johnvillan

Russia v Republic of Ireland - Post Match Interview - Richard Dunne

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Daily Mail

'Dear Chief Secretary... there's no money left': Outgoing minister's letter of warning to new government

By Daily Mail Reporter

Last updated at 12:00 PM on 17th May 2010

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The new coalition Government may be accusing Labour of cooking the books but one ex-minister made no effort to hide the state of the economy, it was revealed today.

In a stark message left in a Treasury desk for his successor, outgoing chief secretary to the Treasury Liam Byrne wrote simply: 'I'm afraid to tell you there's no money left.'

His pithy summary of the serious challenges facing the new power-sharing administration was revealed by Liberal Democrat David Laws, who has taken on the role.

No money left: Liam Byrne (left) wrote the letter of warning to new Chief Secretary to the Treasury David Laws (right)

Speaking at a press conference at the Treasury, he told reporters: 'When I arrived at my desk on the very first day as Chief Secretary, I found a letter from the previous chief secretary to give me some advice, I assumed, on how I conduct myself over the months ahead.

'Unfortunately, when I opened it, it was a one-sentence letter which simply said "Dear Chief Secretary, I'm afraid to tell you there's no money left", which was honest but slightly less helpful advice than I had been expecting.'

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Mr Byrne insisted the message was meant as a private joke.

'My letter was a joke, from one Chief Secretary to another,' he said.

'I do hope David Laws' sense of humour wasn't another casualty of the coalition deal.'

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The independent

Election 2010: Debt - A conspiracy of silence

Britain is in a far worse financial crisis than many realise. Drastic action is needed, says venture capitalist Jon Moulton in the first of a series unpicking the issues The IoS believes matter most

Sunday, 11 April 2010

In the past week our politicians have put on their most serious faces and addressed the economy. They have got into a wrangle about National Insurance contributions. Labour wants to increase them; the Tories don't. A lot of heat has been generated, much ink spilt. What it suits none of them to tell you, though, is that such talk is tinkering at the margins. The debt that Britain faces is monstrous, and neither Tories nor Labour will admit it. They prefer to quibble about the small change than admit that they are taking part in, in effect, a conspiracy on the British people. To make it worse, much of the media is allowing them to get away with it, presumably because they think – as the politicians seem to believe – that the public doesn't want to hear the bad news. In short, we are complicit in a con.

Let me take you back to the terrible old days of the mid-1970s. The poor country was in a shocking way and we had to be rescued by the International Monetary Fund (IMF). The UK government was told what it had to do and the population suffered. You will have some mental pictures of industrial strife and large-scale job losses in those bad old times.

Thank goodness, it couldn't happen now – or could it?

In 1975 the UK had government interest-bearing debt of about 45 per cent of the total economy (GDP) and the debt was rising at about 8 per cent per year. We then had to crawl to the IMF in 1976.

Today, that interest-bearing debt is about 65 per cent of GDP, rising nearly 13 per cent a year. A degree in economics will not be necessary to spot that things are a lot worse than in 1975.

Actually, quite a few other things were better in the mid-1970s: unemployment was half of today's level. The 1975 decline in the economy was only one-seventh of what happened to us last year. And the UK had much less of the largely unmentioned other debt – mostly, the pensions promises that will have to be paid by future generations, which now represents perhaps 125 per cent of GDP but was near 20 per cent in the 1976 time frame. Not a reassuring background.

The mid-1970s IMF crisis was triggered largely by the fact that foreign buyers of government debt were so nervous of the UK's ability to repay debt that interest rates roared into the teens.

Inflation was a much bigger issue then than now, and foreigners and Brits alike also feared we intended to "repay" our debt with relatively worthless scraps of paper.

So there was a buyers' strike on government debt and we had to be bailed out. Rationally, the currency collapsed in value, and as the cost of importing oil and the like rose, so did inflation. The observant reader may have seen some of this starting to happen in the past few weeks.

Should overseas buyers of UK debt worry about our ability to repay? Well, probably not – we have now come up with a new term, quantitative easing, to replace less attractive phrases like printing money or debasement. So last year the UK government did £200bn (20 per cent of GDP) of this latter-day version of slipping lead into the silver coins to buy roughly as much debt as it issued. So we can always repay with something – it might not be worth a lot, though.

So it really does feel as if the pound in your pocket will dwindle in value as the Government tries to drive interest rates down. Trying to destroy our national debt by letting inflation rip is quite attractive.

At some point the fear is that the debt markets will move their focus from Greece. Horrible but true – we have quite a lot of economic statistics worse than Greece. We might be one of the next to suffer, rather like the big banks a couple of years ago when they many found themselves with too much debt. The markets will probably attack one after another in a loss of confidence.

So here we are spending madly. Put simply, in the past year for every pound of receipts the Government spent £1.36p. And the gap is filled by borrowing. That gap is roughly £180bn a year. Wow.

The last Budget shows borrowing continuing to rise for the next five years. Beyond doubt, there will therefore be an ongoing risk of a market panic with high interest rates and considerable economic effects throughout that period. However, you should not pay too much attention to budget forecasts – the 2008 Budget forecast that last year the Government would spend 99p for every pound it raised. Honest.

As debt rises, the cost of paying interest and making repayments obviously rises, too. To the extent this money is paid overseas, this is money leaving our economy and weakening it. At some point that cost will mean our economy cannot grow – even the Budget predicted a drop in government investment to one-third of last year's level over the next five years, which will not be good for growth.

So how can we get out of this financial hole before our creditors get to us? There are three ways to reduce our national debt: let inflation rip to destroy the debt; increased tax revenues from higher taxes and economic growth; cut government spending.

The inflation route was explored a lot in the 1970s and 1980s; it's chaos and permanently weakens the economy.

Increasing taxes is not going to get there. We need to get £50bn plus in each year to stop the debt from rising in five years' time. Look at the bickering about National Insurance rises – try 10 per cent on VAT as a political idea to make a good dent in the budgetary hole. It's inconceivable that our current politicians would have the stomach to do this. In any case, the tax load would probably become counterproductive with businesses and people moving overseas to less taxing environments.

Will growth get us there? Well, very short-term growth will probably return as the economy restarts. But the fact is that over the past 10 years the economy's ability to grow has reduced – largely because we have moved from 40 per cent of the economy being public sector to 50 per cent.

Civil servants do not really generate growth, so a smaller private sector has to support a larger public sector. We have casually added about a million people to the public payrolls. No one actually knows what the economy's growth potential is and our government merely hopes for the best. However, it does not seem feasible that growth will be enough to plug the gap over the next few years.

Now that really leaves the only route to stability, which is to cut the public proportion of our economy, which means reducing spending, increasing the ability of the economy to grow and reducing the number of civil servants, and probably their pay and pensions. And the numbers are large: we need to take out several hundred thousand public sector jobs. We need to reduce the vast liability for public pensions that clouds our future. The politics – and human costs – of this are not palatable. Tough choices have to be made as to what we can afford.

But, actually, we have to do this. Only the timing is uncertain, because either we work up the stomach to do it ourselves or the debt markets will at some point stop buying UK debt; interest rates will rise, probably rapidly and a lot, and we will be forced into doing it by the IMF and the debt markets on their terms.

A short moral section. Essentially, by enjoying today while stacking up government debt we are simply leaving the cost for our kids and grandkids to repay. Our growth will be their lack of growth. Or perhaps we intend to rob our creditors by inflating the debt away. Either way, we have no grounds for pride in our actions.

As I say, none of our political parties appears to trust the electorate to grasp the dreadful state we are in. The Government has actually increased public spending in more than 20 new commitments this year. The Conservatives talk of no public sector compulsory redundancies and efficiency gains which will at best be just measurable.

Our senior politicians know the reality. They fear that being the first party to say it will kill their electoral prospects.

The political debate talks of a few hundred million here and there – it needs to be about tens and scores of billions. Neither party has plans to deploy actions for the economy remotely commensurate with the size of the problem. Is it possible that it is time for some serious political leadership to emerge? We need radical treatment – not cosmetics.

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The Telegraph

Don't let the voters know we face bankruptcy

Britain's truly momentous challenges will not even appear in the election campaign, says Christopher Booker

By Christopher Booker

Published: 7:37PM BST 10 Apr 2010

Comments 215 | Comment on this article

Gordon Brown has money worries: a national debt that grows by half a billion pounds a day Photo: REUTERS Four huge shadows hang over this claustrophobic election, about which the three main parties will be trying to say as little as possible. The first, obviously, as part of the catastrophic legacy of 13 years of Labour misrule, is the barely imaginable scale of the deficit in public spending.

This is now growing so fast that it is difficult to find ways of bringing home how stupendous it has become. The Taxpayers' Alliance has tried to do it by pointing out that public debt is rising by £447,575,342 – virtually half a billion pounds – every day. With the Government's own projections showing that within four years the National Debt will have doubled to £1.4 trillion, I recently used figures from the Institute for Fiscal Studies to show that by 2014, in only four years' time, it will be costing us the equivalent of £60 a week for every household in the land just to pay the interest on the debt - let alone paying off the debt itself.

Gordon Brown to warn Barack Obama over protectionismThe implications of Gordon Brown's doubling of public spending in the past decade are so hard to grasp that it is hardly surprising the parties don't want to talk about it, because none of them really has the faintest idea what to do about it. The utter unreality of this debate was illustrated last week by the Tories' claim that they could cut spending by £12 billion, when it is now rising by that figure every month. Meanwhile Labours boasts that, having trebled spending on the NHS, to no great effect, it could save half a billion a year by cutting out NHS waste – when our public debt is now increasing by that amount every day.

The second shadow over this election is the unprecedented damage done to our politics by the expenses scandal, which has degraded the standing of Parliament to its lowest point in history. More than anything, these revelations have reinforced the realisation that we are ruled by a political class in which the three main parties are blurred indistinguishably together, almost wholly divorced from the concerns of the rest of us. Never have MPs or peers been so diminished in stature, at the very time when the bloated apparatus of the state has been intruding on our lives more obviously than at any time before.

A third, closely related shadow which the political class has been only too keen to hide away has been the still barely understood extent to which it has handed over the running of our country and the making of our laws to that vast and mysterious new system of government centred on Brussels and Strasbourg. Nothing better exemplified how our politicians are caught by this system, like flies in a spider's web, than the shifty means whereby each of the three main parties weaselled its way out of keeping the manifesto promises of the last election that it would give us a referendum on the EU constitution, otherwise known as the Lisbon "reform treaty". Here was another great surrender of Parliament's power to decide how our country is run, and the MPs of all parties were not only happy to agree to it, but treated us all with contempt as they lied about it.

As I have often observed before, one of the consequences of this abdication of their responsibilities by our politicians has been the way in which vast tranches of policy-making which used to be the stuff of debate have simply passed into a limbo, where they are no longer properly discussed or even explained. Farming and the countryside, the fate of our fishing industry, our immigration rules, our laws on employment and how businesses are run, on the environment, on food safety, the regulating of our financial services, including the operations of the City of London – the key decisions in all these areas, and many more, have been handed over to a form of government which is unconcerned with our national interests and almost wholly unaccountable, with consequences which in almost every case have proved disastrous for Britain.

Yet on all these hugely important issues our political class remains virtually silent, because it no longer has any power to decide what happens. All our political nonentities are left to bicker over at election time is that ever shrinking area of policy-making still under our national control: schools and hospitals, crime… that's about it.

Few issues have given rise to more bafflement and grief since the last election than the utter shambles we have made of our once efficient system for disposing of our rubbish. Yet because this is essentially driven by the EU's landfill directive, the political class prattle about "recycling", which is largely a cynical farce, and mutter about "bin taxes", but otherwise have stepped aside from a process they scarcely understand. We are left having to put up with a mess which is soon going to cost us hundreds of millions of pounds a year, for failing to meet EU targets far more damaging to us than to any other country in Europe.

A final huge shadow which will barely be discussed at this election, because the main parties are all but unanimous on it, is the way our politics has become permeated by everything which can be related to global warming, from soaring taxes to the propaganda dished out in our schools, from the wishful thinking that we can spend £100 billion on building thousands more useless wind turbines, to the disastrous distortion of our national energy policy by the "green" obsessions of both the EU and our own political class, which threaten within a few years to turn Britain's lights out. (Although next week I hope to reveal an unexpected way in which this might be averted.)

This flight from reality was never better exemplified than by the 2008 Climate Change Act, committing Britain, uniquely in the world, to reducing its carbon emissions by more than four fifths. Even the Government admits that this will cost us up to £18 billion every year for four decades, making it by far the most costly law in our history. Though its target could only be met by virtually closing down our economy, such is the bubble of unreality in which our political class lives that our MPs voted for this insane law almost unanimously, without having any idea of its practical implications.

The real tragedy of what has happened to Britain in the past 20 years is that we no longer have an opposition worthy of the name. It is almost impossible to measure the damage done by 13 years of rule by Blair and Brown. They have left the country effectively bankrupt, its manufacturing industry halved, the City tottering and under threat. They have allowed the United Kingdom to splinter, debauched the House of Lords and brought politics into contempt. They have done irreparable damage to our Armed Forces (not least through the humilating fiasco which led to our being thrown out of Iraq). Our country's standing on the world stage has never been lower.

Yet, as the worst Government in our history has presided over this catastrophe, we have had an Opposition so hypnotised by the devilry of the "Blair revolution" that in fundamental respects it has scarcely been an opposition at all. Having had the stuffing knocked out of it by the way it got rid of Mrs Thatcher, the Tory party has never really recovered its identity, leaving millions of voters in effect disfranchised. Three virtually indistinguishable parties squabble over trivia, leaving the electorate without any clear alternative – so that on May 6 almost half the voters may well stay apathetically or sullenly at home.

By the time of the next election the scale of the disaster which has befallen us will be apparent. This election, meanwhile, is little more than a painfully empty charade – while our national debt continues to increase by half a billion pounds a day.

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London evening standard

UK's finances 'ghastly' as tax falls and spending rises

18.02.10

Britain's public finances turned out much worse than expected in January as Government spending shot up and tax receipts fell sharply, the Office for National Statistics said today.

The Government borrowed a staggering £4.34 billion in January - a month that usually sees it in credit due to a seasonal surge in tax receipts. January is usually the biggest tax collection month due to the self-assessment deadline and quarterly company payments.

In January 2009, the Government repaid £5.27 billion.

Last month saw the first deficit for a January since records began in 1993. Analysts had forecast a repayment of £2.8 billion.

The appalling figures came as a major blow for Gordon Brown as the debate rages about the dreadful state of Britain's public finances. The UK is set to borrow £178 billion this year.

The ONS today said the deterioration in the numbers was due to central government receipts falling sharply as both income tax and capital gains tax inflows dropped markedly.

In January 2009, capital gains tax receipts had been boosted by the abolition of taper relief.

Government spending and interest payments also rose sharply, the ONS said.

On spending, unemployment benefits were one of the biggest increases as the jobless total spiralled. Official figures yesterday showed the number of people claiming dole benefits jumped by 23,500 in January to 1.64 million.

The government has pledged to halve its budget deficit over the next four years.

Andrew Goodwin, Senior Economic Advisor to the Ernst & Young ITEM Club, said: “These are pretty ghastly figures and come as somewhat of a surprise given the smaller overshoots of the past couple of months. January usually yields a healthy surplus due to receipts from corporation tax and even in the current climate it is surprising to see the government rack up a deficit. If this overshoot is replicated in February and March then the Chancellor's full year forecast will certainly be under threat.

“These figures emphasise the scale of the fiscal challenge facing the next government. The current HMT forecasts are far too optimistic, both in terms of the speed of recovery and the extent to which tax revenues will recover, and it is clear the major additional tightening will be required.”

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£1.3 trillion in various guarantees and investments behind the banking system in order to avoid the consequence of its fall.

£863 billion public debt & counting

A large chunk of our tax income is gained from the financal (pyramid debt selling ) sector, so we can expect that to fall . If the Torys get in Brown will have left them in the crap .The cuts in public spending will have to be brutal or our credit rating will have to be downgraded from AAA, insuring that who ever wins will be so unpopular that they will only be around for one term.

Forbes.com

Trillions Of Troubles Ahead

Bert Dohmen, 12.18.09, 05:50 PM EST

A crushing burden of debt threatens to sap America's growth for years to come.

Not too long ago, a billion dollars in a governmental budget was a lot of money. Then we got into hundreds of billions. People understood that this was a lot, just because of all the zeros. Now, unfortunately, the number has become small: the world "trillion," as in $1.2 trillion for health care reform, seems so tiny. But it has 12 zeroes behind it, which is so easy to forget.

If the government stays on the course it's been on for the past forty years without a radical change, the federal government will soon have a $10 trillion budget.

In other words, the federal budget deficit will be $1.4 trillion. Just to make the size more visible, that's $1,400 billion.

Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that "at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company--only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time."

Add the unfunded portion of entitlement programs and we're at 840% of GDP.

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federalreserve.gov

“In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010.”

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Might be heading for a downturn in Feb 2010.

telegraph.co.uk

UK backs £167bn of overseas bad debt

Treasury reveals taxpayer is insuring more of RBS’s foreign toxic loans than British ones.

By Edmund Conway and Philip Aldrick

Published: 9:37PM GMT 07 Dec 2009

British taxpayers stand behind more than £167bn of toxic assets in the US, Ireland, the Middle East and beyond, it has emerged as the Treasury disclosed details of what Royal Bank of Scotland has dumped in the state insurance scheme for bad debts.

Most of the £281.9bn of assets RBS has placed under taxpayer protection are based outside the UK, with loans secured against everything from negative equity properties in Dublin to hedge fund assets in Caribbean tax havens and container ships docked in ports around the world.

In a document released quietly on its website on monday, the Treasury revealed the full make-up of the portfolio of assets taxpayers are now supporting through the Government’s Asset Protection Scheme (APS).

It includes:

* The overdrafts on 3.2m British bank accounts, and 70,000 UK mortgages at an average loan-to-value ratio of an alarmingly high 95pc.

* A vast portfolio of loans to Irish and Northern Irish businesses and customers, including £2.9bn worth of negative equity mortgages in Dublin and throughout Ireland.

* Some £3.1bn of loans to hedge fund managers, almost half of whom were based in the Cayman Islands and a third in the US.

* Almost £4bn worth of shipping loans secured against oil tankers and container ships.

The details underline the fact that at the peak of the banking crisis, RBS had become the world’s biggest bank in terms of assets, having expanded rapidly during the credit boom, swelling its size even further with its acquisition of ABN Amro.

Similarly striking is the fact that in almost all of the asset classes, the majority of the loans now being supported by the taxpayer were made only very recently, some of them in 2008, only months before the bank was semi-nationalised.

In total, £167.4bn of assets underwritten by British taxpayers are overseas. Only £114.5bn are in the UK.

Observers estimated that at least a quarter of the insured toxic debts came with RBS’s disastrous acquisition of Dutch bank ABN Amro. In all, the Government’s exposure to RBS’s European assets is £75.4bn, its US ones £43.6bn, and “other” foreign debts £48.4bn.

The Treasury stresses in the document that its “central expectation is that overall net losses on the insured pool will not exceed the £60bn first loss [borne by RBS]. The direct cost to the taxpayer from the APS is therefore expected to be nil”.

Under the agreement, RBS will manage the assets in the scheme but hand control to a “step-in manager” appointed by the Treasury if losses reach £75bn. The bank has also been instructed to ensure “RBS personnel working on the APS are remunerated at an equivalent level to those

working on non-APS assets”.

The document reveals that the Treasury paid its advisers, including investment bank Credit Suisse, £71m to set up the APS – a sum that has been reimbursed by RBS and Lloyds. Lloyds, which withdrew from the APS earlier this year, has paid £26m and RBS “is paying” £45m.

RBS has also agreed to pay the Treasury for the cost of running the Asset Protection Agency (APA), the body established to ensure RBS’s assets are being managed in the taxpayers’ best interests. It is expected to have a staff of 50, led by chief executive Stephan Wilcke, a former senior advisor of Cairn Capital.

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I see that bank shares have taken a tumble today with the news about Dubai World.

Seconds out: round 2?

The Register

London's stock exchange crashes again

Who's to blame this time?

By John Oates • Get more from this author

Posted in IT Director, 26th November 2009 12:23 GMT

Updated The London Stock Exchange has suffered yet another systems crash, leaving brokers high and dry since 9.30 this morning.

The Exchange last went down in September 2008 and took almost the entire day to get back online. That outage, on one of the Exchange's busiest days, was the day after the $200bn bailout of US housing giants Freddie Mac and Fannie Mae, leading to lots of conspiracy theories.

The TradElect platform on which trading depends has a flakey history despite a .NET upgrade overseen by Accenture. Microsoft and Cisco were blamed for the last failure, but the Exchange chose not to reveal what the problems were.

From 9.33 this morning customers had problems connecting to two Trading Gateways, problems which lasted an hour.

By 10.35 the Exchange gave up and put all orders in to an auction call period - buy orders are matched to sellers, but the deal does not actually go through until the period ends. LSE has yet to announce when this "uncrossing time" will be.

The update page is here.

Updated:

The Exchange restarted continuous trading at 14.00. A spokeswoman was uable to tell us what caused the failure. ®

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Bloomberg

U.K. Stocks Drop Most Since May; LSE, HSBC, Barclays Decline

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By Adam Haigh

Nov. 26 (Bloomberg) -- U.K. stocks plunged the most since May as Dubai’s move to delay debt payments risked triggering the biggest sovereign default since 2001.

London Stock Exchange Group Plc, whose largest shareholder is Borse Dubai Ltd., dropped the most in almost eight months. HSBC Holdings Plc, a lender to Dubai World, the government investment company burdened by $59 billion of liabilities, led a retreat among bank shares. Anglo American Plc and Rio Tinto Group led mining companies lower as copper fell in London.

The benchmark FTSE 100 Index lost 146.68, or 2.7 percent, to 5,218.13 as of 3:34 p.m. in London, heading for the steepest drop since May 21. Technical problems halted trading on the London Stock Exchange for more than three hours earlier today.

“Certainly the Dubai debacle and the uncertainty that it has created has had a severe knock-on effect on European equity markets,” said David Buik, a markets analyst at inter-dealer broker BGC Partners. “This is not the end of the world for Dubai but it is a hammer blow.”

The FTSE 100 has soared 48 percent since March 3 amid government stimulus programs and record low-interest rates. The FTSE All-Share Index slid 2.7 percent today and Ireland’s ISEQ Index dropped 2.6 percent. U.S. exchanges are closed for the Thanksgiving holiday.

LSE Retreats

The cost of protecting government notes from Qatar to Saudi Arabia rose the most since June yesterday as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Dubai borrowed $80 billion in a four- year construction boom that reduced its reliance on falling oil supplies and created the region’s tourism and financial hub.

London Stock Exchange slid 6.9 percent to 758.5 pence, heading for the steepest drop since April 7. Borse Dubai has a stake of almost 21 percent in the company, according to Bloomberg data.

HSBC, Europe’s largest bank, declined 5.3 percent to 702.1. The FTSE 350 Banks Index slid 5.8 percent, the steepest decline since May. Dubai World’s lenders trading in London include Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc and Barclays, which all dropped more than 4 percent.

Legal & General Group Plc, the U.K.’s second-biggest insurer by assets, slid 6.7 percent to 79.05 pence as Citigroup Inc. cut its recommendation on the shares to “sell” from “hold,” citing “business model challenges.”

Anglo American dropped 3.8 percent to 2,586 pence. Rio Tinto, the third-largest mining company, lost 4 percent to 3,020.5 pence.

Copper fell from a 14-month high in London on speculation rising stockpiles and a rebound in the dollar signal slower demand for the metal.

Severn Trent Plc, the U.K.’s second-largest water company, led gains in U.K. water utilities after industry regulator Ofwat said it would reduce household bills by less than previously estimated over the next five years. Severn Trent rose 3.2 percent to 1,038 pence, Pennon Group Plc advanced 1.2 percent to 492.6 pence and Northumbrian Water Group Plc climbed 3.6 percent to 265 pence.

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The British taxpayers about to get mugged again. The market nearly crapped itself there.

The Telegraph

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

By Ambrose Evans-Pritchard

Published: 6:12PM GMT 18 Nov 2009

Comments 51 | Comment on this article

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.

SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.

Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.

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Bloomberg

Former Beneficial CEO Finn Caspersen Dies in Apparent Suicide

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By Michael Moore and Phil Milford

Sept. 9 (Bloomberg) -- Finn M.W. Caspersen, the former chairman and chief executive officer of Beneficial Corp., was found dead from an apparently self-inflicted gunshot wound to the head, authorities said. He was 67.

Police, responding to a call to check on him, found Caspersen on Sept. 7 behind an office building in the Shelter Harbor community of Westerly, Rhode Island, where he owned a home, said spokesman Edward St. Clair. He died from a single gunshot wound, the medical examiner said.

“Finn was always a gentleman and always made his resources available,” said Rhode Island state Senator Dennis Algiere, who represents the seaside region, just across the state line from Connecticut. “He was a very charitable individual. He donated a lot of time and money to various organizations in our community over the years.”

Caspersen sold consumer-finance company Beneficial to Household International Inc. in 1998 for more than $8 billion, His father, Olaus W. Caspersen, had joined Beneficial in 1920 and ran the company for 18 years. Finn Caspersen was paid almost $24 million in severance and other payments from the sale to Household, which became HSBC Finance Corp.

A graduate of Harvard Law School, Caspersen donated $30 million to the school in 2003 to help jump-start a capital campaign. He was also a graduate of Brown University.

An equestrian who specialized in carriage driving, Caspersen won three national championships and represented the U.S. in three world championships. He had been a board member of the U.S. Equestrian Team since 1982, was named president in 1990 and chairman in 1992.

No One ‘More Caring’

“I don’t think you could find someone more philanthropic or caring,” said Tucker Johnson, an equestrian and a friend of Caspersen’s, according to a statement on an equestrian Web site.

Former New Jersey Governor Thomas H. Kean said Caspersen gave away tens of millions of dollars to charity, according to the Newark Star-Ledger. While running Beneficial, Caspersen built a corporate headquarters in Peapack-Gladstone, New Jersey, the newspaper said.

Caspersen gave about $590,000 to the Republican Party between 1998 and 2001, according to the Center for Responsive Politics.

He was chairman of Knickerbocker Management, a private firm overseeing the accounting and investments of various trusts, foundations and individuals, according to a 1999 press release from the Hodson Trust, a philanthropic organization.

Caspersen was chairman of the board of trustees of the Peddie School, his high school alma mater in Hightstown, New Jersey. The school has 530 students and an endowment of $218 million, according to its Web site.

Caspersen is survived by his wife, Barbara, and four children, according to the equestrian Web site.

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The Wall Street Journal

* SEPTEMBER 16, 2009

Death of Rockefeller's McDonald Is an Apparent Suicide

By CRAIG KARMIN

James S. McDonald, head of investment-management firm Rockefeller & Co. and a board member of NYSE Euronext, died on Sunday in Massachusetts, according to people familiar with the matter. He was 56 years old.

In a statement Monday night, Barclay McFadden III, who identified himself as a friend of Mr. McDonald's family, said he "took his own life." The family has "no further comments beyond this," the statement added. "

Jim McDonald was an exceptional individual who provided strong leadership of Rockefeller & Co. for over eight years," Colin Campbell, Rockefeller & Co. chairman, said in a statement on Monday. "He will be missed by all of us privileged to have known and worked with him."

[rockefeller and mcdonald] Bloomberg News

James S. McDonald was CEO of Rockefeller & Co. since 2001.

Mr. McDonald had been president and chief executive since 2001. The New York-based investment-advisory firm evolved out of a family office set up by the oil tycoon John D. Rockefeller in 1882 to manage his family's assets, and it still manages some family money. Other clients include endowments, foundations and family offices. The firm, not affiliated with the Rockefeller Foundation, has $28 billion assets under administration and doesn't disclose its investment returns.

The circumstances surrounding Mr. McDonald's death weren't clear. He is believed to have died in New Bedford, Mass. A police spokesman there couldn't be reached for comment. A person who responded to a phone call to Mr. McDonald's home in New York City declined to comment.

A graduate of Harvard University with a law degree from the University of Virginia, Mr. McDonald also was chairman of the Japan Society in New York. Prior to joining Rockefeller & Co., he was head of Pell, Rudman Trust Co. in Boston.

Richard C. Adamonis, a spokesman for NYSE Euronext, where Mr. McDonald has been a director since 2003, said: "The NYSE Euronext community mourns the loss and offers our deepest condolences to the family, friends and colleagues of Jim McDonald, an outstanding and accomplished individual who served our capital markets and NYSE Euronext with great commitment and integrity."

In May, Mr. McDonald was one of three directors on the board of beleaguered lender CIT Group Inc. to retire from the board, citing "increased demands related to CIT becoming a bank-holding company .. and time constraints related to each of their other professional commitments," according to CIT's proxy statement.

Rockefeller & Co.'s chief operating officer and chief financial officer, Austin Shapard, has assumed day-to-day leadership of the investment firm, according to a company spokesman Joseph Kuo.

link

I think we may be getting some bad news about the Dollar soon.

marketwatch.com

Sep 3, 2009, 6:22 a.m. EST

Hong Kong recalls gold reserves, touts high-security vault

In a challenge to London, Asian states invited to store bullion closer to home

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Banks Asia Pacific

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By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city's airport, in a move that won praise from local traders Thursday.

The facility, industry professionals said, would support Hong Kong's emergence as a Swiss-style trading hub for bullion and would lessen London's status as a key settlement-and-storage center.

"Having a central government-sponsored vault would create a situation where you could conceivably look at Hong Kong as being a hub, where metal could be traded for the region," said Sunil Kashyap, managing director at Scotia Capital in Hong Kong, adding that the facility was the first with official government backing in the region.

The Hong Kong Monetary Authority, which functions as the territory's unofficial central bank, will transfer its gold reserves stored in other vaults to the depository later this year, the Hong Kong government said in an earlier statement.

The monetary authority reported $63 million in physical gold reserves as of July 31, according to its International Reserves and Foreign Currency Liquidity statement. The authority wouldn't disclose where the reserves are held, but local media reports cited gold traders as saying that London's the most likely location.

Traders said the new depository facility could also foster new financial products, such as exchange-traded funds based on precious metals.

The 3,660-square-foot depository, located at the city's main Chek Lap Kok Airport, will serve as a "storage facility for local and overseas government institutions," according to the government statement.

Martin Hennecke, a financial advisor with the Hong Kong-based Tyche Group Ltd., said that could be appealing to regional central banks unnerved after watching the global financial system teeter on verge of implosion last year.

"Central banks are increasingly aware of the importance of having gold reserves at time of financial crisis and having it easily available at their own disposal," he said.

Meanwhile, local newspaper reports said the Hong Kong Mercantile Exchange had signed an agreement to use the depository for its physical settlement and storage needs.

Marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility, according to reports citing Raymond Lai, finance director with the Hong Kong Airport Authority.

Efforts will also be made to reach out to commodity exchanges, banks, precious-metals refiners and ETF providers, the reports said.

Management firm Value Partners planned to launch an ETF gold fund that will use Hong Kong instead of London as a repository for the gold backing the fund, local reports said Thursday.

Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong

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I wonder if the cupboards are bare in London ? Maybe they are trying to buy one or two bars before the Chinese army turn up looking for their Gold. Gold price link

* SEPTEMBER 3, 2009

China Set to Buy $50 Billion in IMF Notes

BY MEENA THIRUVENGADAM

WASHINGTON -- China is on track to become the first purchaser of notes issued by the International Monetary Fund, a move that would diversify its foreign asset holdings and could give the IMF's quasi-currency more clout.

The IMF on Wednesday said China has signed an agreement to purchase approximately $50 billion in notes from the fund. The notes are denominated in Special Drawing Rights, a quasi-currency issued by the fund and promoted by China as a potential replacement for the dollar ...

link

rferl.org

China, Russia Line Up To Buy IMF's First Bonds

IMF Managing Director Dominique Strauss-Kahn

June 09, 2009

By Kathleen Moore

The International Monetary Fund's resources have been depleted as countries from Latvia to Pakistan have lined up for emergency loans to help them weather the economic crisis.

So in April, G20 leaders meeting in London promised to replenish the war chest by tripling the fund's resources to $750 billion.

Much of that is meant to come through loans from member countries, with Japan, Europe and the United States each pledging $100 billion.

But big emerging countries have wanted to contribute in a different way. So, for the first time, the International Monetary Fund (IMF) is planning to issue bonds.

IMF spokeswoman Caroline Atkinson said last week the fund was finalizing details of the bond issue to put before the board soon.

"We are working on how to draw up the terms and conditions of the bonds that we are able to issue under powers we have had for a long time, but which we now have a number of countries expressing interest in," she said.

Chief among those potential buyers is China, which said in recent days it was considering buying up to $50 billion worth.

Indian officials have also expressed interest in buying around $10 billion of the notes.

And late last month Russia's Finance Minister Aleksei Kudrin said preliminary discussions are being held in the government about the possibility of investing up to $10 billion in IMF bonds "in the near future."

Russian President Dmitry Medvedev said he hopes the money will go "toward helping [countries] overcome the effects of the crisis and will support countries, including those close to us, that are suffering the most from the global financial crisis."

Growing Clout Not Reflected

Experts say there are reasons, other than altruism, why big emerging countries might want to line up to buy IMF bonds.

That's because they feel their share of voting power at the IMF does not reflect their growing clout in the world economy.

Any reform is likely to take some time. So in the meantime, the bonds will allow them to make a short-term contribution while they continue to lobby for greater representation.

"So what the emerging markets are doing by using the bonds is basically saying, ‘We understand this is a very difficult time for the world economy, that we need to provide resources to the IMF," says Eswar Prasad, a professor of economics at Cornell University. "But we are not willing to provide resources on a permanent basis unless it is accompanied by a governance reform at the IMF which would give emerging markets more say at the IMF."

Prasad says buying IMF bonds fits in, too, with the search for alternatives to the dollar by countries like Russia and China.

Both have recently called for a move away from the dollar as the world's chief reserve currency.

One suggestion has been for an expanded role for the SDR, or "special drawing right." The SDR is a kind of artificial currency created by the IMF 40 years ago but used only as a unit of accounting between member states and the fund.

A bond issued in SDRs would mean greater use of that quasi-currency -- though the bonds would only be sold to member countries' central banks.

"Given the amounts involved -- for instance, China has committed to buying about $50 billion of IMF bonds -- in a pool of $2 trillion of reserves, this is not going to make a big difference," Prasad says. "But symbolically it's still very important that these emerging markets are looking for an alternative to the dollar in the short turn, and this might be a viable option."

Increase Legitimacy

The bonds are also an easier way to contribute for countries where direct loans might require legislative approval and be politically unpalatable.

Mark Weisbrot of Washington's Center for Economic and Policy Research says the chief attraction for the IMF, therefore, is to increase its legitimacy.

"So [the IMF] can say, ‘We're the global crisis fighting machine and we've got support not just from the rich countries that run the organization, but also from developing countries.' That's where the bonds come in," Weisbrot says.

Not everyone sees the IMF bonds as a significant development.

Edwin Truman of the Petersen Institute for International Economics in Washington describes the exercise as "cosmetic" -- whether countries lend through buying bonds, or other ways, makes no real difference.

"It's certainly a way of making a point that, ‘We want to participate on our terms rather than the standard terms.' But the truth of the matter is the substance is no different," Truman says.

RFE/RL's Russian Service contributed to this report

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Now that China can get rid of it's US Dollars for a basket of more stable currency's , is this the point that the US takes a back seat and China starts to lead?

Bernanke looks more nervous with each interview he does.

From The Times

July 15, 2009

India to issue all 1.2 billion citizens with biometric ID cards

An overcrowded train in Bihar, India

(Zuma/eyevine)

Millions of Indians who live in remote rural areas will finally have proof of their existence thanks to biometric identity cards

Rhys Blakely in Mumbai

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It is surely the biggest Big Brother project yet conceived. India is to issue each of its 1.2 billion citizens, millions of whom live in remote villages and possess no documentary proof of existence, with cyber-age biometric identity cards.

The Government in Delhi recently created the Unique Identification Authority, a new state department charged with the task of assigning every living Indian an exclusive number. It will also be responsible for gathering and electronically storing their personal details, at a predicted cost of at least £3 billion.

The task will be led by Nandan Nilekani, the outsourcing sage who coined the phrase “the world is flat”, which became a mantra for supporters of globalisation. “It is a humongous, mind-boggling challenge,” he told The Times. “But we have the opportunity to give every Indian citizen, for the first time, a unique identity. We can transform the country.”

If the cards were piled on top of each other they would be 150 times as high as Mount Everest — 1,200 kilometres.

Related Links

* UK has no machines to read its own ID cards

* Flights at risk in row over identity cards

* Government denies it is delaying ID scheme

India’s legions of local bureaucrats currently issue at least 20 proofs of identity, including birth certificates, driving licences and ration cards. None is accepted universally and moving from one state to the next can easily render a citizen officially invisible — a disastrous predicament for the millions of poor who rely on state handouts to survive.

It is hoped that the ID scheme will close such bureaucratic black holes while also fighting corruption. It may also be put to more controversial ends, such as the identification of illegal immigrants and tackling terrorism. A computer chip in each card will contain personal data and proof of identity, such as fingerprint or iris scans. Criminal records and credit histories may also be included.

Mr Nilekani, who left Infosys, the outsourcing giant that he co-founded, to take up his new job, wants the cards to be linked to a “ubiquitous online database” accessible from anywhere.

The danger, experts say, is that as one of the world’s largest stores of personal information, it will prove an irresistible target for identity thieves. “The database will be one of the largest that ever gets built,” Guru Malladi, a partner at Ernst & Young who was involved in an earlier pilot scheme, said. “It will have to be impregnable.”

Mr Nilekani will also have to mastermind a way of collecting trustworthy data. Only about 75 million people — or less than 7 per cent of the population — are registered to pay income tax. The Electoral Commission’s voter lists are thought to be largely inaccurate, not least because of manipulation by corrupt politicians.

He will also have to persuade as many as 60 government departments to co-operate. The Government has said that the first cards will be issued within 18 months. Analysts feel that it will take at least four years for the project to reach “critical mass”.

Such is the scale of the project that analysts believe India will have to develop a new electronics manufacturing base to supply information-storing servers, computer chips and card readers.

For the time being Mr Nilekani has more mundane matters on his mind. “I’ve only just left my previous job,” he said. “First I have to find a new office.”

Keeping tabs around the world

• Compulsory national identity cards are used in about 100 countries including Germany, France, Belgium, Greece, Luxembourg, Portugal and Spain

• ID cards are not used in the US, Canada, New Zealand, Australia, the Irish Republic or Nordic countries

• German police can detain people who are not carrying their ID card for up to 24 hours

• The Bush Administration resisted calls for an identity card in the US after the terrorist attacks on September 11, 2001

• In Australia street protests in the 1980s forced the Government to abandon its plans for a card

• Plastic cards are favoured over paper documents because they are harder to forge

• Most identity cards contain the name, sex, date of birth and a unique number for the holder

• South Korean, Brazilian, Italian and Malaysian ID cards contain fingerprints. Cards in some countries contain information on any distinguishing marks of the holder

• Objections to card schemes have focused on the cost and invasion of privacy

• Supporters say that they prevent illegal immigration and fraud

• In the European Union some cards can be used instead of a passport for European travel

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We definitely haven't seen the last of compulsory ID cards.There is a real desire to make this happen.

Confidence is up because people keep saying the worst is over, no statistical evidence - just like a year ago when they were claiming the end of the house price crash was nigh because "the rate of falls was stablising". Destocking has completed which means the big falls have finished - it doesn't mean that the fall has finished. Many companies will fail to survive on their new sales levels, and the undemployment lag will cost them further sales.

The only evidence people can point to with regards to calling the bottom is the stock market. Which is of course all based on confidence.

So is this a confidence trick?

Basically yes, a good indicator of how badly businesses are suffering is how easy it is to obtain trade credit insurance. Trade credit insurance is bought by suppliers of goods or services to a business to protect them against unpaid invoices in the event that the business is unable to pay its suppliers.The scaling back of credit insurance can put substantial pressure on a company's cash flow because suppliers often demand a change in terms to continue delivering goods, such as payment up front or cash on delivery. Claims were up by 166% to a record £316m in the first quarter after companies were hit by a wave of insolvencies during the recession.This is only going to make trade credit insurance harder to obtain or prohibitively expensive. A good example of how this can affect any business is relating to the problems Threshers are currently experiencing.

telegraph

Threshers suffers hangover from diminution of credit insurance

Retailer's alcohol deliveries disrupted as suppliers encounter problems.

By James Hall

Published: 4:12PM BST 30 Jun 2009

Alcohol deliveries to certain franchisees of the Threshers off-licence chain have been disrupted following the reduction of credit insurance to a number of the retailer's suppliers.

Threshers, which is part of the private equity-owned First Quench Retailing (FQR), said that there have been "some temporary out of stocks in the supply chain" due to a scaling back of credit insurance.

Threshers said: "During the current recession, credit insurance has become a major issue impacting many retailers across the country. FQR has the full support of all the largest suppliers across each of our product categories who continue to extend favourable terms."

In a sign of how much the high street is suffering, FQR has also reduced the management fee that it charges its franchisees. Threshers normally charges franchisees a so-called "management service fee" of between 3pc and 5pc of the store's sales. However, on Sunday it reduced this figure for six months in the light of the "very tough" current trading environment.

Threshers said: "We recognise that franchisees are a key part of our business. We therefore provide regular stock updates to all franchisees advising them what is available to order. They are given priority allocation for stock ahead of the managed estate and this has always been the case."

Threshers has 95 franchised stores and 83 franchisees. The company has recently bought its logistics operations in-house.

FQR's most recent accounts flagged a "material uncertainty that casts significant doubt upon the group's ability to continue as a going concern".

Threshers said that it was progressing with a turnaround plan.

Last month it was reported that Paul Mason, the former Somerfield boss, was considering a bid for Threshers.

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telegraph

QE just acting as a sugar rush for insolvent banks that deserve to fail

The UK is in the midst of the most dangerous economic experiment for generations. Yet it's the subject of no debate. Since March, the authorities have been using "quantitative easing", or QE. This involves the Bank of England expanding its balance sheet from nothing in order to purchase debt instruments from the market.

By Liam Halligan

Published: 8:45PM BST 04 Jul 2009

Comments 43 | Comment on this article

The idea is that the proceeds of such sales boost the money supply and kick-start lending. By decreasing the supply of gilts in the market, QE is also meant to push up gilt prices, driving down the yields that determine borrowing costs right across the economy – not least for commercial loans and mortgages.

At this point, people in my position are supposed to explain that QE isn't "printing money". I'm not going to do that. For the only difference between the UK's current policy and Zimbabwe-style economics is that QE involves the creation of electronic balances rather than actual notes.

That last paragraph will have caused a sharp intake of breath among my friends in the higher-echelons of the UK's economics profession. Unable to dismiss me as a "non-economist", they'll say I'm being alarmist – perhaps due to some kind of personality trait.

I would suggest they sit down, turn off their mobile phones, take a cold look at the evidence and then ask themselves if they've got the guts to help expose the madness of the current policy consensus – the debt-funded fiscal boosts, the non-conditional bank bail-outs and, above all, QE.

Over the past three months, the Bank has spent £106bn of QE funny money. By the end of July, it will have purchased the £125bn of assets it has so far been authorised to buy. At this week's meeting of the Monetary Policy Committee, interest rates will be held at 0.5pc. But, with the original QE "pot" almost gone, the Treasury and Bank could well signal there's more to come.

I accept the start of QE caused share prices to rally and business sentiment to improve. But that sugar rush has gone. The harsh reality is that despite the huge inflationary dangers posed by QE, the credit crunch is getting worse.

The Bank of England has more than doubled the monetary base since March, yet mortgage approvals remained at 43,000 in May – consistent with house prices falling at double-digit annual rates. Lending to non-financial companies contracted 3pc last month.

Banks are keeping the QE cash on reserve or lending it to their own off-balance sheet vehicles (the ones stuffed with sub-prime toxic waste). So rather than helping solvent firms and households access credit, QE is re-capitalizing, by the back door, banks that are otherwise insolvent and should be going bust. Gilt yields haven't come down either. The 10-year yield remains where it was before QE began, having been much higher in the interim.

Around a third of the Bank's QE purchases are, anyway, from overseas investors – doing nothing to ease credit in the UK. Such sales by foreigners reflect mounting concerns about the UK's wildly expansionary policy stance and sterling's related medium-term fragility.

As someone who spends a lot of time talking to overseas asset-managers, I can't tell you how often I'm asked: "Liam, why this money-printing? Have your politicians gone mad?" I can only reply that I ask myself the same thing.

There is, in extremis, an argument for QE, but only to buy commercial paper, not sovereign debt. When used to re-purchase gilts, QE allows governments to carry on borrowing like crazy, rather than facing up to the reality the country must balance its books.

When QE was announced, the emphasis was on the commercial debt purchases the authorities would make. In the event, gilts have accounted for a staggering 99pc of the total. That's why QE will inevitably lead to high inflation – whatever nonsense is spouted about "withdrawing the monetary stimulus".

History shows you can't get the inflationary toothpaste back in the tube. That's why price pressures are rising – and gilts yields refuse to fall.

At the outset of QE, the Tories called it "a leap in the dark" – failing to reveal if they backed it or not. Since then, HM Opposition has been silent on a policy that's destroying the last vestiges of this country's policy-making credibility.

Such credibility is what keeps inflation benign and borrowing costs low. By providing a solid macro-economic platform, such credibility is vital if this country is to create the jobs and wealth that will be so important to our citizens in the years to come.

Such credibility, tough to win, is easy to lose. Because of QE, the UK is now losing it – at breakneck speed. Yet those who will form our next government are silent – not yet in power, but complicit in this grotesque policy vandalism.

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We are only putting off the inevitable high inflation and eventual mega crash.The world should have let the banks fold.

double post

thedailymash

BUT WE LOVE THE MADNESS, BANKERS TELL DARLING Print Email this story

BANKERS have rejected Alistair Darling's plea not to return to the 'madness' that caused the recession, insisting they bloody love it.

Maisie: Two grand

In a keynote speech the chancellor said the high-risk, bonus-driven culture of the past must not be repeated, as bankers across the City of London laughed and laughed and laughed.

Julian Cook, from Donnelly-McPartlin, said: "What Mr Darling completely fails to understand is that I'm not right in the head.

"This is a picture of my daughter Maisie. I can let you have her for two grand and I'll even throw in the garden swing. You see what I mean? I am **** up."

Martin Bishop, from Madeley- Finnegan, said: "It's the madness that gets me out of bed in the morning. Without it I'd go mad."

He added: "There are two reasons why people get into banking. One, you get access to some really excellent pens, and two, the absolutely enormous amounts of money.

"If you take away the money then I may as well go off and become something worthwhile like a nurse. Or a prostitute."

Shadow chancellor George Osborne said a Conservative government would radically overhaul the financial system while at the same time ensuring it remained 'nicely unhinged'.

Meanwhile commentators who earlier this year had predicted the end of capitalism were last night staring at the rock solid inevitability that everything was hurtling back to exactly the way it was.

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P.S. leviramsey you are hopfull, i dont think the US Dollar will be quite the same in 6 months.California is already issuing IOU's and you have pased the crippling H.R. 2454: American Clean Energy and Security Act of 2009. I dont think the UK will be too far behind the USA under the expert guidance of Gordon (going down with the ship) Brown.

.telegraph

China's banks are an accident waiting to happen to every one of us

Fitch Ratings has been warning for some time that China's lenders are wading into dangerous water

By Ambrose Evans-Pritchard

Published: 5:38PM BST 28 Jun 2009

Comments 77 | Comment on this article

A growing number of experts are casting doubt on China's ability to pull the global economy from recession

China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.

Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.

Fitch Ratings has been warning for some time that China's lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.

"With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary," it said.

"Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."

Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".

The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".

Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.

Fitch traces the 2009 bubble to the central bank's decision to cut interest on reserves to 0.72pc. Bankers responded to this "margin squeeze" by ramping up the volume of lending instead. Over half the new debt is short-term. Roll-over risk is rocketing. China's monetary stimulus since November is arguably more extreme than the post-Lehman printing of the US Federal Reserve, though less obvious to the untrained eye.

Under the Taylor Rule, US policy remains tight (for the US). China's policy is loose (for China). New loans doubled in May from a year earlier, almost entirely to companies.

China's Banking Regulatory Commission fired a warning shot last week. "The top priority at the moment is to stop explosive lending. Banks should carefully monitor the process of credit approval and allocation, and make sure that loans flow into the real economy," it said.

Unfortunately, 40pc of the "real economy" consists of exports, mostly to the US and Europe, the consequence of a mercantilist export model that has qcrashed and burned. Chinese exports were down 26pc in May.

World trade may be stabilizing at last after contracting at faster rate than during the early Great Depression. But it will not rebound fast in a world where the US savings rate has risen to a 15-year high of 6.9pc. A trade policy based on the assumption that debtors in the Anglosphere and Europe's Club Med can ruin themselves for ever is absurd.

Andy Xie, a Sino-bear and commentator for Caijing, said Western analysts are in for a rude shock if they think that China's surging demand for raw materials implies genuine recovery.

Commodity speculators have been using cheap credit to play the arbitrage spread between futures and spot on the oil markets. They have even found ways to trade lumber to iron ore by sheer scale of leverage. "They've made everything open to speculation," he said.

Mr Xie thinks the spring recovery is an inventory spike, to be followed a double-dip downturn into next year as stimulus wears off.

Reformers know what must be done to boost consumption. China needs a welfare revolution. But creating a social security net takes time, and right now Beijing is facing a social crisis as 20m jobless workers retreat to the rural hinterland.

So the regime is resorting to hazardous methods to keep excess factories humming: issuing a "Buy China" decree: using a plethora of export subsidies; holding down the price of coke, bauxite, zinc and other resources to lower production costs (prompting a complaint from America and Europe); and suppressing the yuan, again.

Protectionism is a risky game for a country that lives off global trade and runs a surplus near 10pc of GDP. Mr Pettis said he fears China is nearing its "Smoot-Hawley moment", repeating the US tariff blunder of 1930 that brought the world crashing down on Washington's head.

Two facts stand out about China's green shoots. While the Shanghai composite index is up 70pc since November, Chinese imports are down 25pc from a year ago. China is still draining real stimulus from the global economy.

If the world's biggest surplus state ($400bn) is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump.

link

China might go down the plug hole too.They are massively exposed by underwriting American borrowing and are trying to swap has many Dollars for the basket of world currencies. Have you noticed the state sponsored shopping trips and wholesale purchase of raw materials paid for in Dollars over the last few months.

Redheads turn out to celebrate Birmingham's first Ginger Fest (with video)

Jul 2 2009

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Red-headed revellers enjoy Ginger Fest 2009 in Moseley

REDHEADS have been celebrating their fiery roots at Moseley’s first ever Ginger Fest.

In between sucking down pints of ginger beer, strawberry blonde beer and red wine, participants took part in fiery-haired antics including a ginger quiz, an inner beauty pageant and voting on their favourite red-headed celebrity.

The event, which doubled as a handy sheltering spot for fair-haired gingers during the heatwave, was staged as part of Moseley Festival.

Organiser of Ginger Fest, Rob Benson, said: “Gingers are obviously the best people in the world, so we thought we would organise an event to celebrate that.

“A lot of people are jealous of ginger people, it’s the least common hair colour on earth. I get the occasional comment, I just put it down to small mindedness. People would rather be ginger than any other hair colour. I’m proud to be ginger, and other people should be too.”

Festival goer Joanna Palmer, whose 18-month-old son Frankie is a gingernut, said: “We’re celebrating all things ginger. Why not celebrate it, my son’s ginger, he’s got flaming red hair and we want to show him that it’s nothing to be ashamed of.

“We want him to know we’ve been celebrating gingerness since the day he was born. It’s all about being proud. Ginger is the new blonde. Chris Evans is our favourite ginger, because he gets all the girls. My son’s going to grow up to get all the girls as well.”

She added: “We’ve got some orange lollipops to hand out to people to help them celebrate all things ginger.”

Owners of the inaugural Ginger Festival venue, the Fighting Cocks pub, were even good enough to lay on the favourite food of Gingers – Ginger Nuts.

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Bloomberg

Insiders Exit Shares at the Fastest Pace in Two Years (Update3)

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By Lynn Thomasson and Michael Tsang

June 22 (Bloomberg) -- Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.

Insiders of Standard & Poor’s 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show. Amgen Inc. Chairman and Chief Executive Officer Kevin Sharer and five other officials sold $8.2 million of stock. Christopher Donahue, the CEO of Federated Investors Inc., and his brother, Chief Financial Officer Thomas Donahue, offered the most in three years.

Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects.

“If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,” said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets. “They’re taking advantage of this bounce and selling into it.”

Banks Downgraded

The S&P 500 slid 2.6 percent to 921.23 last week, the first weekly decline since May 15, as investors speculated the three- month jump in share prices already reflected a recovery in the economy and profits. Stocks dropped as the Federal Reserve reported that industrial production fell in May and S&P cut credit ratings on 18 U.S. banks, saying lenders will face “less favorable” conditions.

The S&P 500 slid the most in two months today, losing 3.1 percent to 893.04 at 4:05 p.m. in New York, after the Washington-based World Bank said the global recession this year will be deeper than it predicted in March.

Insiders increased their disposals as S&P 500 companies traded at 15.5 times profit on June 2, the highest multiple to earnings in eight months, Bloomberg data show. Equities climbed as the U.S. government and the Fed pledged $12.8 trillion to rescue financial markets during the first global recession since World War II.

Executives at 252 companies in the S&P 500 unloaded shares since March 10, with total net sales reaching $1.2 billion, according to data compiled by Princeton, New Jersey-based InsiderScore, which tracks stocks. Companies with net sellers outnumbered those with buyers by almost 9-to-1 last week, versus a ratio of about 1-to-1 in the first week of the rally.

Bear Stearns

“They’re looking to take some money off the table because they think the rally will come to an end,” said Ben Silverman, the Seattle-based research director at InsiderScore. “It’s the most bearish we’ve seen insiders, on a whole, in two years.”

The last time there were more U.S. corporations with executives reducing their holdings than adding to them was during the week ended June 19, 2007, the data show. The next month, two Bear Stearns Cos. hedge funds filed for bankruptcy protection as securities linked to subprime mortgages fell apart, helping trigger almost $1.5 trillion in losses and writedowns at the world’s biggest financial companies and the 57 percent drop in the S&P 500 from Oct. 9, 2007, to March 9, 2009.

Insider selling during the height of the dot-com bubble in the first quarter of 2000 climbed to a record $41.7 billion on a net basis, according to data compiled by Bethesda, Maryland- based Washington Service. The sales coincided with the end of the S&P 500’s bull market and preceded a 2 1/2 year slump that erased half the value of U.S. equities.

‘Clouding the Picture’

Bill Latimer, the director of research at O’Shaughnessy Asset Management, says insider transactions aren’t an accurate barometer of stock performance because executives often reduce their stakes for reasons that have little to do with a company’s prospects.

“When you’re dealing with an individual’s buying or selling, you’re clouding the picture with what their specific financial situation may be,” said Latimer, whose Stamford, Connecticut-based firm oversees about $4.5 billion.

During January 2008, executives at New York Stock Exchange- listed companies bought more shares than they sold for the first time since 1995, Washington Service data show. The S&P 500 slumped 40 percent in the next 12 months.

Citigroup Inc. CEO Vikram Pandit purchased 750,000 on Nov. 13, paying an average of about $9.25 apiece, the New York-based bank said in a U.S. Securities and Exchange Commission filing. Citigroup closed last week at $3.17.

Unrestricted Stake

U.S. laws require executives and directors to disclose stock purchases or disposals within two business days to the SEC.

Sharer, the chairman at Thousand Oaks, California-based Amgen since January 2001, disposed of $1.76 million worth in the world’s largest biotechnology company on May 12, an SEC filing showed.

The sale of 36,411 shares trimmed his unrestricted stake by 13 percent and came three weeks after the company reported first-quarter earnings that trailed analysts’ estimates. Between May 22 and June 9, five Amgen officers, including George Morrow, the executive vice president for global commercial operations, and Roger Perlmutter, the executive vice president for research and development, sold a combined $6.4 million.

“From time to time, and within appropriate trading windows, Amgen executives exercise their right to sell shares for tax planning, to prevent stock option expiries and other purposes,” spokesman David Polk wrote in an e-mailed response to questions.

Eight-Month High

Federated’s Christopher and Thomas Donahue together sold about 65,000 for $1.68 million on June 4 and June 5 through a family trust, according to SEC filings. The transactions were the biggest outright sales for each since December 2005 and followed a 52 percent rally this year that recouped more than a third of 2008’s stock losses.

The executives began selling two days after the third- biggest U.S. manager of money-market funds, which was founded by their father, John Donahue, in 1955, reached an almost eight- month high compared with reported profits.

Federated said in a statement on June 8 that the officers sold as part of a “longer-term” diversification strategy. Ed Costello, a spokesman, said the Pittsburgh-based company had no comment beyond the news release.

“If these folks don’t have confidence in the company and don’t feel that it’s an attractive value, then why as a shareholder would I think it’s a good value?” said Jason Cooper, who helps manage $3 billion at 1st Source Investment Advisors in South Bend, Indiana.

Amgen shares dropped 2.6 percent to $50.99 today, while Federated slumped for a seventh day, tumbling 5.4 percent to $23.15, for the longest streak of losses since 2003.

Stock Options

Seven directors at CME Group Inc., the world’s largest futures exchange, disposed of almost $3 million since May. John Pietrzak sold for the first time since becoming a director of the Chicago-based company in July 2007, according to data compiled by InsiderScore. Board member Joseph Niciforo cut his stake by 28 percent. CME shares sank 7.4 percent, the most since May 7, to $303.48 today.

“It’s our policy to never comment on any executive sale of shares,” said Allan Schoenberg, a CME spokesman.

Nine insiders at TiVo Inc., the maker of digital video recorders, sold $10.6 million between June 3 and June 11, after the Alviso, California-based company jumped to a five-year high. That was the most by value over a one-month period in more than five years, InsiderScore data show.

A 53 percent jump in TiVo’s stock on June 3 initiated trading plans of some insiders such as CFO Anna Brunelle, who cut her holdings by 17 percent, according to regulatory filings to the SEC compiled by InsiderScore.

TiVo Director

The so-called 10b5-1 programs allow executives to cash out a portion of their holdings when stocks reach predetermined prices. Brunelle also sold through her plan from exercising options with average expiration dates about seven years away, InsiderScore data show.

Geoffrey Yang, a TiVo director since 1997, cut his stake by 8.4 percent, raising $1.5 million. The sale was the first by Yang in almost two years. Chief Technical Officer James Barton reaped an 89 percent profit from selling $2.8 million that he received from exercising stock options that were due to expire in four years, according to InsiderScore. TiVo shares dropped 5 percent to $10.50 today.

Whit Clay, a spokesman for TiVo, declined to comment.

Electronic Arts Inc. Chairman Lawrence Probst and two other executives sold a combined $1.2 million worth since May 28, after the world’s second-largest video-game publisher jumped 49 percent from an almost nine-year low.

‘Out of Steam’

Probst, who joined the Redwood City, California-based company in 1984 and was CEO between 1991 and 2007, trimmed his holdings by 25,000 shares on May 28, SEC filings show.

Frank Gibeau, president of the EA games division, slashed his stake by 66 percent after unloading about $538,300 worth the same day, the filings show. The sales came three weeks after Electronic Arts, which makes “Madden NFL,” the world’s most- popular sports video game, reported a narrower fiscal fourth- quarter loss than analysts estimated. Shares of the company retreated 3.6 percent, the most since May 7, to $19.97 today.

Jeff Brown, a spokesman for Electronic Arts, didn’t immediately return a telephone call seeking comment.

“It does make you wonder if the market rebound is running out of steam,” said Scott Leiberton, the managing director for the equities division of Principal Global Investors, which oversees $189 billion in Des Moines, Iowa. “If you see broad- based selling among the management team or large holders, that’s generally not a good sign because presumably who knows that business better than they do?”

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By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) -- The top-performing letter that predicted the Crash of 2008 now predicts a confiscatory Franklin D. Roosevelt-style "bank holiday." But it's surprisingly sanguine about stocks -- in the (very) short term.

The Harry Schultz Letter (HSL) was my pick for Letter of the Year in 2008 because it really did predict what it rightly called a coming "financial tsunami." But its performance in 2008 was still terrible, albeit arguably for technical reasons. ( See Dec. 28, 2008, column.)

Now HSL has bounced back big-time. ( See April 13 column.) Over the year to date through May, it's up a remarkable 81.7% by Hulbert Financial Digest count, compared to 4.1% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.

Of course, simple arithmetic dictates that doesn't make up for 2008 -- over the past 12 months, HSL is still down 48.19% versus negative 32.63% for the total return Wilshire 5000. In fact, the damage inflicted by 2008 was so great that HSL is also under water over the past three years, down an annualized 14.89% against a drop of 8.18% annualized for the total return Wilshire 5000.

Still, over the past five years, the letter has achieved an annualized gain of 9.19%, compared to negative 1.26% annualized for the total return Wilshire 5000. This reflects its success in catching the post-millennium hard-asset bull market that caused me to name it Letter of the Year, for more conventional reasons, in 2005. ( See Dec. 29, 2005, column.)

And over the past 10 years, the letter still shows an annualized gain of 3.65%, against negative 0.86% annualized for the total return Wilshire.

In its current issue, HSL reports rumors that "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."

Yes, yes, it's paranoid. But paranoids have enemies -- and the Crash of 2008 really did happen.

HSL's suspicion: "Another FDR-style 'bank holiday' of indefinite length, perhaps soon, to let the insiders sort out the bank mess, which (despite their rosy propaganda campaign) is getting more out of their control every day. Insiders want to impose new bank rules. Widespread nationalization could result, already underway. It could also lead to a formal U.S. dollar devaluation, as FDR did by revaluing gold (and then confiscating it)."

HSL is still sticking with its 20-year "V" formation forecast, but emphasizes that within the current 10-year downtrend phase there will be rallies that will "last 1-2 years." It attributes its current success to "successfully trading almost daily, especially in commodity stocks (coal/potash/energy/ fertilizer/gold). Take profits constantly and rebuy on mini pullbacks. Prefer non-U.S. dollar companies; many such companies are listed in U.S. & Canada or Australia."

HSL says: "The world is staggering today between stagflation and net deflation right now; it varies widely around globe. Net deflation is a maybe 35% risk, due to toxics and/or deepening depression. Bit more likely, we'll slowly creep up to a dangerous 4.5% inflation on average, medium-term. But the wild card is the currency risk, which has a 50% (?) chance of boiling over and causing literally overnight (i.e. 24 hours) mega inflation in the asset markets."

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The hippies/druids would do well to remember to drop to the ground and roll away from the taser.

A Columbus, OH, police department officer safety memo, obtained by Gun Week, is raising alarms in law enforcement circles that criminals may be teaching one another how to defeat being shot by Tasers.

The memorandum was written after a July 15 incident in which a female Columbus officer confronted a stabbing suspect. After the suspect ignored repeated verbal commands, the officer shot the suspect with the Taser twice, and both probes made skin contact about 16 inches apart.

However, according to the memo, the suspect dropped to the ground and rolled. In the process, he broke both Taser wires, and thus broke the contact with the weapon, which stopped the electric charge. He then jumped up and ran away with the two probes still in his chest, according to the memo.

Gun Week contacted Sgt. Brian Bruce with the Columbus Police Division of Defensive Tactics Unit, who confirmed that the memo is authentic. While he did not write the original memorandum, he did circulate it to other law enforcement sources. He said the suspect in the July 15 incident was captured a short time later and that the female officer involved was not hurt.

He also said that police examined the suspect and found two contact wounds where the Taser probes had entered his skin. According to the memo, the suspect “stated that he learned from talking to other inmates at the jail that to defeat the Taser one merely needs to roll away from the Taser, which will cause the probes to fall out or the wires to break.”

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or they could wrap themselves in foil, but it might be a bit warm for that.

bloomberg.com

Japan Probes Report Two Seized With Undeclared Bonds (Update2)

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By Shunichi Ozasa and Makiko Kitamura

June 12 (Bloomberg) -- Japan is investigating reports two of its citizens were detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland.

“Italian authorities are in the midst of the investigation, and haven’t yet confirmed the details, including whether they are Japanese citizens or not,” Takeshi Akamatsu, a spokesman for the Ministry of Foreign Affairs, said by telephone today in Tokyo. “Our consulate in Milan is continuing efforts to confirm the reports.”

An official at the Consulate General of Japan in Milan, who only gave his name as Ikeda, said it still hasn’t been confirmed that the individuals are Japanese. “We are in contact with the Italian Financial Police and the Italian Public Prosecutor’s Office,” Ikeda said by phone today.

The Asahi newspaper reported today Italian police found bond certificates concealed in the bottom of luggage the two individuals were carrying on a train that stopped in Chiasso, near the Swiss border, on June 3.

The undeclared bonds included 249 certificates worth $500 million each, the Asahi said, citing Italian authorities. The case was reported earlier in Italian newspapers Il Giornale and La Repubblica and by the Ansa news agency.

If the securities are found to be genuine, the individuals could be fined 40 percent of the total value for attempting to take them out of the country without declaring them, the Asahi said.

The Italian embassy in Tokyo was unable to confirm the Asahi report.

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Great spot.

The Government are not spending TARP money to support the economy. They are robbing the American people blind and laundering the money through switzerland. The Italian government stand to claim 40% of $134 billion in fines, for illegal transport of money. Trust greed to catch them out. This is a massive story, the illegal transport of USA TARP money.This is only being reported on a few news sites on the web.