Is the end nigh for the Euro? [vol. 2]

[Mermaid]

I suppose the market has pretty much baked in a Greek default of some sort.

[1point7bar]

The only news not anticipated from Greece are good news or war.

[Crusoe]

German papers starting to get behind the calls to leave Greece to default.
"It's Time To End the Greek Rescue Farce"
http://www.spiegel.de/international/europe/0,1518,...

or an alternative to give them a small bit of the aid to stop them defaulting to give them time to enforce the wage cuts then require them to make.

German FT
"Germany proposes postponing majority of new Greek aid"

[HundredthIdiot]

Crusoe said:

German papers starting to get behind the calls to leave Greece to default.
"It's Time To End the Greek Rescue Farce"
http://www.spiegel.de/international/europe/0,1518,...

or an alternative to give them a small bit of the aid to stop them defaulting to give them time to enforce the wage cuts then require them to make.

German FT
"Germany proposes postponing majority of new Greek aid"

It's a bit odd that they are calling the Greek default a "bankruptcy", as that would imply that state assets are sold off to pay the creditors. I don't see that happening, instead the Greeks will just tear up their repayment obligations.

[bosscerbera]

HundredthIdiot said:

It's a bit odd that they are calling the Greek default a "bankruptcy", as that would imply that state assets are sold off to pay the creditors. I don't see that happening, instead the Greeks will just tear up their repayment obligations.

I love the perceptions around these kinds of things.

When Thatcher's government privatised a bunch of industries - notably our utilities - it was portrayed in a variety of ways ranging from empowering citizen Sids through selling citizens what they already owned to using the market to drive efficiency for the sake of conservation and consumer interest. All of it horseshït.

Britain's precarious public finances needed a shot of cash. Sucking it out of the private sector, spun as 'a good thing' worked. But it only works once.

So enamoured with laissez-faire market theory (something that was tried and dismissed as a failure over a century before) were our government/legislators that the reconstitution of the privatised Regional Utility Companies (RUCs) into a big handful of players, now virtually all owned by overseas operators, was not contested. Our energy security (sic) has never been more parlous than it is today - and it will get worse.

With 20-20 hindsight it is easier to see the family silver was sold off to pay down debt. State assets sold off to pay creditors. But not bankruptcy.

You can only sell the family silver once of course. Greece isn't the only nation without much family silver.

[Trommel]

bosscerbera said:

now virtually all owned by overseas operators

It seems ridiculous.

[speedy_thrills]

bosscerbera said:

When Thatcher's government privatised a bunch of industries - notably our utilities - it was portrayed in a variety of ways ranging from empowering citizen Sids through selling citizens what they already owned to using the market to drive efficiency for the sake of conservation and consumer interest. All of it horseshït.

Brave thingy to say here.

I can talk out of both sides of my mouth though because if I could control my own pension in a tax-efficient way (local tax law prevents me) utilities would be high up my research list. Can’t beat the slow tick of a boring but stable investment if you want certainty. We are going to privatize some utilities here soon, Chinese seem pretty interested (along with agricultural assets, probably for the same reason).

[bosscerbera]

speedy_thrills said:

bosscerbera said:

When Thatcher's government privatised a bunch of industries - notably our utilities - it was portrayed in a variety of ways ranging from empowering citizen Sids through selling citizens what they already owned to using the market to drive efficiency for the sake of conservation and consumer interest. All of it horseshït.

Brave thingy to say here.

I can talk out of both sides of my mouth though because if I could control my own pension in a tax-efficient way (local tax law prevents me) utilities would be high up my research list. Can’t beat the slow tick of a boring but stable investment if you want certainty. We are going to privatize some utilities here soon, Chinese seem pretty interested (along with agricultural assets, probably for the same reason).

NZ suffers the same kind of laissez faire ideology as the UK; by some observers' reckoning worse.

China sniffing around energy, food and water supplies.... what could possibly go wrong?

[speedy_thrills]

Though avoided some other traps.

The Chinese are playing the long game, they know that the world is relying on increased crop yields because the area of arable land worldwide is diminishing (the North-South water diversion for example). We in the west are playing a waiting game as well because we know that as Chinese workers are paid more their advantage will diminish and if wages stop rising the Chinese population won’t remain acquiescent for long.

The background is though that population age demographics (due to the one child policy and rapid human development) mean that by 2030(ish) Indians will outnumber Chinese and eventually the Chinese population will fall (the birth rate is already well below the replacement rate). So there is reason for the British to be optimistic if you can maintain financial sovereignty.

[LongQ]

bosscerbera said:

You can only sell the family silver once of course. Greece isn't the only nation without much family silver.

Unless you re-nationalise at some point. Presumably a good reason would be required. War would probably be the backstop. Insolvency might work anyway since the assets are not much good if they have maintenance costs but poor chance of reliable income.

After a few years they could be sold on again ...


Just a thought.

[Mermaid]

speedy_thrills said:

The Chinese are playing the long game, they know that the world is relying on increased crop yields because the area of arable land worldwide is diminishing (the North-South water diversion for example). We in the west are playing a waiting game as well because we know that as Chinese workers are paid more their advantage will diminish and if wages stop rising the Chinese population won’t remain acquiescent for long.

Interesting. Clearly the Chinese are playing the long game on so many fronts. They perhaps enjoy that we waste billions on wars & social benefits. & create useful precedents if they ever want regime change anywhere etc.

If their workers revolt, I suspect the Government will be resolute in how they deal with them.

Time is on their side, I feel.

[Andy Zarse]

The Telegraph are reporting some sort of ECB accounting debt trickery...

Here's a reasonable explanation of how it would work in reality.

http://www.mindfulmoney.co.uk/wp/shaun-richards/th...

"As I type this I am trying to remember the name of the computer leasing company which collapsed in the UK because it accounted for its profits and income up front and parked losses in the future. This was considered quite a scandal by the sort of people who are making this proposal……..And the difference is?

Where will the bonds go? Step forward the EFSF. So if the ECB writes these bonds down to a claimed purchase price of 70 and gives them to the European Financial Stability Facility it solves one problem for itself but creates one for the EFSF. It is in effect buying bonds for 70 which are worth 20. Not a triumph of bond dealing is it? So whilst it is holding these bonds an already weak ill-designed and troubled vehicle is made even weaker. My unstable lifeboat has just been made even more unstable.

So what happens next? Whilst bureaucrats may hope that this is the end of the matter there is an inconvenient truth which is that the current price of such bonds at circa 20 differs very much from the price the EFSF will pay of 70 and even more from a redemption value of 100. The EFSF can help very little at this point as it has no capital unless you feel that it will be possible to raise money by selling bonds to cover existing losses. Even the most myopic investor will see through that ruse.

So as you can see we have indulged in yet another game of pass the parcel with no real solution to the problem. We need another step to the process and unless the bonds can be repaid at say 70 someone has to take a loss. You could say that the whole Euro zone response so far has been to avoid precisely that and frankly you would be correct."

[bosscerbera]

Andy Zarse said:

"...You could say that the whole Euro zone response so far has been to avoid precisely that and frankly you would be correct."

Have another:

[Digga]

As I understand it - and my words may count for little more than the monkey that flukily manages to type the works of Bill Shakespear - the ECB is not allowed to engage in any sort of unsetrilised intervention, but the EFSF can. I think.

[Andy Zarse]

Digga said:

As I understand it - and my words may count for little more than the monkey that flukily manages to type the works of Bill Shakespear - the ECB is not allowed to engage in any sort of unsetrilised intervention, but the EFSF can. I think.

Well I suppose it could if it actually had any funds... which it apparently doesn't! (IIRC according to it's website it had so far only got about Eu14bn of the pledged big bazooka; can you see the Germans, let alone the Spanish, Irish etc, paying up now?)



ETA if you put that question to Shaun Richards on his blog above, I guarantee he'll answer it tonight, he always replies and welcomes new contributors.

[Steffan]

bosscerbera said:

Andy Zarse said:

"...You could say that the whole Euro zone response so far has been to avoid precisely that and frankly you would be correct."

Have another:

Oh Dearie Me.

As others have said the smoke and mirrors game is being shown in stark detail for the outright fraud that it is in the open markets around the world.

This cannot continue IMO. Unless the whole investment market is prepared to turn a blind eye to what is, in anybodies terms, wholesale dishonesty.

Moving investments, (well possibly investments more probably huge losses), about between connected parties has long been favoured by the Charlatans of the business world like Madoff, Maxwell, Bernie Corfield and so forth all over again.

It is dishonest, deliberate, knowledgeable fraud. Nothing more nor less.

No investor would actually accept such a practice unless he was seeking to hide losses that cannot be admitted in order to run away with the ill gotten proceeds.

The more I see of this corruption of financial markets the more concerned I become as to the effects that will be seen when the whole rotten edifice crumbles. This is bad and getting worse by the week.

[Mermaid]

Steffan said:

Moving investments, (well possibly investments more probably huge losses), about between connected parties has long been favoured by the Charlatans of the business world like Madoff, Maxwell, Bernie Cornfield and so forth all over again.

It is dishonest, deliberate, knowledgeable fraud. Nothing more nor less.

Bernie - have not heard his name in a while, the Charlatan of Charlatans.

[bosscerbera]

LongQ said:

bosscerbera said:

You can only sell the family silver once of course. Greece isn't the only nation without much family silver.

Unless you re-nationalise at some point. Presumably a good reason would be required. War would probably be the backstop. Insolvency might work anyway since the assets are not much good if they have maintenance costs but poor chance of reliable income.

After a few years they could be sold on again ...

Just a thought.

A bewildering hypothesis: re-nationalize something nobody in the nation owns. It's even trickier than Putin's 'Rosneft technique' - at least Lukoil was Russian. The only available method is, bluntly, to steal it ...war.

But in the case of utilities, seizing them is not much use given that the generation plants need imported fuels. And, anyway, the UK go to war? With what?

How might the UK re-nationalize that which French state-held Energie de France owns? In lieu of debts when France goes bust? Having pinched a major order from Britain's only two major manufacturing enterprises (after Britain's annual bribe failed to seduce the Indians) the French may rue the day they removed a means for British citizens to pay their utilities bills. Mr Bruni's sneer that Britain doesn't have any industry a few days before Dassault bagged the plane deal was perhaps prescient.

We live in interesting times - which is a Chinese curse isn't it?

[Steffan]

Mermaid said:

Steffan said:

Moving investments, (well possibly investments more probably huge losses), about between connected parties has long been favoured by the Charlatans of the business world like Madoff, Maxwell, Bernie Cornfield and so forth all over again.

It is dishonest, deliberate, knowledgeable fraud. Nothing more nor less.

Bernie - have not heard his name in a while, the Charlatan of Charlatans.

Quite right Mermaid I was an articled clerk at the time Mr Cornfield was spinning his web. A pal of mine worked for him, saw the for what it was, got out well before the trouble. He always had the highest regard for the then king of Pyramid selling.

Sign on my age I am afraid.

[Mermaid]

February 08, 5:58pm
Greek parties edge towards bail-out cuts
Leaders of Greece's fractious national unity government were on the verge of approving tough new austerity measures last night [Wed], one of the last hurdles to be cleared before eurozone officials can sign off on a €130bn bail-out and save Athens from a messy default.