Lets get this started

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northernsoul's picture
northernsoul
Status: Member (Offline)
Joined: Jun 16 2008
Posts: 16
Lets get this started

Hi

The crisis we face is global and not limited to the US

This article appeared in the Daily Telegraph in the UK on Thursday. 2nd October. Already it is looking dated so quickly does the situation develop

 Since then, Ireland has guaranteed all bank deposits at an estimated possible cost of £2 Trillion, as has Greece (...and Italy - I think!) while Iceland is preparing to nationalise its banks. The failiure of fiat money within the next 6 months is a real possibility. $700Bn is only the start of the bill for the US taxpayer from the Paulson plan if little old Ireland is into £2 Trillion..

I believe that the stresses on the Euro will increase. The European parliament with its terrible democratic deficit and financial incontinence -( it has not had its own accounts signed off for the past 8 years) does not augur well for its ability to deal with this crisis although no doubt there will be acres of fine words in print.

While we are in the teeth of the financial storm the enviromental issues are not going away. the Tundra within in the Artic Circle is becoming a methane generator as the permafrost melts, which if unchecked will signaficantly increase the level of global warming.  

 Just a couple of lines to get the ball rolling. 

Northern Soul 

Financial Crisis: So much for tirades against American greed

Ambrose Evans-Pritchard says it is ironic that European banks have turned out
to be deeper in debt than their US counterparts.

 
By Monday, Mr Steinbrück was having to orchestrate Germany's biggest bank bail-out
German finance minister Peer Steinbrück denounces US greed last week
Photo: AP

It took a weekend to shatter the complacency of German finance
minister Peer Steinbrück. Last Thursday he told us that the financial
crisis was an "American problem", the fruit of Anglo-Saxon greed and
inept regulation that would cost the United States its "superpower
status". Pleas from US Treasury Secretary Hank Paulson for a joint
US-European rescue plan to halt the downward spiral were rebuffed as
unnecessary.

By Monday, Mr Steinbrück was having to orchestrate
Germany's biggest bank bail-out, putting together a €35 billion loan
package to save Hypo Real Estate. By then Europe was "staring into the
abyss," he admitted. Belgium faced worse. It had to nationalise Fortis
(with Dutch help), a 300-year-old bastion of Flemish finance, followed
a day later by a bail-out for Dexia (with French help).

Within
hours they were all trumped by Dublin. The Irish government issued a
blanket guarantee of the deposits and debts of its six largest lenders
in the most radical bank bail-out since the Scandinavian rescues in the
early 1990s. Then France upped the ante with a €300 billion
pan-European lifeboat for the banks. The drama has exposed Europe's
dark secret for all to see. EU banks took on even more debt leverage
than their US counterparts, despite the tirades against ''le
capitalisme sauvage'' of the Anglo-Saxons.

We now know that it
was French finance minister Christine Lagarde who begged Mr Paulson to
save the US insurer AIG last week. AIG had written $300 billion in
credit protection for European banks, admitting that it was for
"regulatory capital relief rather than risk mitigation". In other
words, it was underpinning a disguised extension of credit leverage.
Its collapse would have set off a lending crunch across Europe as
banking capital sank below water level.

It turns out that
European regulators have allowed even greater use of "off-books"
chicanery than the Americans. Mr Paulson may have saved Europe.

Most
eyes are still on Washington, but the core danger is shifting across
the Atlantic. Germany and Italy have been contracting since the spring,
with France close behind. They are sliding into a deeper downturn than
the US.

The interest spreads on Italian 10-year bonds have
jumped to 92 points above German Bunds, a post-EMU high. These spreads
are the most closely watched stress barometer for Europe's monetary
union. Traders are starting to "price in" an appreciable risk that EMU
will break apart.

The European Commission's top economists warned
the politicians in the 1990s that the euro might not survive a crisis,
at least in its current form. There is no EU treasury or debt union to
back it up. The one-size-fits-all regime of interest rates caters badly
to the different needs of Club Med and the German bloc.

The euro
fathers did not dispute this. But they saw EMU as an instrument to
force the pace of political union. They welcomed the idea of a
"beneficial crisis". As ex-Commission chief Romano Prodi remarked, it
would allow Brussels to break taboos and accelerate the move to a
full-fledged EU economic government.

As events now unfold with
vertiginous speed, we may find that it destroys the European Union
instead. Spain is on the cusp of depression (I use the word to mean a
systemic rupture). Unemployment has risen from 8.3 to 11.3 per cent in
a year as the property market implodes. Yet the cost of borrowing
(Euribor) is going up. You can imagine how the Spanish felt when
German-led hawks pushed the European Central Bank into raising interest
rates in July.

This may go down as the greatest monetary error of
the post-war era. The ECB responded to the external shock of an oil and
food spike with anti-inflation overkill, compounding the onset of an
accelerating debt deflation that poses a greater danger. Has it
committed the classic mistake of central banks, fighting the last war
(1970s) instead of the last war but one (1930s)?

After years of
acquiescence, the markets have started to ask whether the euro zone has
the machinery to launch a Paulson-style rescue in a fast-moving crisis.
Who has the authority to take charge? The ECB is not allowed to bail
out countries under EU treaty law. The Stability Pact bans the sort of
fiscal blitz that has kept America afloat. Yes, treaties can be
ignored. But as we are learning, a banking system can implode in less
time than it would take for EU ministers to congregate from the far
corners of euroland.

France's Christine Lagarde called yesterday
for an EU emergency fund. "What happens if a smaller EU country faces
the threat of a bank going bankrupt? Perhaps the country doesn't have
the means to save the institution. The question of a European safety
net arises," she said.

The storyline is evolving much as
eurosceptics predicted, yet the final chapter could end either way as
the recriminations fly. Germany has already shot down the French idea.
The nationalists are digging in their heels in Berlin and Madrid. We
are fast approaching the moment when events decide whether Europe will
bind together to save monetary union, or fracture into angry camps.
Will the Teutons bail out Club Med? If not, check those serial numbers
on your euro notes for the country of issue. It may start to matter.

Golden Age's picture
Golden Age
Status: Bronze Member (Offline)
Joined: Aug 2 2008
Posts: 61
Germany takes the hot seat.

another article about the mess in Europe.  For one thing it helps me understand why there is a flight to the dollar when we have just added over 2 Trillion dollars to our debt. 

 http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3141428/Germany-takes-hot-seat-as-Europe-falls-into-the-abyss.html

eternal sunshine's picture
eternal sunshine
Status: Bronze Member (Offline)
Joined: Sep 24 2008
Posts: 50
Re: Lets get this started

I'm based in the UK and I'm on a pretty steep learning curve when it comes to the economic aspects of this site (i.e. most of it)

I'd be interested if anyone has anyone has come across any sources of similair economic commentary specific to the UK.

Having said that I think that more than most nations our fate is linked to the US - other than the fact that we don't have the worlds reserve currency anymore.

 

 

 

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