Bank and Sovereign debt commitments have emptied the growth engine’s tank.

The range and profundity of EU financial problems were revisited overnight when Moody’s  slashed Spain’s rating by two notches, and downgraded the debt of Italy, Portugal, Slovakia, Slovenia, and Malta by one notch. Significantly, the credit ratings agency lowered its outlook on the United Kingdom and Austria as well. In this extended analysis, The Slog argues that the fruitless search for growth will now take over from the frantic belief in debt monetisation.

Moody’s latest EU downgrades won’t have immediate importance in the markets – although Asian shares did fall overnight. Rather, these downgrades, the upcoming FinMinCom meeting on Greek austerity in Brussels, and the Chinese banking chaos reported by The Slog yesterday all point to the global debt crisis moving almost imperceptibly from one phase to another. We have all become unhealthily eurocentric in recent months; time now – while keeping an eye on eurozone financial meltdown as it morphs into EU socio-economic disaster – to apply the other eye to a simple reality: you can’t suddenly go all Keynesian if the public coffers are empty.

One thing I find intriguing is that, while media and market opinion leaders continue to dramatise ezone events, the bulk of investors are gradually adapting to Basket Case Europe. Volumes across most markets are low at the moment, but the Chicken-Licken phase of Greece is now over. Berlin’s obvious determination to dump Athens at the first opportunity was highlighted by the volte-face of Wolfgang ‘Strangelove’ Schauble at the weekend, who – having for months predicted the end of civilisation if Greece left the euro – blithely remarked, “Well, whatever happens they will still be a European country and life will go on”. Schauble really is a piece of work.

The next phase in Europe now moves to a crisis called ClubMed, doubts about the structure of the Union as a whole, economic stagnation hitting big non-ezone member the United Kingdom, and Chinese retrenchment acting as a likely catalyst for slump.

In a piece of comical and cliched rhetoric last night, George Osborne said, “This is proof that, in the current global situation, Britain cannot waver from dealing with its debts. This is a reality check for anyone who thinks Britain can duck confronting its debts.” OK, I think we’ve got you there George, although if you want to stick in a wake-up call or three, feel free. However, as The Slog and thousands of others predicted from last Spring onwards, there simply is not a big or diversified enough UK private sector to drive an economic recovery for Britain – hence Mervyn King’s latest QE splurge, at a stroke wiping out the total net Coalition spending cuts fivefold.

But it’s the Chinese enigma that too many people are ignoring. Asian shipping shares aren’t doing well at the moment, and most of the indices measuring economic futures are at or near the red-flashing-light point. The equation here is remarkably simple: China exports to the West, West’s ability to consume spirals down the loo, China hits the ground hurting. China stops ordering raw materials, Australia goes into a rapid and deep recession, and the Sydney property bubble bursts. China cuts imports and tries to focus on the home market to take up the slack. Western exports fall further, and depression becomes slump.

Yesterday’s revelations about Chinese loans to local government poolswinners have added another dimension to Beijing’s problems. I was surprised the piece here didn’t get more hits – the scandal does, after all, involve a likely Beijing write-off of a sum totalling nearly three times the size of the US bank bailout of 2008. It doesn’t have any of the potential for contagion, but let’s get real here: we have a stop-start gerontocracy in China grappling to control private property inflation, chronic housing shortgages, huge wealth imbalances, overspent infrastructure budgets, and most of its trade customers going bankrupt. The likelihood that China will soon shrink as an outlet for Western consumer goods has now become a near-certainty, but the coverage given to this development was minimal. Anyway, you read it here first.

In the more immediate term, Brussels, Berlin and London are all about to be found out by the lack of G-forces: there simply isn’t any growth potential. Mario Monti has had an immediate, positive influence on the Italian situation, but as yet another Goldman veteran he knows perfectly well that the Wile E Coyote mid-air realisation moment is upon us. For the last three weeks he has spoken in public of only one theme: economic stimulation.

Just as Greece now finds itself blamed for an economic performance made worse by the incompetent Troika, Italy’s parlous output figures will soon come to light. Spain’s property weaknesses remain largely unsolved, and Portugal is barely functioning as an economy. We will reach a stage in a month or so where the next German to say ‘austerity’ will be shouted down. The mood will change – indeed, it already is shifting. A source in Dublin told me yesterday afternoon that – in the light of Athens developments – the Irish Government is now “confident” of negotiating some form of debt forgiveness.

This would be fair to my mind: more than any other EU peripheral, Ireland has taken the hit on the chin, wafted a towel at the concussion, and gone out fighting for another round. The problem remains, however, that bazookas exist only for borrowing….and even then, largely in the tortured minds of Tim Geithner and Christine Lagarde. The cupboard has been almost emptied by the credit fiasco: either the private sector takes a huge hit from here on, or the consequences will be even more dire. I first used the phrase debt forgiveness here in May 2010: I’m still at it. Yes, yes – I know that this will have awful knock-on effects for every banking and insurance institution on the planet. But zero economic income simply doubling the debt will be far, far worse: most sovereign debt is notional, but goods exchanged for currency aren’t.

The UK is busily emptying its cupboard of the bit that’s left. The new QE round from Mervyn King marks the point at which I finally part company with Merv. I realise that I’ve just finished saying we need to ‘create’ some money for economic stimulation, but you can’t stimulate a fantasy. Well,  you can – by taking drugs – but we’ve had enough fantasies and silly wing-and-prayer stuff like that already from the amateurs in Camerlot. Dave might get the odd inspired vision from a line now and then, but the next morning will only find him ‘suffering with a cold’.

This is indeed what makes Britain a special case – as in a special Basket Case – among the EU’s larger players: the French have their farming to fall back on, and the Germans their engineering. We have a bunch of lunatics buying and selling worthless shreds of paper. So while the EU lacks the money for economic ignition, the UK lacks a motor as well as the money. One shouldn’t ridicule the Sarkozy jibe just because it came from an intellectual Anglophobic ant: technically, he’s right. Only 13% of the UK economy does something other than provide retail or financial services.

The West is about to face up to mercantile greed-capitalism’s fatal flaw: it can never resist kicking the investment-can down the road in favour of instant bonus gratification. Western sovereign democracies are about to face up to supranational and meganational government’s fatal flaw: they can never resist kicking the diversification-to-debt can down the road in favour of votes, and another term in power.

I do have lots of answers to this dilemma: more small and community capitalism, more national self-sufficiency, more businesses modelled mutually, more emphasis on tax as a behaviour-changer rather than an income drain, smaller national Government, dumping globalism and, above all, much less notional money swimming about busily infecting the real stuff.

All that said, however, two answers present themselves not as bollocks, but rather, as the dog’s bollocks: in the immediate term, debt forgiveness. And in the medium term, the removal of all monied, commercial and financial lobbying interests from Western politics.

The debt forgiveness thing is based on logical common sense. As I’ve outlined above, business isn’t going to get back on its feet without investment in new ideas and processes, and giving such manufacturing is there is the confidence to tool up and employ new staff. The only way to create that money without printing it is to forgive debt. (In the longer term, reducing dependence upon the remote shareholder multinational model of financing capital would also be a major leap forward – as would [especially in the UK] a much more intensive focus on better farming producing a reduced need for food imports. Leaving the EU, by the way, I take as a given).

My ‘take money out of politics’ point is worth a lengthy tome in its own right. With luck, it will come as a side-effect of the phase after Crash 2. With bad luck, we will lurch back into Leftist state-controlled fluffiness. Berlin and Brussels are, between them, ensuring that the chances of that second option will become much greater. This – more than any anti-German bigotry – is the reason why The Slog has, in recent weeks, become far more single-minded in saying that the Merkelian Juggernaut must be stopped by any and all means. With every tree crushed under its caterpillar tread, it is making things infinitely worse than they need be.

If Sloggers don’t mind, I’m going to ignore any and all comment threads saying ‘you will never take money out of politics’. Two Bills to ban direct lobbying and fund all political Parties through the State could achieve much of it in one afternoon. But apart from that, saying it’s impossible to do is kind of pointless really. We either want a better econo-political model or we don’t.

Thanks for getting to the end of this piece – apologies for the length of it. Have a good day.



  1. “the French have their farming to fall back on, and the Germans their engineering. We have a bunch of lunatics buying and selling worthless shreds of paper”

    Lulz. Poor old Britain. One thing I would say is this is the time when capitalism is supposed to be at its creative destructive best, killing off the dinosaur incumbents in favour of the new paradigm upstarts, so this could theoretically turn around.

    Completely agree with most of this anyway, right up until the end – can’t say I am in favour of state-funding for the troughers, unless it’s open to everyone, otherwise we may just reinforce the status quo, as the bill they tried to introduce a couple of years ago would have done. Better if the parties have at least a notional chance of oblivion I feel.


  2. Thoroughly agree with everything here John.

    I simply cannot imagine the necessary amount of common sense suddenly pervading the mover/shakers to achieve it all.

    The human race seems constantly to make its progress to better places so difficult for itself.


  3. And don’t forget Japan’s debts of 260% of GDP and America’s $15 trillion of debt. Shorting UK, US and Japan’s bonds could be the trade of the decade. I’m sure Kyle Bass is.


  4. An inspired piece of writing, thankyou.

    Firstly, I would like to say that the problems the west is facing – and this goes for the entire of the west not just the eurozone, because Britain and the US are facing precisely the same problem: competitiveness.

    The Anglo-Saxon response to this lack of competitiveness has been to ignore the fact and print money to meet the shortfall. Which of course is where the problems in the eurozone start: Greece can’t print its own money!! For people to go on about how having your own currency makes it easy to deal with finances misses a very essential point, which is that you can borrow or print for only so long.

    If you do not use that space wisely, your money printing or borrowing will turn sour. Greece, Portugal and a few others have all been borrowing but not investing. Now the spotlight is turning on Britain: finally Moody’s is waking up from its catatonia wondering what hit it over the head (that was the American default of $6 trillion by the way!). When all is too late to rescue a situation, the markets wake up to their calling and far from being a help in such situations, largely make it worse not better.

    Britain has consistently failed to become competitive in a real way. Germany has done this in its usual Germanic fashion, by simply rolling over any problems. Try telling a German that this is wrong! It is like saying to a Greek “stop enjoying the sunshine and the olives” – rolling over things is what makes Germany German. Put this another way, and it leaves some gaping holes. When it comes to ingenuity, the Germans aren’t quite so hot.

    Britain has it in shovelfuls, but in true British style, prefers insularity. That after all, is a British characteristic as much as Germany is a steam-roller and Greeks sun lovers. That would be fine if Britain were able to pay for everything using money it generates by making things. The problem is that it does not. Britain is facing precisely the same essential problems here: competitiveness. What is more, you have wasted the last ten years quite as spectacularly as any other country. That it does not show is because your banks still have valuations on business properties that are hugely inflated. Were the British banks to write these down, your problems would really start to show.

    The cupboard has been almost emptied by the credit fiasco: either the private sector takes a huge hit from here on, or the consequences will be even more dire.

    This goes for Britain as much as any other country. Yes, Britain can devalue its currency – but only for the express purpose of re-gaining competitiveness. That Britain has seen almost zero response from its economy should be a very serious warning that things are not as they are portrayed. In saying what you do above in terms of the eurozone does not make it any less applicable to Britain.

    French have their farming to fall back on, and the Germans their engineering. We have a bunch of lunatics buying and selling worthless shreds of paper.

    What Britain has is imagination, sadly this has been applied as you say, to financial engineering. The problem is self-fulfilling: were Britain not so insular you would be in a perfect position to work with Germany. Britain could supply the very things the German steam roller needs: imagination.


  5. Second that Matt.

    As usual, John’s insight is a welcome antidote to the usual outpourings (see – I can be polite) in the meeja.

    I’m uneasy with the thought of the troughers getting all comfy with state funding. Unless, of course, I could get state funding for the East Devon Popular Front …


  6. “the French have their farming to fall back on, and the Germans their engineering. We have a bunch of lunatics buying and selling worthless shreds of paper”
    John you forgot out best kept secret. An army of egomaniacally nurished managers. In their quest for command and control will finish whatever gets to be left.
    For years I was trying to figure out how comes with all the amenities around people are not relaxed amongst one another. Then I realise that managers put the seed of division in order to part and control.
    Before one thinks I am unfair check NHS, Bio industries, Police, Manufacturing, Engineering, Universities etc. Sadly there isn’t one sector that works symbiotically with another. Commercial interests and antagonist attitudes don’t help either .
    To conclude; after WWII we had a society willing to tough it up and be supportive of one another. Now we have no such society thanks to the sociopaths and egomaniacs of the society (finance, politicos, managers, legal entities).
    The last species should have done more to preserve social structure and cohesion….


  7. In a word…
    Too much government.

    So long as you’re not paying for it – it doesn’t matter does it.

    tummty tummty tum…


  8. Excellent and depressing piece John. Rams home what i have known for a while but keep locked in the ‘too scary to be acknowledged’ part of my mind.
    You put forward some good points and we can change this situation but we are in for a whole heap of national pain. Real pain. And it will affect us all. What depresses me is that we humans are no better than animals. We are caught in a bear trap but are putting off the moment where we have to gnaw our own leg off to escape scarred but alive.

    How far will greece have to descend into anarchy before they install a practical govt with that acts for the people. You are asking for a lot. Basically an honest govt to be one that initiates debt forgiveness and halts all lobbyist practices.

    And even then debt forgiveness will barrel us down the road to depression. Banks will go under and business will implode.

    God help us all


  9. Some random points on my part , as I agree with most but not all of the above .
    China was always going to signal the End-game , I guess that time is coming sooner than we thought . Britain actually manufactures more than France , and regarding this agriculture argument : is it not te case that French agriculture is subsidised by their own government ?and the EU ? Not sure how that is ‘productive ‘ but I am not an expert .


  10. Rather liked that Gemz.

    The problem is that the UK no longer has imagination-that has been destroyed by the UKs major product-regulation.

    As for commercial property, the banks will NEVER allow a write down to real values. The property is on the books as having a specific yield and by God, it’s going to stay there. Yes, it’s fantasy but try getting the bank to agree a letting at a realistice rent (rather than what it believe should be the “market rent”)-impossible. No manager will have that happening on his watch and destroy his chance of hitting his targets.


  11. How can the economy take off when overheads for small businesses are so high? How can a young person tax and run a vehicle when insurance will cost him something like £4,000 a year and her about £2,000 and commercial property rates are punitive? Getting central and local government down to size would be a start. As for farming – getting out of the EU would do wonders – around here in Sussex there were many dairy farms, now we have just one small herd.


  12. “Debt Forgiveness” is just a way of institutionalising profligate people’s thieving of funds from the careful and dressing it up to sound moral.

    Resetting to zero will do no good – it just opens the floodgates for the same thing to happen again, particularly as a precedent has now been set.

    This is the better solution:-

    Cross-cancellation – not writing off.

    But presumably it hasn’t been followed up because the banking industry would lose half its turnover and commissions.


  13. ‘We have a bunch of lunatics buying and selling worthless shreds of paper.’

    Couldn’t agree more. The sooner we wean ourselves off this nonsense (electronic by the way, only metaphorical paper these days) and get back to doing things that require real knowledge and skill (jet engines, heavy electrical, all manner of engineering things, a locally-owned car and truck industry, nuclear power) the better it will be for us. Also much less socially divisive. No manufacturer pays his senior staff in the hundreds of thousands plus monster bonuses. The City can only get away with that because they are skimming tiny percentages from a large turnover. But we are all paying…


  14. I like nearly all your answers apart from funding political parties. Why should we stand for this? They will just get even more comfortable than they already are. What we need is a different set of politicians and more voter control over them, like the ability to recall them. As a thought experiment, why not ban political parties and election campaigning through the media at a national level. Lets make elections intensely local. Candidates must be local, they must all organise and fund their local campaign from local funding using local media, they could however affiliate themselves around a set of ideas. Once they get into Westminster they can assemble around these coalitions of ideas which might look like the current parties. Prime minister to be elected by the people in a second run off from a sample of 2 from parliament selected by MPs. Cabinet members then elected by MPs. This should interfere with the club. If as locals we don’t like what they do, replace them via internet type poll. All a bit mad maybe but we need to replace whats broken, has anyone got better ideas, particularly how this could be changed from the bottom up.


  15. Lack of education, lack of excercise, junk food, broken marriages, television , alcohol.
    Hard Work.
    Debts can and should be repaid.


  16. @Mick

    thanks for that!

    Well, you have hit the nail on the head when you said what you did about the banks – and why. Take this thinking into the eurozone and … guess what! You have the eurozone crisis.


  17. Said as much as this last night, here it is again for anybody that missed it:
    And the debt mountain continues to grow unabated.
    Not one single thing anywhere has addressed this issue.
    They LEND countries money to get them out of DEBT, am I the only person on the planet that see the flaw in this plan?
    What ever the markets do or don’t do the debt just gets bigger everyday.
    It is unaddressable as it is now so, they bury their heads in the sand and believe it will be ok in the end. It won’t.
    Nothing is going to be as it was ever again.
    I like some on here and elsewhere that advise on stocking up on food, it’s good advice.
    I have a portable wood burning stove too, wood makes you warm 3 times, cutting it, carrying it and burning it, you can also cook on it. Just purchased a fire stick too. (matches and lighters will soon disappear)
    Wait until the the shrinking economic growth really takes hold, you think the banks are panicking now?
    Think massive implosion.
    There will be a New World Order but, not one that the conspiracy theorists are predicting.
    Oh, btw, I think the latest round of QE is for the banks to absorb the schockwave that Greece is going to produce. I have to say I now believe that Greece will default, not of it’s own accord I might add.


  18. @KFC

    charcoal is much better (and safer) for use indoors. It is not hard to make, and the warmth from it is truly impressive and lasts a lot longer than wood.

    As to QE, your reasoning is sound, but it does not detract from the fact that once again, it is a means of avoiding an issue and not tackling it. The banks have not fessed up to a lot of false accounting – not writing down business property values being only one. How is it that a small default like Greece (in 2010 it was around €300bn – not much if you say it quickly) could spark a global meltdown. As I mentioned above, the 2007-8 US default of $6 trillion did not help matters one iota.

    50bn will help the banks in Britain in the short term, but the problems they have are long term, and I doubt that the money will be invested with an eye to the future. The last lot has had all but zero effect on the UK economy, why should a little more help any?

    BTW I thought tinder boxes were the modern equivalent of the fire-stick.


  19. Hi Gemz, yes I believe you are correct about the charcoal, and also right about the banks and not tackling the root cause.
    Not sure about tinder boxes, I will research!


  20. Where are the international moves to kill off exotic financial instruments?

    Why not make these derivatives and faux insurance of financial instruments unenforceable?


  21. @KFC

    tinder boxes are extremely efficient at lighting fires. You have a steel and flint (= spark) with lots of dry shavings (kept in the same box to keep everything dry). Much quicker than a fire-stick, which after all, still needs dry shavings to set fire to. We used tinder boxes on the farm, we had no electricity, but usually there was enough from the previous night’s fire to get things going again with a bellows.


  22. @AJC

    there was talk last November on a ban on naked CDSs – which was roundly shouted down by all here, and declared preposterous. The US has legislation in the pipe as we speak. In Germany they are outlawed, and Britain is doing nothing.

    As to enforcability – that is down to the ISDA in the case of a default. A CLN is not bound by the ISDA, but is an agreement between two parties as to the level of a default (a haircut of 50% could trigger a CLN but not a CDS).

    Faux insurance – or faux anything else in the manner of derivatives – they are contractual duties. That Bank of America offloaded $76 trillion of them in September-October last year just goes to show how much credance they give the laws in the US.


  23. My thoughts exactly. JW has the knack of putting succintly what I have trouble articulating. If we add environmental worries, species extinction, social breakdown and so many more elements into the mix of the world’s woes, we’re staring into a very dark place.


  24. “Debts can and should be repaid” – money is not a mechanical thing. That is a problem that modern bankers have: they do not understand what it is. The ancient Hebrews had their Jubilees, which had a profound effect on their society – and many observers see these Jubilee cycles as counteracting what are known in modern times as “Kondratieff Waves”.

    Look at money – and debt – not as something mechanical, but as the result of the sort of hard work you speak of. Look at the way a farmer plants a seed in the spring. They tend it, weed it and there is hopefully a harvest. That harvest will be the profit, but there is no guarantee of a harvest. We saw consecutive years of potato harvests reduced in weeks by blight – but then we were not experienced in the signs of disease in this most susceptible of plants.

    If you look at a loan not as something concrete, absolute and fixed, then you can say: should this be repaid? After all, the debtor may have died; the business may have died. There are no guarantees in the future. In any case, what is money if it is not valued by a human being? Storing away “billions” as electronic digits stored on a computer only have real value when set into the real world. Why else did Bank of America put $76 trillion of toxic derivatives into a subsidiary bank owned by the taxpayer last year? They must have thought that it had no value simply because it was in the form of paper contracts and electronic digits.

    The problem arises when you and I have to pay for these with real, hard coinage that is earned from real, hard work. But of course, the government could just say “null and void” in the manner of the Chinese! The debit and credit balances are torn in two and like when two tally sticks were broken, the debt existed no more.

    The important thing to remember here is that the interest owed on that debit-credit balance is very real – and so are the profits that a person can make in using that credit. A credit which could with no sense of exaggeration be said to have been “spirited out of nothing”.


  25. Instead of finding ways out of this economic crises, UK government is trying to manage and manipulate it in the hope it can engineer a return to the old days of government and consumer profligacy: living above our means. QE has not been used for what Merv King said it would be; over 95% of it has been used to buy older dated gilts to keep yields low and increase bank liquidity but due to little success at cutting govt spending, we see today that Moodys have put us on negative watch. It was only a matter of time as many had predicted: all the risks are on the downside. ZIRP is not achieving what it was claimed to be for and is only damaging the spending power of savers, whilst providing some mortgage borrowers with a bonus.

    The UK stands its best chance of climbing out of the quagmire if it progressively normalises interest rates, reduces the size and scope of govt and takes a chainsaw to State spending – in particular spending on itself: several Ministries need shutting down and the Civil Service needs shaking to pieces and remissioning – and reducing countless rules and regulations imposed on productive industry by the last Labour government, thereby reducing the cost of regulatory compliance. Govt must make it much easier to start a new business and employ people. I hear a lot of words spoken about these issues by Cameron & Co but very little action towards doing it. Govt does not realise that the gameplan has changed. It will take from 10 years to a generation for Britain to recover from this mess and that is only if they put the right policies in place.


  26. “We either want a better econo-political model or we don’t.”

    We do – state funding of parties isn’t it though. It’ll reduce accountability, and certainly won’t promote any reduction in the size of central government.

    Personally, I’ve thought a bill forbidding any providing of any funds from any sources for an election from outside the concerned constituency or area could, alongside other measures, be helpful. It’d also reduce the power of party machinery. A cap on donations might also be worth mooting.

    Of course, that doesn’t remove the central economic difficulties…


  27. We must crash (2). Disaster is now the only possible catalyst left that can bring about any meaningful change.

    Necessity (through adversity) is the mother of invention. There may be a day in 10-15 years when we will look back on the age of health & safety, bloated government and endless (pointless) rule making and count ourselves fortunate that the great depression of 2010-20 washed the whole terrible mess away and forced something more reasonable onto society as a whole.

    It’ll hurt no doubt, but IMO its the least bad option when compared to more head in the sand, political ineptitude coupled with corruption, excess and all the rubbish that the current system is trying to maintain.

    Interesting thoughts on Ireland as well John, I can see the outside POV that the people here have tried their level best to right their own ship. However, living here in it has not been fun at all. And those in charge now are absolutely not up to the job. The next election here (if it ever happens) will be the one that dictates the country’s future and scary thought as it is. Merkel, Cameron etc will be dealing with Mr Gerry Adams before long.

    Sinn Fein is playing the patriotic, rebel role to a tee. They’ll be the 2nd biggest party here next time (maybe even top dog). Terrifying as that thought may be, it will be fascinating to see how the EU deals with a group of people who wield power very differently (and far less politely) than they are used to.


  28. Or The Independent Wessex Party…

    Yes – what has been suggested WRT state funding of political parties is as bad as it could be. Payments to be made according to votes for WINNING candidates. Hence entrenching even deeper the clearly useless three party system we already have, and making it harder for any emerging party.

    I guess that was the idea? Certainly, I would baulk at any of my hard-earned dosh being given to political parties – but if I have to then all parties with a presence, and yes, that includes, as a legitimate political party, the BNP, have to benefit from the taxpayer. Democracy, innit?


  29. @Bankrupt Taxpayer,you have it absolutely right.The coalition government’s economic policies are basically more of Garry’s one eyed nonsense,’borrow more for ever’.So what comes next?At some time.the markets will decline the offer of gilts not purchased by the electronic new money created by the Bank,as their yield and security will correctly be seen as pathetic when compared with debt and equity in multinationals.It is called a gilts strike,which the Greek and Portugese governments know too well.The Euro experiment should return Europe to something like 1970s South America with new national currencies but all serious business done in US dollars.I expect Sterling to reach parity with that currency( it has happened before,in 1985)before a non Cameron new government slashes income tax and public expenditure simultaneously.Good luck to those currently on welfare, the game is over.Expect inflation,urban riots in Liverpool et al ,and pray for a new Governor at the discredited Bank of England.,


  30. @William

    so with this “news” that you bring – which is not so much news as old news – why is it that the ratings agencies haven’t picked up on this yet? After all, this has been going on for some time now.


  31. @Gemz,I do not bring ‘news’,just shallow insights,opinions ,certainly not mechanical grades churned out by a spotty youth armed with a lap top at a ‘rating agency’.Here,on the chilly South Downs,I walk the dog and increase my savings,and eagerly await my first swim on 1 May in the pool.Meantime,be short sterling,long Norway and Singapore,and grant as many put options in Tesco as you can,which will enable you to own some wonderful Russian Wanderer’s group art at not silly prices…


  32. Gemz, your contributions increasingly make me wonder if you understand anything. The money printing in the UK, USA & Japan you so strongly deprecate prevented a debt/deflation death spiral – you know, the sort of thing Greece is experiencing right now. Or perhaps you think the contortions the PIIGS are being put through are correct?

    The Germans are competitive by virtue of the fact they are operating a ruthless mercantilist policy with an artificially suppressed currency thanks to the feckless Latins of the Eurozone. It’s a racket. You seem to think they are the virtuous character in a morality play. They’re not. They’ve enjoyed the benefits of a cheap currency to eliminate competition and enrich themselves. The flip side of that in a single currency area, since by definition not everyone can operate a surplus, is fiscal transfers – in other words, it’s time to pony up, and they’re not willing to. If, at the 1953 London debt conference, the UK, USA, and other creditors, including Greece (which surrendered its right to war reparations, including about €80bn worth of gold stolen by the Germans who presumably still have it in their vaults and hidden Swiss accounts to this day), had imposed the same terms on Germany as the Heinies are currently insisting on for Greece, the Germans would be living in an agrarian wilderness. They have a moral obligation to the Greeks and they are screwing them with this witless pious morality play narrative.


  33. Good God. This is just witless. Are you seriously saying that money in paper form is “real” and money stored in, as you say, “billions as electronic digits stored on a computer” is not real? Both represent value; neither has an intrinsic value of itself. Cash is worthless pieces of paper unless everyone believes otherwise – ditto a value in a computer. By your reasoning, ideas are not real as they have no corporeal form. Software is not “real”.

    “Why else did Bank of America put $76 trillion of toxic derivatives into a subsidiary bank owned by the taxpayer last year? They must have thought that it had no value simply because it was in the form of paper contracts and electronic digits”. No, no no!!!! You damned fool! Bank of America put it there precisely because it does have value – a f***ing huge negative value which in a normal capitalist society would kill the bank as they are not good for it. But idiot politicians are prepared to sting the taxpayers for it, rather than let the bank go under and see the shareholders lose everything. That’s why they parked this “worthless” stuff in a taxpayer owned bank. It is simply not possible to be any more wrong than you are on this subject.


  34. @Sebbie

    I know that Japan is printing: but Japan is a successful economy. The problem for the UK and US is that their competitiveness – which is something you did not mention – has slipped. That was, and is the thrust of my argument and was the very thing you did not counter.

    All you can come up with is that Germany has abused the system of the euro. Oh, and Greece didn’t? Spain didn’t? Who was being ruthless and who not. Who was being foolish, who was not.

    Had the DM remained, many Germans would have been happier, and would have dealt with the “negative consequences” that it would have entailed. The Germans do not sell on price, which is another issue you forget to mention in your passion for printing funny munny.

    Whatever reasons for printing money – and there is ample evidence right here at the Slog to back me up – it is NOT HELPING BRITAIN!!! All it is doing is putting off the inevitable for another few months. On other comment threads that is called can kicking – yet you love it because Britain doesn’t do what Germany does when they kick cans!

    Tell me: all this business of making things efficient. By and large that means an “efficiency of scale”. Cheap cars come from large production volumes – not for nothing did Henry Ford succeed. If you can’t do that, then you need other points to sell your wares on, and that is not helped by trashing your currency.


  35. @Seb

    I think it is time for some politeness on your part. I have been here long enough for you to understand where I am coming from and take that into account when answering. You do not need to be discourteous, it is not the mark of a gentleman.

    The problem I was addressing with my views on computer-stored money was that it has no value to the computer. It matters not a whit if there is ten cents or seventeen thousand dollars in the machine. Because it is a machine.

    You are quite right when you speak about fiat currencies, but that argument can be used with gold. After all, Midas himself learned that lesson quite a few years ago for you cannot eat it. When push comes to shove, bread is worth more than gold albeit that gold is prettier. I think in this respect, I am no fool, and I hope that I am not damned for it.

    As to the bankers, they should be clever enough to de-fuse the toxic derivative bombs that they have made. That they are too lazy to is another matter. I presume you understand how these things are legally formulated? You write as though you do.

    I will remind you that you have voted for these politicians you so denigrate: they are your servants. If you do not like them, then tell them so – and if necessary surround the houses of parliament until they agree. I can see this happening to the Bundestag in the near future if Merkel does not change her ways for the better.


  36. I haven’t voted for any of the present crop of pillocks. The only 2 in the House of Commons who show any semblance of sense at all are John Redwood and Douglas Carswell, neither of whom get listened to. I write regularly to my local prat in the hope of educating him; like the rest of them he’s an incorrigible deadhead.

    Bankers are indeed very smart. They don’t need to defuse the derivatives mess because the politicians have decided not to call their bluff. I take a very simple view; that can create as many wacky instruments as they like but if they screw up they can take the hit. I use such things as hedging to control costs in my business since I am heavily exposed to currency risks and commodity costs – if I f*** it up, I go out of business. No one gives me a bail out. I wish to see the same courtesy extended to bankers. It’s called capitalism.


  37. BT most of us know what should/could be done. The question to ask is why ‘they’ dont do anything sensible or curative? and the answer to that is the reason we are in a mess from which it appears there is no escape.


  38. @leila young:
    I wish I shared your optimism. For sure there are ideas around, but there is no monopoly on knowing what the right policy actions are in getting Britain re-started and on the right road to renewed prosperity. One thing I am sure of is that our political leaders do not feature on the list of “those who know something” and are heavily influenced by dogma & vested interests.


  39. I agree with the local part and put a cap on how much can be spent on a campaign, thereby balancing the playing field, slightly.


  40. Spot on John, I agree and with State funding of politcal parties, was once opposed to this but having seen what this crises is doing across the globe I can’t see how else you stop the politicians from being so corralled by vested interests.

    As the economic implosion hits there will be winners too remember, I hope to be one. Got ride of my debt, out of equities and into tangibles. I think there will be life after the correction. I like this too


  41. Pingback: OFF THE RADAR: If Russia starts to get the China Syndrome, watch RBS fall over. | A diary of deception and distortion

  42. Pingback: John Ward – Off The Radar : If Russia Starts To Get The China Syndrome, Watch RBS Fall Over – 10 May 2012 | Lucas 2012 Infos

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