Despite a month of trying, there has been no success in papering over the cracks in the Euro.
Europe’s rescue plan for Greece appears to be crumbling after the country
threatened to call in the International Monetary Fund unless Brussels comes
up with real money on acceptable terms within a week.
|
| The inability of the eurozone to put together a viable package after a month
of talks has dismayed markets, which thought the terms of a deal had already
been agreed. |
| The euro fell two cents against the dollar to below $1.36. |
| Greek Premier George Papandreou told the European Parliament that his country |
| is in effect already subject to the full
rigours of an IMF-style austerity plan but without enjoying any of the
benefits. |
| savings from cost-cutting measures were vanishing into
the pockets of bond-holders through higher interest rates.
|
| a German-led bloc of states is also warming to the IMF |
| IMF route is fraught with danger |
| completely undermines the credibility of
monetary union. |
Remember Rowen and Martin’s, Laugh-in? For people with pounds, it’s no laughing matter, though.
UniCredit has alerted investors in a client note that Britain is at serious
risk of a bond market and sterling debacle and faces even more intractable
budget woes than Greece.
|
The Italian-German group, Europe’s second largest bank, said Britain’s tax
structure will make it hard to raise fresh revenue quickly enough to restore
confidence in UK public finances.
|
| Paribas expects sterling to drop to $1.31 |
| and
reach parity against the euro |
| markets are fretting
over how the UK will cover its deficit following the pause in quantitative
easing by the Bank of England. The Bank has absorbed £200bn of debt, |
| Britain’s
trump card is an average debt maturity of 14.1 years, nearly three times US
maturities and double those of France. This greatly reduces the risk of a “roll-over”
crisis.
|
| “Britain’s AAA-rating is highly at risk. The budget deficit is huge at
13pc of GDP and investors are not happy |
Climate change is only a small part of a much bigger picture of the consequences of industrial civilisation. Most of the other aspects of the picture are beyond debate, plain for all to see, if they would but look. We fix around 121 million tonnes of nitrogen a year, far more than nature does – and nature cannot cope |
Half the world’s tropical rainforests are gone, and large areas of grasslands once open to wildlife are now fenced in for livestock |
Every degree of warming caused directly by CO2 is amplified by feedback processes that could drive temperatures much higher |
We have more than doubled the global concentration of aerosols such as soot since pre-industrial times |
There are approaching 100,000 different human-made chemical compounds in use around the world today, and many of them harm humans and wildlife Read more at www.newscientist.com |
I would not be surprised if some kind of special drawing rights (a new currency) will be issued by the US government, specifically for the purpose of bailing out State Governments because they are too big to fail. Otherwise, banks and foreigners would not have their loans repaid.
Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should
be more worried about the risk of default of the state of California than of
Greece’s current debt woes.
|
California however poses more of a risk, given the state’s $20bn (£13.1bn)
budget deficit, which Governor Arnold Schwarzenegger is desperately trying
to reduce.
|
| Earlier this week, the state’s legislature passed bills that will cut the
deficit by $2.8bn through budget cuts and other measures. However the former
Hollywood film star turned politician is looking for $8.9bn of cuts over the
next 16 months, and is also hoping for as much as $7bn of handouts from the
federal government.
|
Earlier this week, John Chiang, the state’s controller, said that if a
workable plan to reduce the deficit and increase cash levels is not reached
soon, he will have to return to issuing IOU’s, forcing state workers to take
additional unpaid leave and potentially freezing spending.
Read more at www.telegraph.co.uk |
What happens when the higher tax bills actually arrive in the mailbox at the same time as thousands of government employees are being laid off? The government will have to hire a lot more tax collectors … The Greek bond markets fell sharply on Thursday after the second ratings agency in as many days warned that the country’s long-term credit ratings could be downgraded. |
Greek two-year bond yields, which have an inverse relationship with prices, rose nearly half a percentage point following warnings from Standard & Poor’s on Wednesday and Moody’s Investors Service in the early hours of Thursday morning. |
The Athens stock exchange and the euro were also down, while credit default swaps rose, as concerns over the ability of the Greeks to finance their debt rose, particularly following the warning from Moody’s. |
Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in an interview in Tokyo that the agency could downgrade Greek two notches. |
| “If in a few months it appears there are significant deviations from the plan, then it is pretty likely that we would adjust the rating accordingly,” Read more at www.ft.com |
“A sterling collapse could be on the cards.” I didn’t say it, this time. It’s a question of who goes first. Greece, Spain, Japan, or the UK? For all the focus on the euro and Greece’s budget woes, sterling is sinking stealthily into a crisis of its own. |
Currency traders say short-term flows indicate that any commercial demand for sterling that appears in the market is being very easily absorbed by speculative players. This is important as it suggests investors are starting to increase bets against the pound. |
No wonder, since news this week showed the UK government borrowed £4.3bn in January – a month in which tax revenues are supposed to be swelling coffers. |
| the absence of any positive adjustment to the UK fiscal position runs the real risk of a run on the pound. |
Meanwhile, Gordon Brown lives on in his fantasy world, calling for a “global financial constitution” to sort the mess out.
Sterling extended losses against the dollar this morning, as the US currency
continued to thrust higher after the Federal Reserve prompted speculation
that it was to tighten monetary policy.
|
The pound slipped to its lowest level against the US dollar in nine months,
shedding 1.5 per cent to $1.5377 after the Fed hiked a key interest rate.
|
| He also called for sweeping changes to financial regulation including calls
for a “world constitution for the global financial system”, adding
that these should include “common rules for capital and liquidity,
common standards for supervision, common rules for bonuses and a shared way
of assessing the contribution banks should make to society, free of the
unfair and disproportionate use of regulatory and tax havens which penalise
countries doing the right things.” |
The falls came as Prime Minister Gordon Brown claimed the government would
halve Britain’s groaning deficit - a key factor in sterling’s recent
weakness - within four years.
Read more at business.timesonline.co.uk |
| there’s an ill wind blowing, and it is picking up. I hope those of my readers who haven’t done what they can to basically make themselves secure will feel a new sense of urgency and do so. |
| if you are still assuming that our collective crisis will wait until you are finished with school, have paid off the mortgage, are ready to move, etc… that’s a bad idea. All your plans should include a “what if something unpleasant occurred now” assumption. |
| We all have differing abilities to make our lives secure, but what we can do - build up a basic reserve of food, work with other people, be aware of those in need around us, get out of debt, plant a garden - those things are always a good idea anyway. The time and energy you expend on them will not be wasted, even if you could have left your hat hanging a bit longer. |
EB reader Ann Pelusa writes:
Both Astyk and Greer are correct. In a nutshell: In the interim, inflation of necessities, deflation of discretionary stuff:Read more at www.energybulletin.net |
Just because people have been focused on other things, such as the economy and climate change, does not mean old problems go away. If they are not addressed, then they just tend to get worse. What is notable, now, is that peak oil being talked about seriously in the Wall Street Journal … even if it is being used as an excuse to push nuclear power. A shortage of oil could be a real problem for the world within a fairly short period of time. It was unfortunate for the group which chose to point this out yesterday that they should have chosen to do so on the day the Organization of Petroleum Exporting Countries, or OPEC, reported that the effects of the financial downturn had led to a slight downgrade in its forecast for oil consumption this year. |
| But the work of the Industry Taskforce on Peak Oil and Energy Security shouldn’t be disparagingly dismissed. Its arguments are well founded and lead it to the conclusion that, while the global downturn may have delayed it by a couple of years, peak oil—the point at which global production reaches its maximum—is no more than five years away. |
| a former chairman of Shell, wrote that “It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. |
Credit Suisse says Greece must
raise €30bn (£26bn) in debt by mid-year, mostly in April and May. Greek
banks have been shut out of Europe’s inter-dealer markets, forcing them to
raise money at killer rates. They are suffering an erosion of deposits as
rich Greeks shift money abroad. This could come to a head long before April.
“Economically, we are in a very risky situation. Greece is close to
default. We face systemic risk like the Lehman collapse and unless there is
a bail-out for Greece, there will have to be a bail-out for the whole
European banking system within two or three months,” he said.
|
Yet they are damned if they don’t, and damned if they do. “A Greek
bail-out increases the risk of EMU break-up, because monetary union can only
work if everybody sticks to the rules,” Mr Felsenheimer said.
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Crisis 2.5 in the air - Markets spooked as Greek rescue plan crumbles
