9
   

Is the Euro well and truly buggered?

 
 
High Seas
 
  1  
Reply Mon 12 Dec, 2011 01:10 pm
@georgeob1,
Indeed he has many great qualities - accounting skills not among them: the large eurozone banks are less shaky than the large UK banks (no matter what the Telegraph may think) and only marginally more shaky than the US banks. The UK has also produced "Whoops!", the best account of the financial crash:
Quote:
No essay in English has a better title than De Quincey’s ‘On Murder Considered as One of the Fine Arts’. I wonder whether, if he were alive today, he might be tempted to go back to the well and write a follow-up, ‘On Financial Disaster Considered as One of the Fine Arts’? The basic material might be less immediately captivating, but there’s a lot to choose from.

http://www.lrb.co.uk/v33/n24/john-lanchester/short-cuts

As far as broker-dealers are concerned, the US firms have to pay twice the premium of eurozone firms to insure against defaults (source: BIS, 201112)
http://av.r.ftdata.co.uk/files/2011/12/Securities-dealers-e1323713832157.jpg
Quote:
.....As the market values of euro area sovereign and bank debts fell and became more volatile, funding costs rose for financial institutions with exposures to these assets. This was especially the case for securities dealers, who tend to be highly leveraged and reliant on wholesale funding. Furthermore, some securities dealers may have had significant derivatives exposures to sovereigns.

Traditionally, these have not been collateralised. Short-dated CDS premia increased sharply for US and European dealers in September and November (Graph 6, left-hand panel). The November increase came after the failure of MF Global highlighted the importance of sovereign risks. As their own funding conditions deteriorated, securities dealers tightened terms on securities financing and reduced their market-making activities. A Federal Reserve survey of 20 large securities dealers, published in October, already showed that financing asset-backed securities, corporate bonds and equities had recently become more expensive and required more collateral (Graph 6, centre panel).

It also showed that liquidity had deteriorated in these markets (Graph 6, right-hand panel). Market contacts reported that liquidity declined as market-makers sought to reduce inventories, the values of which had become significantly more volatile. But this reinforced volatility, as trades moved prices by more than previously
.

http://www.bis.org/publ/qtrpdf/r_qt1112.pdf

0 Replies
 
High Seas
 
  0  
Reply Mon 12 Dec, 2011 01:34 pm
@Old Goat,
Old Goat wrote:



BTW, Later on this week, Italy and France are holding bond auctions. Following Germany's disastrous attempts at trying to sell THEIR bonds a week or so ago, it will be interesting to see how the world's banks react this time around.



This allegation about the German bond auction is absurd - a fact explained on your very own thread right here, some pages back. And Italy and France sold their securities today at reasonable rates - and both issues were comfortably oversubscribed. Perhaps if you relied more on reading posts right here and less on The Telegraph you would be better informed? As to banking and financial "panics" the Telegraph alleges exist in the eurozone - see if you can spot them:
http://av.r.ftdata.co.uk/files/2011/09/Gold-lease-rates.jpg

NB in a panic (see Lehman, late 2008) repo rates against top collateral like gold (AU) minus LIBOR reach several %, and right now they're negative!
High Seas
 
  1  
Reply Mon 12 Dec, 2011 01:58 pm
@High Seas,
Sorry axes didn't copy for scale of page on my previous graph, here's a link to the FT http://av.r.ftdata.co.uk/files/2011/09/Gold-lease-rates.jpg
cicerone imposter
 
  1  
Reply Mon 12 Dec, 2011 02:36 pm
@High Seas,
Your graph is on "gold lease rates." What has that to do with bonds?

Also, I'm not sure how they can sell bonds when most people are taking their money out of Euro banks to transfer to what they deem to be more "secure" places. Most are in a liquidity crunch, and can't meet their daily needs.
High Seas
 
  1  
Reply Mon 12 Dec, 2011 02:44 pm
@cicerone imposter,
"Gold lease rates" refers to interest rates for loans against good collateral (gold in this case) for 3-months - as is clearly stated on the title and the axes of the graph. Interest rates have plenty to do with valuation of bonds and notes - as of course you know - and you can think of the "gold lease rate" as a repo of sorts. Finally, there's tons of liquidity sloshing around the system, both here and in Europe. The problem is too much overall debt, not too little liquidity.
cicerone imposter
 
  1  
Reply Mon 12 Dec, 2011 03:30 pm
@High Seas,
Can you provide a credible source that equates gold prices with interest rates? This is the first time I've heard such a thing;

Federal Funds Rates:
http://img.photobucket.com/albums/v97/imposter222/640px-Federal_Funds_Rate_1954_thru_2009_effectivesvg.png

Bond Interest Rates:
http://img.photobucket.com/albums/v97/imposter222/Graphbondinterest.png

Gold Prices:
http://img.photobucket.com/albums/v97/imposter222/goldpricessince2006graph.gif
CalamityJane
 
  1  
Reply Mon 12 Dec, 2011 10:03 pm
@Old Goat,
Calm down, Pete! I am not against you or the Brits Smile
As the Guardian said, "even after 70 years, it doesn't take much to get the British to refight the second world war." I realize why the UK chose the USA over Europe, I have no objection to it, I merely stated the fact that the UK sided with the U.S. and perhaps was never as dedicated to the EU as other members are. Despite harsh criticism from opposition leader Miliband and VP Clegg who accuse Cameron of isolating the UK and future EU decisions will have to be read through the "Financial Times" only, the majority of Brits are behind Cameron which leads me to the conclusion that the UK should pursue other options outside the EU.

I said already many pages ago that I am in favor of Angela Merkel backing off. In her pursuit to save the Euro she has won the battle, but in all probability will lose the war. Historical resentments towards Germany are very well alive - as you have proven here too - and very few nations feel secure with Merkel, along with Sarkozy, calling the shots. What will ultimately work on an economical level may very well fail on an emotional level due to Europe's history.









Old Goat
 
  1  
Reply Tue 13 Dec, 2011 05:14 am
"I am not against you or the Brits"

No, I don't suppose you are, when push comes to shove. Nor is Walter, in the real world. It's just that it gets very tedious when....once again.....we get pats on the head from Continental Europeans when Britain actually has the temerity to stand its ground on anything that doesn't go along with the Party Line, which usually involves a few more major steps towards total Federalism. Over the past few months alone, we have been told to shut up and go sit in the corner on several occasions, verbally explicit from that little **** Sarkozy, and more subtly by Putin wannabee Merkel.
Just think "Cameron/big bazooka", or google it if you don't know what I'm on about.

Whenever a leader of ours actually gets a word in edgeways and states an opinion or a position regarding a European matter, we just KNOW that the mud slinging will start, most of which is quite deluded....."little Englander" "disloyal" "Anti Europe" "Cameron should shut up" "Britain's rebate" (more of which later) "Britain somehow not contributing" "Britain always being negative/obstinate etc"

Germany and France are the two big players who want to keep other big players on the sidelines at all costs. Especially if that interloper (as they see us) holds a different view to their Grand Design.
So.....the little euro spin doctors get to work on how the Brits are being grumpy and unfair again, and it's only natural that their sheeplike population adopt this spin and actually believe that it is true to a certain extent.
We hold our hands up to being sheep as well, when it comes to spin....just look how long Blair got away with conning this country into an unjust war and nearly bankrupting us!

But it does get tedious, all the same.


And when Britain is shown to be RIGHT on these matters (more often than not it seems), ie .....

Warning from the start that the single currency was doomed to failure the way that it was set up.

That sovereign fiscal power HAD to be relinquished one day, in order to keep the thing going.

That the Eurozone members should in no way bend the rules or blatantly break them, as far as individual member debt criteria was concerned, because failure to adhere (as mentioned in previous post) will weaken confidence in the Euro and end in tears for some countries.

To name but a few......So when Britain is shown to be RIGHT on these matters....and then, when we have the audacity to imply that we WARNED the EU about all this stuff but you told us to shut up, JEEZUS does the resentment kick in, especially from France!....who seems to have an inbuilt cultural thing about never, ever losing face, especially against Britain.

This latest outpouring of seething from Sarkozy has seen him spring an ambush.
It was Sarkozy and Sarkozy alone, imo, who tweeked things so as to put us in a position where it was impossible for us to agree, and he was probably hoping upon hope that cameron would go so far as to use his veto.

Cameron didn't go there with any opt out requests...he merely asked for a safeguard to ensure that the financial trading centres (of Europe, by the way....not just the UK) did NOT get hobbled by any new tax, or legislation that would allow other trading centres around the world to have any advantage over us.
In this world of trading by the click of a mouse, this business can ever so easily be transferred to non european centres, should the financial wheeler dealers see that european trading centres were now taxed more than the rest of the world.
Whether you like or dislike that industry, the fact remains that it WILL take place somewhere, either with Europe taking part, or elsewhere. It seems a very reasonable request that Cameron should ask that nothing was done to create an unlevel playing field with the rest of the world.

Sarkozy said that this quite reasonable request was "unnnaceptable". Period. So much for "discussion", and "negotiation".
Sarkozy wants us out altogether. He played his trump card perfectly.

As the financial sector employs around a million people in the UK and accounts for around 7% of our total business....what would YOU have done if you were Cameron? I'd be interested to hear answers from other people here as well. What would YOU have done?


Cameron? He had no choice. He HAD to fall into Sarkozy's trap. The veto that he used was quite legal. I think I'm right in saying that Britain hasn't used a veto for at least twenty odd years.
It would be interesting for someone to google just how many times FRANCE has used a veto in that time. And Germany?

The problem is that by doing so......ie ....actually having the (god forbid)nerve to stand up and put national interests first in this vital matter as far as the UK is concerned, he also fell into the second trap, of Sarkozy and/or Merkel using him (or Britain, take your pick) as an easy scapegoat to be paraded around as the reason for the Euro failing, and if the EU breaks up as a result of the Euro failure, then he'll probably get blamed for that as well.

The Euro will fail (not if) because it wasn't set up correctly in the first place, that Germany and France bent and broke the rules repeatedly regarding debt ridden members, purely to keep them onside, and the Eurozone peoples will not tolerate their loss of sovereign/democratic powers for very long.
It may happen soon....it may take ten years. It will happen though.


saab
 
  1  
Reply Tue 13 Dec, 2011 06:28 am
@Old Goat,
I like to read the "letters to the editor" over internet, it can be a British paper, a Swedish or a Danish. I also read German papers over internet.
The letters express much more the opinions of the people than the journalists express. They as a rule express what their editor wants them to express or siding with the media.
As far as I can see the Danish and Swedish people are much more on the side of the Brits than the German papers or French.
What is being said about Merkel and Sarkozy, the Euro and Eu are sometimes just not very polite, others show very much how much they are against it and even several times people just pllainly want to get out of EU. Ultimate they feel that Brussels is taking away our democracy and were are ruled Germany and France and the rest has nothing to say.

I can not give links to letters to the editors weeks back .

I have a question to a Brit. Yesterday I watched some of Cameron´s speach and saw that people stood up very fast and sat down again and another speaker came. What does that mean?
0 Replies
 
Old Goat
 
  1  
Reply Tue 13 Dec, 2011 06:37 am
@CalamityJane,
"As the Guardian said, "even after 70 years, it doesn't take much to get the British to refight the second world war."

Another little pat on the head, maybe?

It's not just the British, you can include Americans, the people from the Commonwealth, the Poles, the French Resistance and their offspring....basically anybody that actually had either themselves or their parents (even Grandparents) on the side that actually did the dirty work of clearing Germans and Japs out and sending them back from whence they came.
Try telling an oldtimer that what they did all those years ago should now be forgotten and discounted as irrelevant in the modern world.
What they did was truly spectacular, and until they have all gone, and their offspring have all gone, it's quite right that a big thing should be made about what they achieved.
Two of my Dad's brothers were involved in the D-Day landings, one pushed right through to Germany and came home unharmed, the other landed on Gold Beach and woke up a week later in a Brighton hospital minus a leg. He died pretty soon after the war finished.
My Dad wept on several occasions when talking about him. I still have his medals.
There are thousands of people around the world who have a similar first or second hand story to tell. Hollywood still churns out film after film about WW2.
TV series abound "Band of Brothers" "Pacific" etc, all made recently.

To single Brits out for this "fault" seems a bit unfair. I take great pride in knowing that my fellow countrymen and women did their bit, but can't help feeling a little peeved when Europeans don't want to recognize how their green and pleasant land would have been so very different if it wasn't for this countries efforts, and the efforts of other free countries who put their young men at risk so that Europe remained as free as possible.

Too right I bang on about it, given the attitude that we now get from mainland Europeans who take their freedom/democracy for granted.

If t'wernt for Tommy and Yankee doodle, you and Walter would probably be standing in a bread queue right now, before asking Ivan for his recipe of borscht, as you'd managed to grow a few spare beetroot in the people's garden.


Despite harsh criticism from opposition leader Miliband and VP Clegg who accuse Cameron of isolating the UK and future EU decisions will have to be read through the "Financial Times" only,"

Let's see now....have you actually heard Miliband in action? A cross between Kermit the Frog and a gangly fifteen year old schoolboy who's just been robbed of his lunch money. A national joke in years to come, that lad.

And Clegg? Oh my Gawd. Think of the wettest politician in the USA and double it!
If he'd had to stand in for Moses, he'd have come down from that mountain with the Ten Suggestions!


"the majority of Brits are behind Cameron which leads me to the conclusion that the UK should pursue other options outside the EU. "

You should never have let yourself be led to a such a sweeping conclusion on the one single fact that we support him on this occasion. See above.

He was very cleverly hijacked and had two choices:


1.Take down his trousers and let Sarkozy go doggy style on him before returning to our parliament with a sore bottom, after handing over swathes of sovereign power with no safeguards.

2.Having been given no alternative, stand up for our national interest, veto and wait for the inevitable propaganda style mud slinging.

I think every rightminded Brit wants to be part of Europe. It's just the grand design and being run by unelected Merkozy puppets in Brussels that we seem to have a slight problem with.

If you and Walter are quite happy to see your people treated like sheep, then so be it.

"Historical resentments towards Germany are very well alive - as you have proven here too "

You can chuck that at me if you like, but as far as modern day Germans are concerned, I think they're really Englishmen in disguise. We had a German lad over for school exchange many moons ago. He fitted in perfectly....loved Monty Python, had an excellent sense of humour and, when offered all of the sights of London, opted to go to Carnaby Street where he bought a TShirt with "ADOLF HITLER- Grand European tour" written across the front.
On the back it had all the "gig" venues listed. Poland, Czechoslovakia, France etc etc.....and right at the bottom was England with a big red line through it, and written next to that was "gig cancelled".
I was horrified at the thought of him taking this home to show his dad, but he assured me that Dad would find it hilarious also.

The only thing I get angry (more frustrated really) is how VERY easily all you mainland Europeans are willing to go along with seeing ever increasing chunks of your freedoms and democratic power being whittled away, and you don't seem to mind one little bit!
What is wrong with all of you? Why aren't you getting up there and moaning like the Brits, every time these bureaucrats get their little chisels out?
Not only that, you then adopt the party line without question.

Like I said, the EU I signed up to was primarily one of free trade, with a few small bells and whistles. What IS it within the European psyche to want to build a massive and costly bureaucratic structure over all that, and then actually plan the handing over of your democracy to these unelected and unnaccountable grey men in Brussels?

Are there any Yanks reading this? Can YOU understand this desire?

Beats me.......

We want to sell you beef , you want to sell us Sauerkraut. We agree not to tax anything that the other person sells, and never impose import taxes on anything a member wants to sell in the future. State subsidisng is not allowed, so as to keep a level playing field.
Your people can live here and find work if they want, we can live in your country and find work if we want. THAT is what I signed up to.
If everyone just kept to that......what's the problem? No overheads, negligable bureaucracy. Sorted!

Why do you Euros always want to keep adding complications?




Old Goat
 
  1  
Reply Tue 13 Dec, 2011 07:07 am
"I have a question to a Brit. Yesterday I watched some of Cameron´s speach and saw that people stood up very fast and sat down again and another speaker came. What does that mean? "

The whole shebang is "guided" by "The Speaker" of the House (John Bercow usually, he sits in the high chair at the far end, facing both ranks, government on one side, opposition on the other).
As the designated member is making his or her announcement, something may be said that leads another member to have a question. He/she stands to show the speaker that he wants to ask something.
The speaker then decides whether this will be allowed and if more than one is standing, he selects a person to go ahead and ask.
As soon as the questioner is selected, everyone sits down while the question is asked.

It may be that the speaker decides that requests for questions are getting too frequent and is stopping the flow of the announcement, so he makes the case as such and the announcement continues for a while, uninterrupted, until enough has been said to allow further questions.

Without wishing to complicate things further, on certain occasions it may be the announcer who notices that someone is standing with a question, and opts to do the polite thing and sits down to "give way". He/she then stands to answer and then carry on with what they were saying.

Basically, only one person can be standing at any one time. If a questioner stands and is allowed to go ahead, the person who is being questioned sits down. He then stands again after the questioner has returned to his seat, and responds.

If everyone were to stand and talk at once (which often happens during heated discussions or debates) then that's when you hear the "Speaker" shout "ORDER, ORDER!" until the house is quiet. He then gives them a mild bollocking and sends one or two of them to the naughty corner without any lunch.



saab
 
  1  
Reply Tue 13 Dec, 2011 08:24 am
@Old Goat,
Thank you for your explanation - now I know:

Was just reading an article in Svenska Dagbladet where three Swedish Politicians thought that Sweden should join the Euro.

There are 99 comments. I read 27 of them. I think we are very much like the Brits.
20 do not want the Euro
2 want the Euro and EU
2 do not want the Euro and want out of EU
2 answered so I do not know what they want.

80% of the Swedes do not want 'EMU/Euro
0 Replies
 
McTag
 
  1  
Reply Tue 13 Dec, 2011 09:30 am

Good stuff from OG lately, appreciated.
0 Replies
 
High Seas
 
  1  
Reply Tue 13 Dec, 2011 10:02 am
@cicerone imposter,
cicerone imposter wrote:

Can you provide a credible source that equates gold prices with interest rates? This is the first time I've heard such a thing;

I never heard of such a thing either Smile Repo rates are interest rates - interest rates on loans against collateral; collateral can be any asset, gold, bonds, stocks, real estate, etc. That's what "repo" means, repurchase agreement - you rent out an asset with an agreement to repurchase it, and receive interest.
CalamityJane
 
  1  
Reply Tue 13 Dec, 2011 10:22 am
@Old Goat,
Yes, your way of thinking is shared by a lot of Brits. "Those bloody Germans should be happy that we bailed them out in WWII and instead of being eternally grateful they are trying to tell us what to do. Damn right we won't go for it! Let them joke on their Sauerkraut, we'd rather eat our BSE beef ourselves!" (not that you had to anyway).

So be it, Old Goat, the future will tell us who fares better economically. Good luck to you!
0 Replies
 
High Seas
 
  1  
Reply Tue 13 Dec, 2011 10:41 am
@Old Goat,
This has nothing to do with freedom or democracy - or Patton, or Wellington for that matter - so please drop that tack, it's irrelevant to the point of incoherence. It has to do with financial economics - your thread is about the euro, right?! Focus on your own topic and you'll understand why Cameron cannot afford to sign any fiscal tightening commitments in addition to what your government has already pledged: total debt in the UK (government, corporate, households) is at 5xGDP highest of any developed economy in the world. There is no way, none, that he can plausibly shut down the NHS, or dissolve the Armed Forces, so that debt will have to be partially inflated away in addition to being cut back somewhat as per current plan.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/10/total%20debt%20to%20gdp_0.jpg
georgeob1
 
  1  
Reply Tue 13 Dec, 2011 10:57 am
@CalamityJane,
CalamityJane wrote:

Calm down, Pete! I am not against you or the Brits Smile
As the Guardian said, "even after 70 years, it doesn't take much to get the British to refight the second world war." I realize why the UK chose the USA over Europe, I have no objection to it, I merely stated the fact that the UK sided with the U.S. and perhaps was never as dedicated to the EU as other members are. Despite harsh criticism from opposition leader Miliband and VP Clegg who accuse Cameron of isolating the UK and future EU decisions will have to be read through the "Financial Times" only, the majority of Brits are behind Cameron which leads me to the conclusion that the UK should pursue other options outside the EU.

I said already many pages ago that I am in favor of Angela Merkel backing off. In her pursuit to save the Euro she has won the battle, but in all probability will lose the war. Historical resentments towards Germany are very well alive - as you have proven here too - and very few nations feel secure with Merkel, along with Sarkozy, calling the shots. What will ultimately work on an economical level may very well fail on an emotional level due to Europe's history.


I agree. In fact I believe the real positions and interests of Britain and Germany arre probably more congruent and aligned than are those between the UK (or Germany) and the southern tier of EU states. Germany started five years ago to deal constructively with the cost and competitive factors associated with a social welfare system that is no longer compatable with current demographic trends and golbal competition, and that has led to its comfortable situation today. The UK has recently begun to deal constructively and seriously with the same issues. Meanwhile many other continental EU states appear to be either resisting or only grudgingly dealing with the unfolding crisis before them. At its core the issue mirrors the current political debate in this country.

In the matter at hand the southern EU states champion added taxes (such as that on financial trading) to help resolve these issues, while others worry about killing the goose that lays the golden eggs. Germany appears to be trying hard to create an effective synthesis for the core EU states at least. Britain is, not surprisingly, also influenced also by traditional skepticism about European-wide entanglements, while Germany, for equivalent historical reasons, is inclined to preserve EU unity. The financial tax issue may well be (with equal validity) a necessary compromise from the German perspective and an intolerable burden from the British perspective.
0 Replies
 
cicerone imposter
 
  1  
Reply Tue 13 Dec, 2011 11:47 am
@High Seas,
When and how was that total debt graph produced?
0 Replies
 
cicerone imposter
 
  1  
Reply Tue 13 Dec, 2011 11:49 am
@High Seas,
What is the repo rate? Did you know that it's physically impossible to back all the gold with currency?
georgeob1
 
  1  
Reply Tue 13 Dec, 2011 11:58 am
@cicerone imposter,
cicerone imposter wrote:

What is the repo rate? Did you know that it's physically impossible to back all the gold with currency?

I think you have it backwards.

It was also impossible to redeem all the currency we had in circulation back before 1971 when we were still on the gold standard. The government merely maintained enough gold (or, more accurately, limited the currency in circulation) so that it could redeem a sufficient fraction, in the public perception, of the circulating currency to quell any run on it. The same is true of banks. As we have seen with the banking crisis and the still-unfolding Euro crisis that confidence can evaporate quickly and without warning.
0 Replies
 
 

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