RWC: Scotland Ahoy

Everything going nicely towards the predicted place in the finals for England. Sorry for poor old Andy Robinson & all that. (Actually, I'm not: a dreadful freudian slip from him in the immediate post-match interview - "we had the match under control in the second half ... that group of players let it slip ..." - bet that did wonders for morale in the camp)

So - will it rain ? Everyone will have been reminded of what happened in 2000. Then again, it rained for the France game in RWC 2003, and England humiliated 'em. As Clive Woodward said when the French blamed it on the elements: I've been to France, and it rains there too!

The only teams England actually fear are NZ & SA - one of which will be staking out the other finals slot, and will probably win. Which will it be ?

ND

Question Time early bird.

David Dimbleby is joined in Liverpool by Birmingham by Grant Shapps, Tim Farron, Caroline Flint, Janet Street-Porter and Peter Oborne.
Oborne annoyed a eurocrat so much that the poor man fled the studio.
There's even a good rumour going around that Mz Flint is about to lose her Shadow cabinet seat. If that could happen live on air it would make the show very X factor..{she deserves it the The HIPS idiot. }

BQs early guesses, subject to change etc.

1. Why is Red Ed "Anti-business as usual?" Miliband's speech of a lunchtime.
2. Blair - booed by party - exposed by Oborne. Does no one like 3 times PM Tony?
3. Euro bailout. Merkel and ECB say This is the final loan. Why does no-one believe them?
4. EU/Tobin tax - {unlikely two EU q's but one will morph into the other}
5. Rihanna strips off shock horror.

Update 30th Sept

September leader board.

{no change at the top..trailing pack closes up a furlong}

Botogol - 12½
BQ - 12½

Hatfield Girl - 11
Timbo614 - 11
Budgie - 11
Measured - 10½
CU - 9½
Miss CD - 9½
Nick Drew - 9½
Hopper - 9
Philipa - 8½
Hovis - 8
Malcolm Tucker - 8
Appointmetotheboard - 8
Sebastian Weetabix - 7½
Dick the Prick -7½
GSD - 7
Mark Wadsworth - 7
Miss S-J -7
Jan - 6

Woman on a raft - 4½
Andrew - 4½
Alex - 1½
&
Electro-Kevin - ½

Osborne: 6 Weeks to Sort the Euro - I feel a song coming on ...

So - Boy George has given 'em their marching-orders ! I'm sure they will snap to it. The *more mature* reader may know the wistful tune ... or should that be wishful ?




Try to dismember Greek debt by November
That ton of cash they beg and borrow
Serial offenders, they’ve been on a bender
They spent like there was no tomorrow
Tried to pretend they could endlessly fend off
The austerity which must surely follow
But in the end, ah, it’s something they’ll just have to swallow …

On the agenda of Eurozone members
To print more cash to make things mellow
New legal tender in all of its splendour
“Keep printing !” - hear Tim Geithner bellow
Who’s the defender of small private lenders ?
Joe Public is a luckless fellow
And in the end Euro-promises tend to be hollow …

ND

Tough times for retailers.

Game, the video games retailer, is hoping for a good Christmas to boost its flagging sales and revive the groups fortunes.

Aren't we all!

Game are about 10% down. Not bad really in the middle of a downturn and sales are poor almost everywhere. If you strip out Greggs {a C@W hot tip} and 99p stores {no, never tipped them..and it was so obvious even without the hindsight} then almost everyone else is flat or down. Game, is struggling to meet to the very poor sales of 2010.

Game blamed a combination of a "cyclical low point" for the sector, as new hardware is developed, and the tough economic backdrop as sales slumped by 10.5% to £558.8 million in the six months to July 31st. Losses soared to £51.5 million from £21.5 million as margins also came under pressure after it invested heavily in promotions to get sales moving.

In other words.. Its tough out there, there's no money about, what we've got on the shelves isn't great and we had to discount like crazy just to stay still.
Same for everyone. Summer sales came earlier and lasted longer and didn't do much for business. But without offers in the windows people weren't coming in.
So Game are hoping for a decent Christmas.

What worries me about Game is the amount of competition they face. The Supermarkets are very aggressive on price and have a much bigger footfall. Online retailers push prices down. Once released a game has about 4 weeks to sell before the heavy discounting starts as the Ebay/Amazon resell market kicks in.
And in the same high street, often the exchange stores are happily swapping blu-rays/old phones and old games for new, further forcing prices down.

Game has an excellent online and pre-order service. It really is 1st class. But by necessity it competes with its retail stores. Game, once the leading video games retailer is starting to have an HMV feel about it.

Directors of the group, which has 615 stores in the UK and Ireland, have committed themselves to the recovery by agreeing to spend at least 20% of their salary and fees to buy shares over the next 12 months.

Somehow that just doesn't reassure.

Video games players only bit here.
{ I don't think much of the all important festive line up. It looks like a 1980's ITV/BBC festive special. Instead of Morecambe and Wise or the Two Ronnies its Les Dennis, Blind Date, Cannon & Ball & Terry & June on offer.
Potential bestsellers include FIFA 12, Call of Duty: Modern Warfare 3 and Assassin's Creed Revelations. FIFA 12 ? The twelfth instalment..Ho-hum. Most people buy bi-annually and FIFA 11 was poor. MW-3? Up against many other FPS which almost EVERY new release now is . CoDMW-2 was an all time bestseller, but still.
Assassins Creed is also the 3rd or 4th instalment of a series that sold about 6 million units. Pretty good but a dance game sells 10 million or so. I may be biased because I didn't like assassins much. But in perspective Lego star wars and portal 2 have been top 2011 sellers.
Have I bought anything this year that I really liked? Top Spin tennis and ..erm.., erm..Angry Birds?}

Hasta la Vista

I am off on a business trip later today to sunny Spain. Hopefully, given the Euro crisis, it will still be there for the plane to land.

In the meantime I can see lots of developments of the rest of the week:

- Equity markets rally as they are bored of falling
- Then they fall again when they realise that Germany can't commit to the new EFSF without a referendum
- Then they rise again as the EU gives Greece its next bailout


By then it will be Friday and I will be back. (I will keep some Spanish Euro's as a memento.)

I have some questions on Gold though that Nick Drew may answer:

- How low will Gold go before this sell-off ends?
- Is this a good sign, gold only sold off like this in 2008 immediately post-Lehman - i.e. at the point of maximum pessimism - is this a contrary indicator?

Finally, a thought on the proposed Euro bail out. If Germany won't support the Euro then it should leave. The devaluation will be a better medicine than all the austerity for all the other member countries.

National Politics of the Bailout

Breaking news everywhere that at last a major plan for a Euro area bailout is coming together, a mere year after one was urgently needed. Perhaps the most interesting part is the role that the politicians of each nation are playing:

America - Led by Tim Geitner the US has performed its cavalry role. Coming up with the idea of leverage to help increase the EFSF bailout fund and to knock the heads together at the G20 to push forward a solution before the world markets meltdown in the abscence of any leaderhsip. Stereotypically, America provides leaderhsip and clever thinking, althought this time no money....

France - The IMF leader Christine lagarde if French, unsurprisingly she has been very down on the chances for the World Economy in recent days. She knows that France has the greatest exposure to Greece and unlike the Head of the Bank of France knows that, Common Agricultural Policy style, the only thing that is going to save France is tying everyone else into her future and getting external funds to assist.

Italy - In Berlusconi they have comedy leader of a comedy economy. Run by a mix of mafia and state backed businesses, the people have little chance of being successful entrepreuners - instead the girls queue outside the presidents office. Farcical and sad.

Britain - Not being in the Euro allows the ususal position of commenting from the side, whislt also knowing that our own economy is so weak that not finding a solution will condemn us to an even grimmer future than we know about. At least our downcast politicians have a grasp on reality, thanks to the death-experience of 2008.

Germany - The pride of leading Europe has now given way to a continual estimate of the costs of this leadership. Merkel and others come out badly, refusing to give to anyone else whilst running their own surplus, berating everyone else for not being German. In the end, all rests with them committing Germany either to fund the saving of the Euro or to walk away to a rerun of the late 1930's.


I find it both re-assuring and odd at the same time that crisis after crisis, the same national stereotypes play themselves out.

From the Electricity Front

The time-bomb is ticking but we are no nearer a viable plan for meeting our future electricity needs.

(1) SSE pulls out of the nuclear game. Well of course they do. And it's a cert that neither E.on nor RWE will be up for it either any more, given the pounding they are getting in Germany and their well-publicised shortages of capital; Centrica have voiced their (very sensible) doubts: which just leaves EDF, and the depleted GdF/Iberdrola JV now that SSE have deserted them. I could just about imagine EDF approving one new UK nuke in the next 2-3 years, if Crapper Huhne's new Capacity Payments scheme (due to be published later this year) attracts them sufficiently.

Now Huhne was hoping for 10 new nukes. 'Perhaps one, maybe' looks a bit thin in that context. There comes a point, and it may not be long now, when the required 'run-rate' of new investment becomes plainly infeasible. Actually, it is already, but not quite obvious enough yet, it seems.

(2) Miliband plans to re-introduce the Pool ! This is a real throwback - can nationalisation or the CEGB be far behind ? (An historian writes: the Pool, 1990-2001 was an intermediate step between the initial break-up of the CEGB's monopoly and the introduction of full bilateral competition in wholesale electricity by, err, Peter Mandelson, who did at least get something right. I may have played a small part in this ...) The Pool was rife with gaming and distorted price signals, and its abolition was followed by a marked fall in prices (and, in consequence the, *ahem*, bankruptcy of British Energy).

Still, no-one understands markets, so perhaps there is some rhetorical mileage for Miliband in this, who knows? Coalition 'energy policy' is so dire that we can hardly complain.

He is of course right that people are angry about energy price rises. Harnessing that for political purposes, whilst simultaneously trying to promote 'decarbonisation', is enough to defeat a medieval schoolman. It requires some fairly heavy-duty doublethink and since the departure of the Blairite masters of mendacity, I don't see anyone equal to the task. Certainly not Huhne.

ND

Friday Fun - Market volatility edition

Once upon a time, in a place overrun with monkeys, a man appeared and announced to the villagers that he would buy monkeys for $10 each.




The villagers, seeing that there were many monkeys around, went out to the forest, and started catching them.



The man bought thousands at $10 and as supply started to diminish, they became harder to catch, so the villagers stopped their effort.



The man then announced that he would now pay $20 for each one. This renewed the efforts of the villagers and they started catching monkeys again. But soon the supply diminished even further and they were ever harder to catch, so people started going back to their farms and forgot about monkey catching.



The man increased his price to $25 each and the supply of monkeys became so sparse that it was an effort to even see a monkey, much less catch one.



The man now announced that he would buy monkeys for $50! However, since he had to go to the city on some business, his assistant would now buy on his behalf.



While the man was away the assistant told the villagers, “Look at all these monkeys in the big cage that the man has bought. I will sell them to you at $35 each and when the man returns from the city, you can sell them to him for $50 each.”



The villagers rounded up all their savings and bought all the monkeys.



They never saw the man nor his assistant again, and once again there were monkeys everywhere.



Now you have a better understanding of how the stock market works

Question Time.

The Question Time show rumbles on. Its going to be another 'special.'
Liberal Democrat one this time. Conference season has begun.
David Dimbleby is joined in Birmingham by
Vince Cable, A C@W favourite. We call him The Gaffer after his many hopeless pronouncements. On the back benches he's known as MOG. {A play on Gladstone being known as GOM. The Grand Old Man. With Vince I think it means Mad Old Git.}
Harriet Harman, Soviet era apparatchik and one trick smack the pony.
Priti Patel, Conservative 'A' lister but an uneven performer. Usually speaks her mind.
Ian Hislop. Private eye editor. Straight man of the aging HIGNFY team but easily able to destroy anyone on the panel if he so wishes.
And Justine Roberts founder of Mumsnet, the surprisingly influential chatroom . {Its like Guardian online, but for women only. Mrs Q calls it Mums-nag.}. Married to Ian Katz, deputy editor of the Guardian, which is a fact missing from the wiki page. Odd, seeing as how mumsnet is about..erm..family mums.}

Best guesses this week come from Hopper, who remembered JR was on the show.
1. Coalition - were the LDs right to coalition with the Tories? Why haven't they been implementing more of their manifesto?
2. Economy - now the western economy is circling the drain shouldn't we be on plan B? I'd like a bonus point fit each time someone says "invest" when they mean "spend".
3. Dale Farm - why is the Daily Mail encouraging 'raceism' against harmless traveller folk.
4. Cage fighting - wouldn't it be better to have Cameron cd Miliband rather than 8 year olds. Sick society etc.
5. Mumsnet question - what biscuit does the panel take with their tea?

Update 23rd Sept

September leader board.

Botogol - 9½
BQ - 9½

Timbo614 - 8
Budgie - 7 ½
CU - 7
Miss CD - 7
Nick Drew - 7
Measured - 6½
Hatfield Girl - 6½
Hopper - 6½
Philipa - 6½
Hovis - 5½
GSD - 5
Malcolm Tucker - 5
Appointmetotheboard - 5

Woman on a raft - 4½
Sebastian Weetabix - 4½
Andrew - 4½
Dick the Prick -4½
Mark Wadsworth - 4
Jan - 4
Miss S-J -3
Alex - 1½
&
Electro-Kevin - ½

Follow on Twitter @BillQuango and a passing nod to
http://www.allseeingeye.net/2011/09/question-time-liveblog-22nd-september.html

This Is The Big One

Returning from an extended overseas stint to be greeted by a really excellent piece of news. Cuadrilla, the firm that has been drilling for shale gas in the Blackpool area, has announced its initial estimates of gas reserves in place. And it's a whopper: 200 trillion cubic feet. Recoverable reserves will be less, perhaps considerably so: but to put it in perspective, the Groningen field, at 100 TCF, completely transformed the Dutch economy** in the '60's and 70's and will last to 2080. The largest North Sea gas field discovery to date - the Troll field in Norwegian waters - was about 50 TCF recoverable, and has been supplying France, Belgium and Germany since the mid '90s, with many more productive years to come.

Earlier in the year I met some Cuadrilla executives, and I couldn't help noticing that they seemed to be wetting themselves every time they thought about what they were finding. Now it seems they will be able to afford some new underwear.

Among other things, this completely stuffs the logic behind Crapper Huhne's electricity market 'reforms'. The moment Cuadrilla's announcement is ratified to everyone's reasonable satisfaction, even to within half an order of magnitude, that is good cause to put a stop to the entire charade and go flat out for gas.

Pinch yourself, because if this discovery is for real the UK's economic prospects are transformed. It really could be that good.

ND

** some argue this was not for the best, but hey, it's a nice problem to have

Question Time liberal Democrat special

Question Time early bird.
No panel up on BBC QT site yet. I'm sure Dimbleby said it would include The Liberal Cable Guy and Ian Hislop. Plus others. If that's not a massive enough clue for you the show is coming from Birmingham, home of this weeks (Liberal Democrat Conference).

Global International Competitiveness

Here is a nice picture from a new report by BDO. It shows the top destinations in the world for investment, as ranked by CFO's of companies looking to expand. As expected, it is full of the stereotypes we have come to expect - Russia has cultural differences (mafia government), India has ethical issues (child labour), the UK has intense local market conditions (recession).

It is interesting to note though that somehow the UK manages to beat Russia and Brazil - so half the BRIC's and also comes in slightly ahead of France (although this reminds me of my train company this year hitting 80.003% service to magically avoid having to refund any of my tickets) - perhaps this report was not written in Paris. The US of course still does very well given the size and power of its market - again, interesting when there is so much current negativity around the US and its economy. Saudi, the Middle Eastern representative, still comes out last. From analysis like this I can see the Middle East falling behind like Africa as soon as the oil money is exhausted and looted by the current despots.

More QE fizz for the double dip?

This is certainly how Neil Hume sees it when the Bank of England stats showing how successful the intervention was. As someone whose badly smashed suckers portfolio is in need of a boost, QE sounds good.

On its own though, I don;t see how it helps to re-balance the economy at all, it does help keep up money supply, but it also rigs the system and leaves us with a future problem of unwinding all the assets that the Bank of England is borrowing today.

More radical is to do more QE - much more, perhaps another £200 billion, but to raise interest rates to 2%. This would keep up the money supply, but allow savers a rate of return and seek borrowing and lending normalise somewhat - an adjust away from the fantasy economy. In gross terms this will be less stimulative overall, but would cure some of the strange things that we now see (idiot borrowers like me well rewarded for taking huge risks, careful savers getting reemed).

Too radical for economists to implement though, sadly

Lib Dems mistake class war for policy

The Liberal Democrat Conference is generally the one which is either totally ignored of laughed at. The bizarrely split protest party often votes and discusses ridiculous measures and everyone else in the world just keeps adjusting to the end summer and the summer holidays.

However, this year again there is a change, as the Liberal Democrats are part of the Government and whilst they clearly ave no mandate to lead they do have a mandate to block.

Which of course suits them best as a protest party. Of course, some of them are not very keen on being in Government as this betrays their true ideology (which is itself a solid entity composed of random fads and policies from both right and left, topped with some populism for extra sauce).

This weekend the protest has been on attacking the Tories for the idea of lowering the top rate of tax below 62% (I am not writing 50% as that is a pure sleight of hand by the Government). In these hard times, how dare the rich get a tax cut etc etc. Now as it happens the Lib Dems would prefer to increase the 'tax free' element of income to £10,000. This is a real tax cut for the poor and middle income and has no benefit for high earners on more than £100,000 as the free element is already phased out. In fact, 2000, tax collectors have been hired to target the rich - given that most tax is evaded by super wealthy (as opposed to PAYE slaves), their expenses for trips to Geneva will add considerably to the national debt.

The real issue with the above is it is a load of tinkering. Cutting top rate of tax will cost £2 billion, out of an annual deficit of over £100 billion. It is loose change. The real changes and struggles are being ignored as per usual for political posturing - so important to political parties after all.

However, better for reality not to intrude into a bit of class war, someone please tell me what the Liberal Democrat policies are for:

The Euro Crisis (they still want to JOIN the euro?!)
The inflation dilemma and quantitative easing
Turning around UK growth prospects
Coping with a double dip recession

All of the above are the critical points by which we should judge a Government today - yet all this is lost in meaningless drivel about mansion taxes and other flam.

(Not that taxes are fair in this country, but the focus on 'high earners' is a shown as a pure bit of posture when one looks at the current non-domicile rules that only apply if you are rich enough not to work, and then enable you to live tax free - in fact winning non-dom status would make a great TV game show prize....)

The Euro crisis in pictures.

Posted by Budgie.
Original here.

ECB as seen by Germany. Is that "The Saviour" or "The last supper?"

Weekend post - Extreme Money Book review

 

 Satyatjit Das has delivered an epic work here. This book has not even taken me very long to read, which considering ho little time I get to myself is quite impressive.

The book is a tour de force through the history of modern money, but with the focus being on the 'financialisation' of the last 30 years. The book is split into four parts and each has a different angle.

Das is in many ways writing a text book and he tires to turn it into a readable story. For my money he succeeds even though the subject is the complex world of finance and he is delving into the workings of derivatives, securitisations, the sub-prime crisis, economic theories of money.

Whilst readable in its own right due to the elegant way he describes such complexity, Das lightens the tone with a cacophony of quotes from everywhere.Although I can imagine some will find these off-putting, they do help to deliver insight and comparisons. Das' own insights are clear and incisive, someone who has worked deeply in the industry and has the clarity denied to us as outsiders:

"Complex chains of transactions allowed risk and debt to move from a place where it was observable to places where it was hidden and unregulated"

"Short-term profits were pursued at the expense of risks that were not evident and would only emerge later. Financiers entered into increasingly destructive transactions, extracting large fees and leaving taxpayers to cover the cost of economic damage"

Perhaps to those who have followed the financial world of the past few years, this book will seem like something of a collation and with the same prognosis of a dark future as can be found elsewhere. But if you really want to understand the pointlessness of hedge funds, why bankers don't deserve their bonus' and why the Government's are so powerless this is a great read and text book background.

Das wrote in 2006 a book which predicted the credit crunch as it saw the issues in leverage and derivatives; this book sees the future as the Government try to reset the same system for as long as they can. It is not a book that will make you feel at ease with the world, but at least it is a cure for naivety.

Friday Fun - Reality Edition

Now often on a Friday we just post jokes or games, given a hard week at work the brain is too fried for more insightful comment..today though the real world stories are better than jokes and have the benefit of being true.

1 - Kweku Adeboli

Honestly, $2 billion in trades hidden by a middle office boy turned trader. Clearly he has passwords to the systems he should not and has been able to hide his positions (no doubt trying to gamble his way back from an original poor trade). How this can happen, to UBS - home of the $35 billion casino bank trading losses 2008-11 - is entirely understandable shocking.

Even better the platform he trades in is called Delta One - like some pathetic US shoot 'em up movie- this must have been named by some geek. We are near Skynet territory here!

Worse, the trades are Synthetic ETF's which have been regularly warned against for some time - see Gillian Tett here.

Anyway, it does not get much funnier than this - although this quote in The Telegraph - "This could happen to any bank" says senior investment banker - perhaps kills the laughter somewhat as the ineptness of those in charge or serious chunks of global funds is revealed.

2 - Central Banks flush the Money

Oh dear, finally the crisis headlines are hitting the main news items -  somewhat late but there we go. How crazy is the reality behind this. US Money markets and other have now stopped lending to Europe altogether so the Central Banks have stepped in. Much like the ECB stepped in when investors stopped buying Southern European Sovereign debt.
The egg timer is nearly done now, the unelected bankers are juicing the system to buy the Politicians time, but the Politicians are not doing anything with it by the looks of things. So it will still end in tears with perhaps the Central Banks left holding more of a baby than they want to. What a terrible state of affairs the World is in when the unelected and nonpunishable Central Bankers are able having to act in this way.

Happy Friday - did I miss any other funnies?

Update QT.

So, Its a Northern Ireland special. What are the pressing issues over there?
David Dimbleby is joined in Londonderry by
Owen Paterson, NI minister and business Tory.
Diane Abbott, Shadow unimportant post,
Nigel Dodds, DUP,

Martina Anderson ,Sinn Féin

Nicola Horlick , investor and financial pundit.

15th Sept

UPDATE

September leader board.

Botogol - 7½

Timbo614 - 6
Budgie - 6
CU - 5½
Measured - 5½
Miss CD - 5
GSD - 5
BQ - 5
Nick Drew - 4½

Woman on a raft - 4½
Hopper - 4
Appointmetotheboard - 4
Mark Wadsworth - 4
Sebastian Weetabix - 3½
Hovis - 3½
Hatfield Girl - 3½
Andrew - 3
Malcolm Tucker - 3
Jan - 2½
Dick the Prick -2½
Philipa - 2½
Miss S-J -2
Alex - 1½
&
Electro-Kevin - ½

Markets vs Governments.

Robert Peston was on R5 this morning. That interview has now been transcribed onto his blog.
In essence, Germany and France are staring into the ERM crisis, John Major style,and willing it to go away.
Its a test of credibility and recent statements from Merkel and Sarkozy haven't been credible. "Greece is integral to the Euro."

That's nice.

Any sign of those Eurobonds that might end the crisis?
Any cash to put behind those "the future of Greece is in the eurozone"' words?

Peston says " ..we will have to see whether Franco-German-Greco solidarity, that isn't backed up by hard cash, succeeds in staunching the flow of money out of Greek banks, and the total boycott of lending to the Greek state.

This emptying of Greek banks' coffers has shown that both professional investors and ordinary people are not prepared to wager that the euro is forever in Greece.

On current trends, the European Central Bank (ECB) will end up financing every single past and future loan made in Greece, because when cash leaves Greek banks, it has to be replaced by emergency loans from the eurozone and Greek central banks."

Robert also said earlier that the Greek people are taking money out of their banks and stashing it elsewhere. Under the beds. In German banks. Investments overseas. No one is investing in Greek companies. Greek banks are not even getting deposits in. If that really is the case then it can only be Eurozone life support that is preventing the collapse.
This can't go on indefinitely. The euro leaders need to get the damn balloon down before it goes bang, taking the Greeks, the eurozone and us with it.

Oh..the humanity!

Question Time early bird.

Do you feel lucky, punk?
After last week's dismal 'special' show this week's also throws up some uncertainties for the serious players.

David Dimbleby is joined in Londonderry by
Owen Paterson,NI minister and business Tory.
Diane Abbott, Shadow unimportant post,
Nigel Dodds,DUP, Martina Anderson ,Sinn Féinand Nicola Horlick , investor and financial pundit.

Tricky.

The China Syndrome

In the film The China Syndrome the plot worries about a meltdown at a Nuclear plant - one caused by a systems failure that causes an unstoppable chain of events leading to a meltdown and explosion.

Today, in a world of Global Economics, a different China syndrome is unfolding as this FT article shows:
“Countries should fulfil their responsibilities and put their own houses in order,” Mr Wen said. “Developed countries must take responsible fiscal and monetary policies. What is most important now is to prevent further spread of the sovereign debt crisis in Europe.”

Mr Wen has been begged by Italy and others to help them out of their Sovereign debt crisis. China is seeking to use it muscle to obtain better terms for its WTO membership in return. Also though, China needs to worry about the collapse of the West. Much like the Greece/Germany stand-off, the debtors have a good hand to play as well as the creditors. If China allows a series of defaults in the West then much of its export driven surplus will come to an end.

Moreover, with poor domestic demand, China will soon collapse into major recession. Especially as a Euro failure will also cause a US recession due to its banking exposure and already weak outlook. Interestingly, the real pain will be felt by those who export the most - China, US and Germany and least felt by those countries who import the most - their standards of living will drop as imports become expensive, but this will balance out as the glut of global exports works it way through.

To stop this chain of events from causing a global meltdown there is an answer, China and Germany need to rescue the debtor countries before their export markets collapse. Time is fast running out for them to do this as they prevaricate when faced with the need to abandon their mercantilist policies that have served them so well over the past decade.

Enter the Dragon - Again

"There will come a moment - who knows when, but China plays a long game - when some ghastly, Europe-threatening crisis arises (Iran? Turkey? or another financial meltdown?) and Europe is confronted squarely with its own flabby uselessness. Couldn't face down Libya unaided: & certainly can't face this putative future challenge, without contemplating some seriously bloody bayonet-work (and/or precipitous standard-of-living reduction). No stomach for that - and the US has decided it's had enough.

And then ... and then China or India has a quiet word in Brussels. Leave it to us, they say: and all we want in return is ..."

C@W 12 June 2011

"The chairman of China Investment Corporation, which was created to invest a portion of Beijing's $3.2 trillion in foreign reserves, met with Italy's finance minister last week in Rome, The Wall Street Journal and the Financial Times reported, citing unnamed sources. Italian Economy Minister Tremonti confirmed on Tuesday that he met officials from a Chinese delegation last week but declined to comment on the substance of the meeting. The Financial Times reported that Italy had asked Beijing to buy "significant" quantities of Italian debt to help calm market turmoil caused by worries over the sustainability of its €1.9 trillion debt load."

DTel 13 Sep 2011

And ain't Silvio just the man to do a deal ?

ND

The end of Free Banking in the UK - pre 2019?

One overlooked point from yesterday's Banking reform is that the funding requirements are changing for the UK banks. They have long pretended that the Universal Banking approach is what has allowed them to offer free Banking to UK customers.

Of course, the truth is somewhat opaque, but it is likely that the retail banks, which are in themselves profitable are able to make enough money from charges and the sales of ancillary products such as credit cards, insurance and mortgages to cover the costs of offering free current account banking.

However, the new regulations will indeed increase their cost of capital and so require profits to be found elsewhere - thus the sights are going to be firmly set on cutting free banking.

Sadly, this will be unpopular amongst customers - indeed this is the sole reason we still have this product in the UK. Now though the Banks are going to be able to blame the Government and new regulations, so it won't be their fault at all.

Therefore the end is in sight for free UK Banking on current accounts? But the new regulations won't be fully implemented until 2019 - so how long before the moves towards ending free banking start. I will be surprised if it still exists in 2015.

Independent Banking Commision Report

Finally today after almost a year of anticipation the Independent Banking Commission has released its report, a mere 363 pages (rather too much to digest with my cereal this morning). Pulling no punches it recommends the full ring-fence option for UK retail banks:

To achieve the purposes of ring-fencing, retail banking activities should have economic


independence. This requires, first, that the UK retail subsidiary of a wider banking group


should meet regulatory requirements for capital, liquidity, funding and large exposures on a


standalone basis. Second, the permitted extent of its relationships with other parts of the


group should be no greater than regulators generally allow with third parties, and should be


conducted on an arm’s length basis.

So Barclays bank in particular is going to see little point in continuing with its current structure. The move points to a break-up here. I think there is going to be less pressure on Lloyds and HSBC as the former has no investment banking and the latter is already a diversified structure. RBS will also have a Barclays type decision, but with Government ownership and other problems I think it unlikely they can do a split of the Bank in the next few years?

Lloyds is hit with a recommendation to change its current sale plan, as at 4.6% and with poor funding it won't been seen as creating a better competitive position.

As well as the ring fence, UK Retail banks are recommended to have 10% equity Capital and also 17-20% loss-absorbing capacity. These are beyond Basel III requirements. They also seem excessive for a retail bank where losses are big but rarely enormous - without doubt this restricts bank lending. Hard to know if it is excessive, but it does seem that it would stop the need for future taxpayer bailouts.

One main issue though is that in the UK it was Northern Rock - a non-investment bank - that started this whole problem through the use of 125% mortgages. this is not an equity issue, this is a business model issue that needs to be regulated more strongly and here the Commission simply refers to the new Prudential Regulatory Authority.

Finally, the commission allows until 2019 for the full implementation of its recommendations. Plenty of time to get the Banks to raise capital and chance structures.

The report is quite sensible overall and for all the barking of the Bankers to come this regime makes more sense from a long-term point of view to UK taxpayers.

Unfortunately there is a major crisis in Europe, right now, some of our banks are in danger of not making it to 2012 let alone 2019. The FTSE is down another 2.5% as I write...

Politically correct films

Ok slight mix up. But two winners.
DP And Calfy Ms Calfy goes first.

New theme Politically correct film/Tv /theatre
'Batperson Begins', The Goshparent Trilogy, and 'Dr. LGBTQ, Or How I Learned To Stop Worrying And Love The Bomb.

Easy Saturday morning

That thing that's going around Twitter.

Recompose a film title that now contains the theme "Euro."
The prize? You get to choose the next word.

Well, it beats work.

BQ's offerings:
A fistful of Euro's.
For a few Euro's more
Bring me the head of Silvio Berlusconi
The Chinese empire strikes back

Wars and Rumours of Wars

One of the most unnerving aspects of the apocalyptic conditions we must all and in our own ways somehow survive, is the inevitable tendency of the Big Players to pull every lever they have, act without warning, and generally lash out in all directions. They are, after all, trying to save their skins - and they still have some big levers within reach.

I point to just a handful of momentous recent actions, (and in my unseemly haste must leave readers to google the details for themselves - apologies, we normally offer a better service I know).

1. Chavez recalling his gold bullion from London

2. The IEA countries dumping their crude oil reserves

4. Switzerland holding a gun to its own head and daring the FX markets to do their worst (which unsentimentally they will)

3. The establishment by the Chinese of their new Pan Asia Gold Exchange, which seems to me the biggest signpost of all: they have in mind the Doom of the Dollar - and the means to bring it about.

When the elephants dance, ants and the humble punter can easily be crushed. The only upside as these developments explode around us is that sometimes they take a while to play out. But what do they mean ? I expect we all have our favourite theories and conspiracies.

In any event, the sands are shifting, the plates are moving, old certainties have limited shelf-lives, and instincts that have served well may no longer be enough.

How Marx would have enjoyed living today.

ND

Question time Competition: Official starting page

Standby..
Weeks of disappointment await!
Only one contestant will emerge victorious.

Reputations can be made.
Political giants may fall!
Anything can happen.
{But it will mostly be evasive and waffley answers, and clapping or booing at Pavlovian spin words, such as hardworkingfamilies or key-workers - The rich elite etc. }

Question Time returns on Thursday 8 September,10.30pm. 2011. David Dimbleby will be joined in London by
Liam Fox,{The left's latest hate figure. Fox in the box is usually good for a goal. An own one.}
David Miliband, {I did not have political relations with that madman!}
Richard Perle,{ He's had more ups and downs than the Dow Jones. But he can be entertaining}
Bonnie Greer,{Another American, by birth..British playwright. Riots and poverty and arts funding. But surely a Libya question here.}
Tariq Ali { Far left Trotskyist, Iraq war opposer,Tony Benn backer. But not nearly as barmy as that description should imply.}
and Christina Schmid.{Incredibly moving widow of her bomb disposal hero/husband Olaf}

This weeks star guest guesses come from
Sebastian Weetabix
1. Sacking troops/airman on duty - disgusting etc.
2. Riots - aren't they rich people's fault/down to oppression of minorities?
3. Why aren't we doing anything about Syria/ why is it ok to bomb Libya but not the wicked Israelis
4. Where is plan B/stop the deficit reduction plan?

Only 4 questions? Hoping to pick up an extra point under the obscure 4 questions or less rule, Seb?

*All previous thread entries are valid. Anyone additions made here will be noted.

September leader board.

Botogol - 4½

Timbo614 - 3
Miss CD - 3
Budgie - 3
Hopper - 2½

Woman on a raft - 2
Sebastian Weetabix - 2
Jan - 2
GSD - 2
Nick Drew - 2
BQ - 2
CU - 2
Appointmetotheboard - 2
Mark Wadsworth - 2
Measured - 2
Hovis - 1½
Hatfield Girl - 1
Andrew - 1
Malcolm Tucker - 1
&
Electro-Kevin - ½ {even though it didn't come up}

Obama. The one term President?

The First post has a story about how Obama is almost certainly going to be a one term President. It then has some polling data that doesn't show that at all.
MSNBC have a more accurate headline, Obama at all time low.

And they give a pretty succinct explanation of why.

After the bruising debt-ceiling fight — as well as Standard & Poor's subsequent downgrade of the nation's credit rating — Obama's job approval rating has sunk to a low of 44 percent, a 3-point drop since July. His handling of the economy stands at a low of 37 percent. And only 19 percent believe the country is headed in the right direction, the lowest mark for this president.

Capitalists@Work pointed out back in July 2010 and Nov 2010 that Obama was running himself into cul-de-sacs by fighting too many battles against very powerful, entrenched and self interested oppositions. He still continues to do so. The budget crisis, just another example. And that really hurt America. And the downgrade from S&P personally hurt Obama.

When the IMF bailed out the Wilson government it was for quite small beer. And the reasons for the bailout were caused by unforseen shocks and changes to the world. And hopeless government management of course, but we'd always had that.
What it did do is make the government look incompetent. And that's what the downgrade did to the Democrats. "They don't know what they're doing."

But the polls actually show a weariness with politicians in general. A whopping 82 percent now disapprove of the job Congress is doing.

I stand by my view that the US & the UK { unsupported last year by the readers comments to this blog} that its only the economy that will really matter. Deal with the economy, almost to the exclusion of anything else. Forget schools and healthcare and foreign wars and political fighting and just sort the economy. Or there won't be another term.
For the $ spent {and estimates range from $7 - 11 trillion dollars} unemployment should have moved more than 0.2% downwards since President Obama took office.
Voters want jobs. Jobs and security of employment.

Even the most hopeless and dislikeable of Labour governments, Brown's last two years, managed to do that. Obama's popularity has tumbled to just 42%. This is a deep plunge for someone who was lauded almost as a God when taking office.
Yet his persona, his likeability rating, is still 70%. A large proportion of Americans agree with at least half of his policies. His opponents are nowhere near ready to challenge him. He must surely still hold the centre ground as the GOP moves ever rightwards. So the chances for a second term must still be very positive, even though he is losing key swing states,like Florida. There is still time to pull them back.

But..

Its the economy stoopid!

And you already knew that before you took the job.