The one hundred and fifty sixth weekly "No shit, Sherlock" award

This week's award is presented to Moody's for the insightful comment that an increased ‘Haircut’ on Greek debt would hurt banks.

"No shit Sherlock

Thank heavens for Gordon Brown not being Prime Minister any more and Ed Balls not being anywhere near the Treasury

10 year government bonds when the coalition came to power 11/5/2010: UK 3.97%, Italy 3.92%. Now UK 2.26%, Italy 7.00%.

What if we had had a continuation of the last Labour government's wasteful spending and insane borrowing plans?


A question for Ed Balls?

Ireland, Greece, Portugal, Spain, Italy...

and now France?

'France's Finance Minister Francois Baroin said Tuesday that the government would do everything in its power to maintain its triple-A rating after Moody's warned it may place the country on negative outlook.

"We will be there to preserve our triple-A rating... We will do everthing in our power not to be downgraded," Baroin told France 2 television after Moody's issued the warning, saying France's financial strength had weakened.

...

Moody's fired a warning shot at France on Monday saying it would determine over the coming three months whether Europe's second largest economy merited its stable status given its weakening economy.


If Moody's changes the French credit rating from stable to negative following that assessment then that would signal a likely downgrade in future, something the French government is anxious to avoid as it would lift the cost of borrowing.


If that is the case then France would follow in the unwilling footsteps of the United States.


In August, Standard & Poor's dealt the US its first-ever ratings downgrade.


France is rated triple-A by all three leading credit rating agencies, Moody's, Standard & Poor's and Fitch Ratings.


Moody's said France's "financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics -- which are now among the weakest of France's Aaa peers."'

Could the EuroZone bailout fund run to bailing out France?

I am sorry to ruin your Monday morning but economically we are well and truly f***ed

Ludwig von Mises wrote that 'there is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.'
 
The Central Banks and their associates in government are trying to put off the evil day but that day will come. The problem is that Capitalism has been replaced by Corporatism is recent years and thus whilst Capitalism works through trial and error in free markets to find an optimal allocation of resources, Corporatism works by fixing the markets. We have had over a decade of central banks deliberately providing cheap & easy credit thus negating the existence of Capitalism. Under Capitalism losses are penalised, under corporatism loss making banks are instead bailed out or otherwise protected - thus we reach the position where a €2 trillion bailout fund is required. That's not €2 billion but €2 trillion; I have explained before how big a trillion is.

Central banks egged on by unscrupulous governments kept interest rates far too low for far too long. This engineered a boom, a fake one but a boom nonetheless, this boom enabled Gordon Brown and others to claim that they had 'ended boom and bust' and to increase taxation just less than the increase in (albeit fake ) wealth that the middle classes experienced as house prices rose. The US housing bubble also resulted from easy credit and liberal guilt over the comparative difficulty some blacks had in getting mortgage credit.

The trouble is that we are now in a situation where it is not the banks that might fail, but countries. If the banks are "too big to fail" what about Greece, Italy, Spain, the UK the USA?

We are well and truly f***ed, there's bugger all most people can do about it and as savings become worthless through the vicissitudes of inflation we may as well spend the lot - the decision is should it be a new car, new kitchens and holidays... or gold, generators and guns?

The 20 most indebted countries

The list of the world's 20 most indebted countries are a little shocking, but not as shocking as the amounts...
20. United States - 101.1% ($14.8 trillion)
19. Hungary - 120.1% ($225 billion)
18. Australia - 138.9% ($1.2 trillion)
17. Italy - 146.6% ($2.6 trillion)
16. Spain - 179.4% ($2.46 trillion)
15. Greece - 182.2% ($580 billion)
14. Germany - 185.1% ($5.4 trillion)
13. Portugal - 223.6% ($552 billion)
12. France - 250% ($5.4 trillion)
11. Hong Kong - 250.4% ($816 billion)
10. Norway - 251% ($641 billion)
9. Austria - 261.1% ($867 billion)
8. Finland - 271.5% ($505 billion)
7. Sweden - 282.2% ($1trillion)
6. Denmark - 310.4% ($626 billion)
5. Belgium - 335.9% ($1.3 trillion)
4. Netherlands - 376.3% ($2.6 trillion)
3. Switzerland - 401.9% ($1.3 trillion)
2. United Kingdom - 413.3% ($8.98 trillion)
1. Ireland - 1,382% (Debt, at $172.3 billion, more than 10 times the national GDP)

Second place for the UK; well done Gordon Brown, Ed Balls and the other members of the last Labour government who ruined the UK's economy with their spend, spend, spend policies, their lack of efficient bank regulation and Gordon Brown's persuading of Lloyds bank to takeover HBOS and so ruin Lloyds bank.

Utterly predictable and not the last time

S&P have downgraded their rating of Italian Sovereign Debt. This was entirely predictable and will not be the last Sovereign debt downgrade of an European country.

Whilst the Euro Zone could afford to bailout Greece and Portugal as well as Ireland, it cannot afford to bail out Italy and Spain. But don't let that persuade you that the EU is in terminal decline. The Euro-fanatics will use the EU Sovereign Debt crisis as a reason to push for even more 'ever closer union'. The EU is all about a transfer of power away from sovereign independent countries and towards the EU. No event can ever persuade the EU that less integration is the answer, the answer is and will always be more integration.

Funding the US debt - it's childsplay to explain

Doorbell



Fiscal Child Abuse



The Debt Baby



Serious points handled in a fun but intelligent manner. I wonder why nobody has done these for a UK audience...

Are we doomed?

The Adam Smith Institute have published a summary of the four problems that face us:
Sovereign Debt, An exposed financial sector, Sclerotic growth and Low private sector confidence.

A worrying and accurate article.

Are we doomed? Yes I fear we are.

A sign of the times?

As the world breathes a sigh of relief that Barack Obama has swallowed some pride and done a deal with the Republicans over the US budget I read that Apple now has more cash to spend than the United States government. The latest figures from the US Treasury Department show that the country has an operating cash balance of $73.7bn (£45.3bn). Meanwhile Apple's most recent financial results put its reserves at $76.4bn.

UPDATE / ERRATA
per Alex:

'Sorry, but cash and reserves are two very different things. Cash is the liquid assets you hold whereas reserves is the accounting estimate of what would be left to shareholders if a company is wound up.

The US government has about 6 times as much cas as Apple. More misinformation from the BBC.'

So file under BBC incompetence and Mr NotaSheep not checking BBC 'facts'!

How to solve the US deficit problem

“I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.”

Warren Buffett 7/8/11


Thanks to Theo Spark for the spot.

Thursday morning catch-up

Usual story, too many open tabs in Firefox and not enough time, oh and this time so many that Firefox keeps crashing:

1) Peter Ferrara for Fox News explains how the US budget can be balanced, after all Republicans did it the last time the Democrats broke the economy. There are of course major parallels with the UK when Margaret Thatcher needed to undo the socialist policies of the previous Labour government. Policies that the left in the UK regularly deride and spew hatred at but were necessary and rescued the UK from bankruptcy; sound familiar? The problem now is that David Cameron is no Margaret Thatcher and has already shown himself to be a coward and no Conservative.


2) This Daily Mail article sings the benefits of nudism; not much to disagree with there.


3) The Metro, a London free paper, shows a worrying lack of mathematical knowledge, let alone understanding of global warming. Under the headline 'Melting Arctic ice 'to flood London in 100 years' if global warming continues' The Metro reports that 'London could be flooded within 100 years as melting Arctic ice causes sea levels to rise by up to 900cm (3ft), a new study shows.' One slight problem is that there are around 30cm to a foot, not 300cm. So either this is 90cm (3ft) or 900cm (30ft); maybe they meant 900mm, maybe the journalist doesn't check facts. Whatever the reason if the journalist cannot report a simple pair of related numbers correctly, what hope do we have that the rest of the reporting in that article is any more than writing what the press briefing said? For some real analysis I suggest reading The Daily Bayonet.


4) The BBC reported
that

'The US Army psychiatrist accused in a deadly shooting rampage at a Texas base will face a court martial and possible death penalty, a general has ruled.

Maj Nidal Malik Hasan is accused of killing 13 people and wounding 32 more in November 2009 at Fort Hood.'

You will not be surprised to learn that the BBC manage not to report Major Hasan's blood-curdling cries as he attacked the soldiers but prefers to say this:

'He has been described as a devout Muslim and a poor-performing military officer who alarmed his superiors with his eccentric behaviour.'

5) VDare wonders at the pairings of the last 20 dancers on America's 'So You Think You Can Dance' - he thinks he may have spotted a patten...

If you thought you were depressed about the UK economy; Liam Halligan makes me look cheerful about its prospects

'The only reason we are still able to roll over our sovereign liabilities is because, for the most part, the true extent of the fiscal risks we face hasn't yet been priced in to yields on global markets. What's happening on the eurozone's periphery, even if the current crisis is averted, is just the beginning.'

There's plenty more in Liam's Telegraph article  but I warn you it is not a cheerful read.

'In my view, a sudden and massive re-pricing of Western sovereign risk will happen much sooner than is widely expected. For now, global investors are in denial, assessing that default risks in many of the big emerging markets are much greater than in the West.

This is nonsense – particularly when you consider that the governments of the "advanced" countries are tacitly reliant on debasing and depreciating their currencies in order to lower their liabilities, so imposing on their creditors a form of "soft default".

At some point soon, and it brings me no pleasure to write this, private sector Western investors, together with our emerging market creditors, will drastically cut their exposure to Western sovereign debt. This will come as a rude awakening to the US and the big European sovereigns, who for years now have abused their "risk-free" status.'

Who is Liam Halligan. He is chief economist at Prosperity Capital Management. Greece, Ireland, now Italy the EuroZone is not in a good state and most people are in denial.What should we do, how do we survive the coming financial apocalypse? I don't think any but the super-rich can or will.

The truth about the UK's level of debt

Gordon Brown hid it, Ed Balls still denies it and Ed Miliband is too busy jumping on bandwagons to address it but this week the true level of UK debt will be revealed when on Wednesday the Treasury will publish national accounts drawn up on the same basis as listed companies. So for the first time we will see official figures as to the amount of national debts were hidden from the public during the Brown Balls era. We will see the future liabilities of accrued pension rights for public sector workers and the future costs of private PFI projects, as well as the liabilities for Northern Rock, rescued to save jobs in Labour constituencies.

The figures will not be pretty, and they may tell us nothing that those interested in the subject do not already know, but they will show Gordon Brown and Ed Balls up for the devious little f***ers that they were and are.

Is the French government's 'ingenious' scheme to roll-over Greek debt still considered default?

A few days ago I heard someone on the BBC lauding the French government's ingenious scheme to roll-over Greek debt and incorporate an insurance scheme into the scheme. How clever the French are, how unlike the stupid evil Tories was the subtext.  Hmmm, I was this not too surprised to read in De Spiegel this:

'Credit rating agency Standard & Poor's warned on Monday that a proposal by French banks to roll over Greece's debt could be classified as a default, casting fresh doubts on plans to secure a bailout for the crisis-hit nation.

"It is our view that each of the two financing options described in the (French banks') proposal would likely amount to a default under our criteria," S&P said in a statement.'

Somehow I think that the EU supporting BBC will not give as much prominence to this news.

How close to Sovereign Debt default is Greece?

Andrew Colquhoun, head of Asia-Pacific sovereign ratings for Fitch, told a conference in Singapore early on Tuesday that the Fitch Ratings Agency would regard a debt exchange or voluntary debt rollover of Greek debt as "a default event and would lead to the assignment of a default rating to Greece."

Standard & Poor have reaffirmed that a voluntary debt restructuring for Greece would probably be deemed a default.

Only Moody’s Investors Service has held back, in so far as they give a Caa1 rating to Greece’s sovereign debt.

All the above is interesting as the technical ways of avoiding default are investigated and explored. I note that the International Swaps and Derivatives Association has said that a debt exchange that extended maturities, rather than writing off debt, would not be considered a default because that would not trigger payment on contracts to insure against default (Credit Default Swaps).

In my view Greece will not avoid default and at that point the Euro currency experiment will fail; maybe the EU with it.

Now what I am about to say may surprise people. I am no fan of the Euro or the EU; I would have voted against the European Constitution/Lisbon Treaty had I been given the chance in the promised referendum, indeed I would have voted to leave the EU if I had been asked. However the collapse of the Euro and maybe the EU will cause misery to many millions of people and Pyrrhic victories are usually not worth it.

'Just two weeks before QE2 ends, Russia becomes third major country to announce it will dump U.S. Treasury holdings'

Hot Air have the worrying story, sourced from Zero hedge:

'Just in time for the end of QE2, when the US needs every possible foreign buyer of US debt to step up to the plate, we get confirmation that yet another major foreign central bank has decided to not only not add to its US debt holdings, but to actively sell US Treasurys… The WSJ reports that “Russia will likely continue lowering its U.S. debt holdings as Washington struggles to contain a budget deficit and bolster a tepid economic recovery…”'

Game over for Greece and the EU?

I hear that Standard & Poor have cut Greece's credit rating to CCC, the lowest in the rated world. To give you an idea of how Greece's likelihood of repaying debt is viewed, that rating places Greece below Pakistan (a country in a state of near civil war) and Jamaica. Standard & Poor says that it believes there is a higher likelihood that Greece will see one or more defaults over the next 12 months than not.

The Greek government is trying to push through austerity measures whilst Greek 'workers' complain in the streets; apparently they don't see why they should have to work beyond their mid 50s like workers in the rest of the EU. It also seems that the Germans are getting fed-up with throwing money at the feckless Southern EU countries (and Ireland) whose massive increase in living standards have come largely as a result of EU transfers of money from Germany, the UK and some other mostly North and West European countries.

Meanwhile the whole EU, the eurozone countries and the IMF are in discussions over a second bailout for Greece; this time one expected to total up to €120bn. The talks have hit a problem as the German government has decided that it will not keep footing the bill and is insisting on the involvement of private investors. Somehow I doubt that private investors will chip-in.

So if Greece is more than likely to default on its debt within 12 months, where does that leave the EU and the UK in particular? The EU project of ever-closer union needed monetary union as a precursor to full union. The Sovereign debt crisis affecting chiefly Greece at present but also Ireland, Portugal and Spain may cause the splitting of the Eurozone into two strands of countries; in effect the solvent and the insolvent. In a sensible world this should mean the end of the EU's ever closer union but the leaders of the EU project do not live by sensible rules and they are more likely to say that the debt problems require closer union.

One thing that I have not heard is an acceptance that those of us who argued that the Eurozone project with its single currency would not succeed because of the impossibility of running a single currency to suit the needs of such disparate countries were correct and the Euro-enthusiasts were wrong, very wrong. I have heard not even a whiff of an apology from Tony Blair, the multitude of Lib Dems who supported it or especially the BBC who gloried in portraying us EU-realists as 'Little Englanders' at best and raving xenophobes at worst. Come on BBC apologise, you got it wrong and in any case you should not have taken sides. I suppose the EU money you receive may have helped sway your coverage though...

“at least an even chance of (Greece) default over the rating horizon.”

Yesterday 247 Wall Street reported that 'Moody’s Investors Service had downgraded Greece in its local and foreign currency bond ratings.  The new rating is Caa1, down from B1.  Moody’s also assigned a negative outlook on Greece’s ratings.' and explains that 'Moody’s sees higher risks that Greece will not stabilize its debt without restructuring.  Moody’s also noted the Troika group supporters like the ECB, IMF, and the E.U. Commission will likely require private creditors to participate in a debt restructuring.  Moody’s calls it “at least an even chance of default over the rating horizon.” '

I wonder if this will help to persuade our Prime Minister, Chancellor & Foreign Secretary that maybe it would be a bad idea to throw more money at supporting the Greek economy?

Bank Holiday Monday evening catchup

My Firefox crashed yesterday, taking 30+ tabs with it but even so I have more open then I can ever blog about in the coming week;

1) AFP report on the murderous Syrian regime:

'Pro-democracy activists in Syria called for fresh protests on Saturday after the alleged torture and killing of a 13-year-old boy by security forces in the flashpoint region of Daraa.

The body of Hamza al-Khatib was returned to his family on Wednesday, following his disappearance after a demonstration on April 29, activists said on their Facebook site, Syrian Revolution 2011.

"We will go out from every home, from every district to express our anger" over the killing, they wrote on the page which carries a picture of the boy.

"A month had passed by with his family not knowing where he is, or if or when will he be released. He was released to his family as a dead body. Upon examining his body, the signs of torture are very clear," they said.

"There were a few bullets in his body used as a way of torture rather than to kill him with. Clear signs of severe physical abuse appeared on the body such as marks done with hands, sticks, and shoes. Hamza?s penis was also cut off."'

I await the protests from the leftist elements who would be up in (metaphorical) arms had this been Israel at fault; I think I will wait in vain.


2) The Telegraph and The Mail have the photographic proof that Samantha Cameron is fit; in both senses of the word.


3) Mary Sean Young has some fascinating Polaroids from the set of Bladerunner, here's one...

Rachael and Deckard together...


4) The Telegraph report on what happens when occupational health departments need to ensure they generate work to keep them employed:

'...modern day police officers are being issued with "lifestyle guides", suggesting bedtime routines and healthy eating options.

Among the pearls of wisdom offered in the documents are that officers should assist their spouses with household chores and do activities such as gardening and dancing to keep fit.

The guides even offer advice on what fillings officers should have in their sandwiches. '

5) ZeroHedge think that DeSpiegel are taking a risk of being sued by Greece:

'Germany's Der Spiegel seems hell bent on getting sued to hell and back by Greece. After a few weeks ago it "broke" the news of a secret meeting that would consider the expulsion of the country from the Eurozone, it is once again stirring passions with an article claiming that Greece has missed all fiscal targets agreed under its bailout plan, according to a mission from an international inspection team, putting further funding for Athens at risk, Reuters summarizes. "The troika (aka the International Monetary Fund, the European Commission and the European Central Bank) asserts in its report to be presented next week that Greece had missed all its agreed fiscal targets," weekly Spiegel magazine reported in a prerelease. In other words, this could be the political game over for Greece, whose fate as has been disclosed recently, is intimately tied with the perception that it is following the troika's demands for fiscal change. If the three key bailout institutions are already leaking that Greece is done, next week could well be the beginning of the end for the €.'

Is that true, is the Eurozone about to fall apart as Greece fails to meet its targets? Does this mean that David Cameron will stop promising money to ailing EuroZone countries? Does this mean that those people who called for the UK to join the Euro will now admit their mistakes and that William Hague, John Redmond amongst others were right when they were being ridiculed for being 'little Englanders' and out of step with history?


6) Brian Lee Crowley in The Financial Post examines the premise behind the question “Are we running out of natural resources?” and explains why we are not. A good explanation that should be required reading for all eco-loons. Here's the conclusion:

'We are nowhere near to running out of natural resources. Human creativity and financial resources together will ensure a continued supply of all the resources we need. The exact form those resources will take cannot be known today, however. It relies on future innovations, which are, by their nature, unpredictable because they will be the fruit of our imagination and curiosity. That is why the human mind is the greatest natural resource of all.'

7) WireUpdate has some bad news for many visitors to Amsterdam:

'In an effort to stop drug tourism, the Dutch government on Friday decided to restrict access to cannabis coffee shops so that tourists will no longer be able to buy the drugs.

Coffee shops are establishments in the Netherlands where the sale of cannabis for personal consumption by the public is tolerated by the local authorities. As this is illegal in most countries, many tourists from around the world travel to Amsterdam to use cannabis.

But in an effort to reduce criminal behavior and tourism as a result of the drug policy, the Dutch government on Friday decided to introduce a membership system for coffee shops. The city of Amsterdam, where most tourists go, is against the decision

The new system will require members of coffee shops to be a citizen of the Netherlands and over the age of 18.'

This will not help the Amsterdam tourist industry and might make the drug-pushers in the Red Light district even more insistent...


8) The Other McCain has all you need to know about 'Weinergate', actually make that more than you probably want to know about New York Democrat Rep. Anthony Weiner's penis, BlackBerry


9) Noel Sheppard at NewsBusters wonders whether 'Hatred Towards Conservative Women is Last Acceptable Misogyny in U.S.'. here's an extract:

'Of course, Tantaros was correct.

What America has painfully learned since former Alaska governor Sarah Palin was first announced as John McCain's running mate in 2008 is that it is completely acceptable for media members to mercilessly attack a woman in print or on television and radio if she is a conservative.

In reality, not only is it condoned, it's applauded.

You can even win awards for doing so - just ask Katie Couric.

Sadder still is that the Left is constantly carping and whining about the scarcity of women in politics.

Maybe if they wouldn't attack every conservative female that deigns to enter public life there'd be more of them - or is that just too darned logical for a liberal?'

10) BizyBlog claims 'AP Reporters Fabricate Scurrilous ‘Possible’ Reason Why Walesa Wouldn’t Meet With Obama'. It's an interesting theory and one that should chime with anyone who realises quite how biased most of the world's media is in favour of Barack Obama. Investors Business Daily has the more plausible explanation:

' Someone who was awarded the Nobel Peace Prize for actually doing something just snubbed someone who won it for nothing. But Lech Walesa’s refusal to meet President Obama is also a cry to save Poland.

Lech Walesa, the former Polish president and heroic leader of the Solidarity trade union that helped liberate the entire Eastern European Soviet bloc from communist rule, has his moral courage indelibly engraved in the history books.

… on Friday, Walesa once again answered the call to duty and announced he would not accept fellow Nobel Peace laureate President Obama’s invitation to meet with him in Poland after the G-8 Summit in France.

… Close observers of this president for the two-plus years of his rule know he isn’t interested in listening to the likes of Walesa, any more than he wants to hear the leaders of former Soviet satellite states explain how the low, flat tax rates they adopted in recent years led their nations to double-digit GDP growth.

For the sake of preserving Poland’s hard-fought freedom, Komorowski and Tusk should be joining Walesa in giving Obama the cold shoulder.

The president hadn’t even had a chance to redecorate the Oval Office before he felt the need, in fall of 2009, to appease Moscow by scrapping plans to build a missile defense shield protecting Poland and the Czech Republic from attack by Russia, Iran or any other aggressor.

At the time, the Polish minister of defense said, “This is catastrophic for Poland.”

The message, once again, delivered loud and clear to America’s friends, allies and enemies alike, is that the U.S. can’t be relied on.

… The message Poland’s leaders should deliver to our self-satisfied president is the one Walesa is delivering by his absence: Neither your Nobel nor bin Laden’s head, Mr. President, is a substitute for U.S. help in keeping a liberated Eastern Europe liberated.'

That has cleared ten tabs, only another 20 or so to go!

Is Greece actually, or at least nearly, insolvent?

I hear that the chairman of the Eurozone finance ministers has warned that the IMF may not release the next scheduled payment of Greece's bail-out package. it seems that IMF rules may stop it paying the amount of €12 billion because Greece cannot guarantee its solvency for the next 12 months.

Just make sure you have realised what that means; a sovereign European country, Greece, is feared to be on the brink of insolvency.

While George Papandreou's government ramps up the privatisation programme and tries valiantly to cut public spending whilst the left-wing protests abound and Greek workers try to protect their right to retire at 53, Mr Junker had some good news for Greece but very, very bad news for the rest of the EU; he said that the IMF was assuming that if it decided not to make the payment the EU would step in and make the payment instead.

How much more money are the, relatively, solvent countries of mainly Northern Europe expected to throw at the, relatively, insolvent countries of Southern Europe? Why should German, British and Dutch citizens help to subsidise the people of Greece, Portugal, Ireland, Spain and Italy?