call for disaster...

"Greece! RAUS!"

Following the international media more and more people refer to expelling Greece from EUROland as the prime solution of a problem they skin deep link to the alleged way of Greek people being especially attentive to black markets, laziness, tax fraud or simply not paying taxes at all.

There probably is a true core in everything you read but then many other nations and economies are not really far from what Greece is like. That goes for the above but also for the levels of accrued debts over the past years, the way those countries were made part of EUROland and the methods they were taken advantage of by the banksters, not only lately, as GS is a prime example for.

So would such an exclusion work? Certainly, the easiest way and the one with a majority of the voters supporting it would be to return to the good, old Drachma. Fine.

And then? Would that help Greece, or the EURO, or the Pound, even?

It is easy to forecast that inflation would be the most dominant of all Greek imports; exports might boom for a while depending on how long Greece had anything on offer besides olives and sheep; tourism could also draw many people into the country, a summer long at least. But then imports such as energy, food, cars and any other commodities would cost stacks of good, old Drachma, lots of paper to be printed; at the same time trying to repay old debts would be the killer: then, as it is today; Greece's rating would be down from triple "A" to mono "-Z".

The very moment Greece would give up on the EURO or was forced to do so Greek creditors - not only banksters - would have a hell of a job to balance their sheets and currencies! That bailout could be called "Lehman II(GR)" with "Lehman III(x) " ... following right away.

By the way, one of those "Lehmans" will then go down in history as "x(UK)" even though nobody would need to shout "raus!". Here are more details on our "quarter of a trillion pound exposure"; so much on how clever it was to not join the EURO - or vice versa!? Clever?

So asking to expel Greece from the EURO is very simple but programmed suicide; it is rather naive and hardly a solution to be looking forward to.

Or, as one of those naive EU commissioners put it the other day in his English voice "ve ar oll sittin in one boot".

Carpe diem!

more than a greek tragedy

Dante or Ponzi?

This is about to become a EUROpean tragedy; while failing Greek debts will be a problem for Euroland it could well ignite a global disaster once Spain and/or Portugal, Ireland, Belgium, not to forget Berlusconi's kingdom get into similar trouble; they all are in trouble, of course, now, but so far the lesser-in-trouble are obviously covering the more-in-trouble. The interdependency of international banks buying national bonds preferable those that pay top interest issued by countries that in the worst case will have to be bailed out by the same national banks that provide inexpensive liquidity to the international banks that in return - you guessed it - buy national bonds is a classic circulus vitiosus or, from a legal perspective, must be addressed as the most advanced Ponzi scheme ever. Let's refrain from discussing the truth or fantasy various countries, not only Greece, have put into providing the basic figures in the first place.

It is really not UK's above 9% nor the 4% share; it rather is the sheer enormity of the plain numbers, away from any percentage gobble; bailing out three relatively small countries alone will make the bank bailout look like ordering early morning tea; once this game of "Ponzi feeds Ponzi" is collapsing we will know the depression has begun.

But then, why bother, everything will be fine as long as Mr. Trichet and the rest of the gang guarantee what they guarantee.

Carpe diem!

the race for the weakest currency...

has only just begun!

We live in a globalised world where all have access to the same means and tools to compete in what is running for labour, market shares and hopefully heaps of money.

While the US very openly seek an advantage in keeping the greenback at the low side the Chinese just piggybacked their paper money called Renminbi to ensure their exports staying competitive which at the same time enables them to massively import labour; the trick with holding more than two trillion soft bucks in cash is not really that bad as those dollars buy access to energy and plenty of shares in i.e. African countries and companies that are used to even weaker currencies.

What is likely to happen in the not so far future is the EURO, which so far endured and tolerated - of course, lacking an alternative - the dominant but weakening world currency ending is some kind of programmed implosion.

With Greece more than insolvent, Spain, Portugal, Italy and Belgium not far behind and in general terms very overstressed French and German budgets and economies the once so-called hoard of stability, the EURO, is about to fail dramatically. And if it is not failing in one go we will see it stretched until it does.

A scenario where one EURO country goes bust has not been taken into any kind of consideration in Maastricht when the artificial currency was imposed not to mention an ugly event where a number of EURO economies are becoming insolvent in a matter of months. What a coincidence, at the same time the once leading and ever so strong economies like France and above all Germany are virtually running out of paper to print the buckets of money they need to bail out or rather pump up banks, run scrappage schemes or fill up tax revenue holes.

A bursting EURO will automatically open the currencies' race downwards; the battle to export what is produced and to minimise cost but still put people into jobs is fought at the low end of a currency's value, see China. With only two plus two major and globally traded currencies left - $, €, and ¥, £ - it will be interesting to see who will win that race.

I dare say we will all loose.

Carpe diem!

flood of weak pound equals inflation

source

telegraph: Bank of England's 'nerves' to be tested as inflation jumps most on record

The sharp rise in the annual rate of consumer price inflation from 1.9pc to 2.9pc was driven by exceptional events in December 2008, as the VAT cut and high street discounting at that point were not repeated last month.

Fine, but here are the two really significant reasons:

• The weak Pound is automatically importing inflation as imports generally became more expensive; classic example: automobile and energy import prices;

• bailing out the banks was flooding them with liquidity; € 1,5 trillion in 2009 Europe wide alone - passing those sums on into the economies has not happened at all - but the liquidity has helped to transform what had begun as a bank crunch into a credit crunch. That is per se bad enough, but the real damage is done by the fact that the banks, flooded with cash, had and have to find lucrative investments; so they did what they know best, had done before and what has proved most profitable to achieve ROI figures of 25% (> Josef Ackermann); they buy gold where they produce no jewels, they buy oil without producing energy and food not for feeding anyone; they gamble and speculate as before and very obviously can hardly get enough highly paid gamblers on board.

The Bank of England certainly is the expert; so what is the hidden agenda behind favouring a weak pound in order to boost an almost not existing and really diminishing export industry and of throwing cheap money at failed banks that then dry up the credit markets, chase commodity prices higher and higher and couldn't care less?

It can hardly make sense to get oneself into the either... or...

NYT

Carpe diem!

God sends crashes?

Telegraph article: "A sterling crash is a godsend"

Apart from who should send what kind of crashes I doubt that the idea of hoping for a weakening currency makes much sense.

A currency mirrors the state in which an economy is in; the weaker the currency the more fragile the economy becomes and – most important - vice versa. The Sterling is weakening ever since 1949 against the DM for example, now the EURO. What once was DM11.70 had become around DM3.00 when the DM was buried and now is almost par value with the EURO [i.e. DM1.95583].

On the long run, how will the Sterling win the race that all major currencies are competing in which is trying to support exports and breeding inflation, the obvious two only ways out of the absolute and disastrous figures?

Just to see the full picture: Pound versus Euro started off in 1999 at 0.65874 and yesterday was 0.9131; that has made all exports round about 40% more competitive for our export partners, so where is the export boom?

At the same time imports are inflated by 40%, that, under normal circumstances would trigger "imported inflation"; once the deflationary trend is over with such "normal circumstances" might strike back and in the mix with a weak and affluent currency lead to (hyper) inflation.

Of course, all equities and liabilities will be relative, then.

Carpe diem!

GBP versus DM between 1983 and 1997
source: Deutsche Bundesbank

EURO: a sleeper

Odd, the Euro is steadily losing ground against the Dollar. Even excessive printing, huge debts and lower interest rates make the greenback more attractive than the artificial youngster among the leading currencies.

Remember DM times? I remember the days when the DM became stronger and stronger; while Germany made exporting its number one priority the other EC currencies had to be devalued constantly to cope with the pressure in EC-land. That pressure relief valve was closed when EC-land was wiped out for EURO-land.

Where has the pressure gone since? It builds up steadily and is now reflected in hugely spread debts and inflation rates within the EURO zone, countries that have to pay premium interest in order to place bonds to keep afloat and the growing threat that some members will need to be bailed out rather sooner than later by the EURO community, who else? Adding up “some members” might soon represent the majority of all members – raising the pressure to where the EURO might implode. Who knows how big the exposure of tiny Austria in Eastern European countries really is; good old Schilling would not have allowed anything comparable.

The coup where by the artificial currency was put over totally different wonna-be-partners now takes revenge; while bailing out member countries was never part of the currency contract there will be no alternative but protect the EURO and keep DM, FF and Lira from being revitalized – most would love to go for it, however, with unimaginable consequences. On the other hand the bailing out will have an effect like cutting hedges: all plants will be cut down to the one smallest in size - a feeling rather like Socialism.

The pound might have to celebrate a come back, soon.

Carpe diem!