers design the super-axe-hackers.
He was a bright cookie, Theodore.
Some here haven't caught on yet - think Texas is heaven, progress is unlimited, and curtailments are always - simplistically - somebody else's fault.
Hehe... hadn't heard of it before - have just checked it out of the university library!
Interesting Kate as the Chicago School also applies to an Architectural style, that of sky scrapers. They didn't have a precedent as the technology allowed them to go to ever dizzying heights, so the made the style up as they went. I think the principles laid down by Lois Sullivan are ignored today to the detriment of our cities.
That's right - but I think Le Corbusier kicked that one off and the North Americans locked in on it.
Sorry I have to burst you bubble in that one:)
Sullivan was 30 years or more before Corbusier. Corb was misinterpreted in being assigned to inventing high rise living, whereas he never advocated living higher than six stories. However he is responsible for the disaster called zoning and the destruction of public communal spaces, which have been given over to commercial interests.
I guess is sums up the 20th C when its most influential Architect created the disaster we call cities today.
I really hope Hugh reads 'A Timeless Way of Building' as I recommended a while back.
ps does anyone know what a coal miner makes in a year?
i'm interested in how risk is priced in that employment market....
http://www.careers.govt.nz/default.aspx?id0=103&id1=J80272
Read it and weep.
sh!t.
that's lower than i thought.
says a lot though doesn't it?
There never has been a proper pricing of risk associated with labour value - as Marx pointed out so many, many years ago.
National Australia Bank and BNZ eye opportunities for New Zealand wool in China...comment box missing!
Sorry Wolly, fixed now.
I reckon the disparities in policy settings between US States, with California at the far Left, is creating similar stresses within the US Union, and with its monetary policy.
Texas is booming, simply because it has chosen to. California has chosen not to. So has NZ. Democracy is wonderful. "The people" can all assent to economic suicide.
Funny how its the conservative "neanderthals" in the Southern and Rural USA whose thinking results in the healthiest economies in the world right now, while the oh so superior sneering liberal elites provide guaranteed leadership into the gutter.
Though you were off to Lourdes.
Comment duplicated
I despise Lourdes just as much as I despise humanist socialism. So do the simple Christians of the Southern and Central States of the USA whose values and ethics have left them in the strongest economic position in the world today.
"Elephant in room" warning for all the sneering, intolerant, secular leftists whose poster child is bankrupt California.
Pippa is bang on right! Nice to hear someone from planet earth talking about this and trying their best to explain it to the obviously dumbfounded hosts
a commenter in the Telegraph,
Yup, even the German Press is starting to say the same thing. Die Tageszeitung, which I understand is pretty leftist, was quoted today in Spiegel as follows. And yes, this is not AEP writing, but you have to wonder if these guys read the DT :-) Where earlier countries with small currencies like the Irish pound had to pay high interest, suddenly the unified interest rate of the European Central Bank applied. This magical interest rate also remained very low, because the central bankers geared themselves not towards delicate, small Ireland, but rather towards stable, large Germany.
Europe, the euro was equivalent to the US's subprime securities. Both inventions promised a totally new financial world in which credit risks disappeared magically. Suddenly, consumption also seemed possible in financially weak social classes and countries, who, until then, had been shut out of the glittery world of capitalism. With a little bit of financial technology, the social questions appeared to be solved. Now, though, they have returned.
That's the real news behind the euro crash in Greece and Ireland. The austerity measures being taken by the governments there are affecting the weakest, regardless whether it means lowering the minimum wage or making cuts to social spending."
Investors can count, and they can see the size of potential losses in Europe. My guess is that we'll get just one more of these fake recoveries, and we'll have to put up with a week of the Euro fans crowing that the situation is "resolved", and then the investors will start to take a very close look at Spain.
Oh, and don't forget, if you have investments that you are holding at a loss, December is the month your broker calls every morning suggesting that you sell to generate a tax loss.
It is becoming clear that sovereignty is partly dependent on control of your currency. Germany is recognising this and will no doubt reclaim their currency for themselves. The low Euro has helped them be the world's largest exporter until last year (approx) but now the cost of this becomes evident - high inflation or leave the Euro and re-establish the Mark.
Our thoughts at Interest.co.nz go out to all the folks on the West Coast after today's tragedy.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10689834
:(
A very sad time and , perhaps, time to reflect on and offer our thanks to those whose daily work carries considerable danger. God bless you all.
I'm with you on that one Iain - a very sad day for NZ indeed. I guess it puts financial issues inperspective when this sort of tragedy hits NZ shores. May all the men and boys rest in peace.
I too thought they would all be out alive by now, what a tragedy.
Im still trolling through the Telegraph, this guy always seems to be ahead of the game, at least hes prepared to look forward a bit.
Jeremy
You say:
"If the Irish stress tests were a sham, what about the rest of the eurozone?"
This is an important question but the focus should not be the banks but rather on the solvency of EMU as a whole.
It really would be useful if you would take time out from attempting to focus our attention on the liquidity of banks to rather focussing our attention on the real problem - the solvency of EMU as a whole.
Here is my take on the situation.
The underlying insolvency of the PIIGS has the core countries of EMU in a boa constrictor-like grip. The periphery countries are in the final stages (no more than 3 months) of squeezing the life out of Germany, the Low Countries and France.
Spasms of wealth transfers to the periphery from the core are beginning to crush the core's own ability to create wealth.
Insolvency beckons all in EMU.
Like a drowning man the periphery has the core in a death grip and will drag them down with them.
The final death throws of EMU will happen in the following stages:
Stage 1: Portugal and Spain will begin the formal process of sucking further wealth from core EMU by Christmas
Stage 2: Before the Portuguese and Spanish bailouts have been agreed there will be a massive run on the Euro as anyone holding Euros recognizes that a once-in-a-lifetime opportunity is emerging for anyone NOT holding Euros.
Stage 3: With periphery and core EMU country banks, facing huge withdrawals and ex-EMU transfers to US dollars, Japanese Yen, Zimbabwe dollars (only joking but couldn’t resist it!), each EMU country’s central bank will face a decision to either formally fold itself into the ECB or to re-introduce its own currency. The German national socialists who run Brussels will be pushing hard to use this extreme crisis to capture all central bank functions across EMU.
Stage 4: The German national socialists will fail because national populations will suddenly see how close to disaster they have come and Europe will be a continent of sovereign currencies again. Holders of Euro denominated bonds will find themselves renegotiating loans in local currencies and taking a crew-cut in the process. How French and German banks will bleed!
Stage 5: As the dust settles those who escaped the collapsing Euro building by getting out in time will rush back in snapping up local assets in local currencies at huge discounts.
Stage 6: The real road to recovered solvency will then begin.
Easter 2011 will be a good time to celebrate this particular resurrection.
Now Jeremy please broaden your commentaries away for the narrow discussion of bank bail outs and how the UK has to support Ireland and start giving us your take on the solvency question.
Jonathan
And here we see the fly in the eu soup.....
"The ECB’s 22 council members must weigh the risk of destabilizing Europe’s debt-strapped economies by making it more costly for their banks to borrow against the danger of over- stimulating faster-growing countries like Germany by leaving policy loose for too long". (bloombergs)
"Oh that's too tight...now it's too loose....can't you pollys get it right....no not tight, I said right...oh for fecks sake"
Now for the soup inside the fly!
".... governments, corporations and individuals are dumping the depreciating dollar. That is what QE2 is all about and that is monetizing US debt, because fewer and fewer people will buy it. The Fed will end buying all the US debt and the dollar will collapse. In February, almost two years ago, we declared an inflationary depression. It’s still going on. There is no growth in America. What is spent is debt by the US Treasury augmented by the Fed. Purchasing power is dropping off a cliff and that means America’s standard of living is falling and will continue to fall. What will America do when the music stops? When no one will no longer buy US bonds? The Fed will buy them all eventually and that process is already under way. What happens if the Congress cuts back spending and austerity begins? That means cuts in many areas and higher unemployment and less consumption. That means a deepening depression. This shows you what few options the government and the Fed really have. They rescued Wall Street and banking and left the economy to shift for itself. If the Fed does not inject over $2 trillion into the economy GDP could shrink by some 18%. This is a consequence the Fed doesn’t dare tell you and the Congress about."
"..It is not that (American) people do not want to work but that there are simply few jobs available. 8.5 million of our jobs have gone to foreign nations with cheap abundant labor and they won’t return until we erect tariffs on goods and services. As a result 14.3% of adult Americans live in poverty. That is cash income before taxation of $22,000, or less, for a family of five."
Likewise. New Zealand will also have to suffer lower wages and a lower standard of living. Our real jobs have gone the same way as the ones in the States.
I thought their exports were picking up with their dollar being lower.
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