Money | Anorak - Part 45

Money Category

Money in the news and how you are going to pay and pay and pay

Yes, It’s Getting Worse! How The National Debt Works To Make France Go Bust In 10 Years

THIS eurozone thing again: yup, it’s just getting worser and worser.

Spain and France faced sharply higher borrowing costs on Thursday, struggling with bond auctions that highlighted the threat of larger euro zone economies succumbing to the debt crisis that began in Greece and is now threatening Italy.

What you need to remember about all of this: when we say “higher borrowing costs” here we don’t mean that the country has to cough up more on all its debt…….ah, no, let’s start more simply.

When a government wants to spend more (read, give more goodies to people so they’ll get elected) money than it collects in taxes it issues a bond. This is an IOU saying that we’ll pay you back in 1 month, 10 years, 30 years, promise, and in the meantime we’ll give you some interest. That interest rate they have to pay to convince people to lend them the money is the borrowing cost or the yield.

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Posted: 17th, November 2011 | In: Money | Comment

Just So You Know, Yes, The BMA Are Damned Liars: Smoking In Your Car Is Fine

AS Dizraeli pointed out there’s lies, damned lies and statistics. However, it is in fact possible to people to come out of the other side of statistics and start shouting damned lies at us: pretending they are statistics.

There is now strong evidence that smoking in vehicles exposes non-smokers to high levels of second hand smoke which is known to be damaging to heath, the BMA said.

Because of the small enclosed space inside a car, smoking creates 23 times more toxins than found in a smoky bar, it was claimed.

Now when I say that this is a damned lie I’m not talking about people playing with statistics or anything. I mean that it’s a flat out, untrue, known to be untrue, statement.

It’s also a damned lie that they’re waving around to try and ban anyone from smoking in their own cars.

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Posted: 16th, November 2011 | In: Key Posts, Money | Comment

What’s Really Wrong In The Eurozone: The ECB-Triggered Depression Looms

HOW we got here is something that we can all argue over. Workshy Greeks, idiot politicians, bankers’ greed, whatever, knock yourself out with your favourite explanation. However, where we are is easier to explain.

We’re just before a Depression. Yup, one just as bad as the one 80 years ago. And yup, for exactly the same reason.

No, that’s not workshy Greeks, bankers’ greed but it is idiot politicians and central bankers. What turned the 1929 Crash into the 30s Depression was the way that the money supply was allowed to contract. It just didn’t have to happen at all.

What’s happening now over in the eurozone?

Greek banks are insolvent, it’s true, if you mark their sovereign debt exposure to market. But to a first approximation, no other banks are. Mark French banks’ holdings of Italian sovereign debt down by say 10%, and they’re still fine; their capital drops, of course, as it would with any write-down, but certainly to nowhere near zero.

What is true is that Europe is in the middle of a textbook liquidity crisis. Banks are not lending to each other — and the ECB isn’t stepping in to solve the problem. This is a serious structural issue with the way that the European monetary system was constructed: the ECB is tasked only with guarding inflation, and not with ensuring the health of the banking system. Individual national central banks are meant to do that. But they can’t print money — only the ECB can. So when there’s a liquidity crisis, no one’s able to step in and solve it.

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Posted: 15th, November 2011 | In: Money | Comment (1)

Sign This Treaty or the Treaty Gets It: Merkel Makes Demands

I’M not really all that sure that our EuroMasters have quite got this idea of blackmail quite right yet:

Angela Merkel, the German Chancellor, has warned Mr Cameron that unless he accepts unconditional changes to the Lisbon Treaty a split will take place, leaving Britain isolated and in a voting minority within the EU.

“She explicitly told Cameron that if there was no treaty change at the level of the 27 EU members then others will peel off, which is not what she wants,” a senior EU diplomat told The Daily Telegraph.

So let’s try and run through that one, shall we?

We have two options here. The first is that Britain signs up to anything that everyone else wants. No regard to national interests, what we might want to get out of it, just sign here and we’ll tell you what you’ve signed later.

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Posted: 15th, November 2011 | In: Money | Comment

Does The SEC Let Warren Buffet Win In A Two-Tier Stock Market? We aRe The 99.99999999%

WARREN Buffet bought $10.7bn of IBM stock though his Berkshire Hathaway fund without making the markets notice. How?

The WSJ’s Deal Journal gets an idea:

Check out the footnote to Buffett’s latest disclosures of his investment holdings released by the SEC:

“Confidential information has been omitted from the Form 13F and filed separately with the Commission.”

In other words, Buffett got permission from the SEC to keep some of his stock holdings secret. This isn’t unusual for Buffett. Most big investors have to publicly reveal their stock investments every three months.

Problem is, when other investors get wind that Buffett is buying a stock, the price tends to zoom up — meaning the price goes up for Buffett to buy more. So Buffett periodically asks the SEC to keep some of his stockholdings a secret.

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Posted: 14th, November 2011 | In: Money | Comment

Pension Funds To The Rescue! Raiding Private Capital To Build Public Assets

PENSION funds to the rescue! This is being greeted with glee over in leftyland:

Ministers are finalising a radical plan to boost investment in UK infrastructure and stimulate the economy, with proposals to pool the vast assets held in British pension funds and use them to back an ambitious programme of road and house building.

Pension and insurance funds are to be encouraged to invest up to £50bn in improving infrastructure, including private and social housing, power stations, super-fast broadband and motorway toll roads.


Those huge pots of private capital are to be mobilised to build the public assets and infrastructure we need! Take that capitalist bastards!

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Posted: 14th, November 2011 | In: Key Posts, Money | Comment (1)

Why The Eurozone Is Screwed: Blame The European Central Bank

EVER wonder why the European economy is screwed?

No, it’s not just the euro itself, not just the insane idea that 17 different nations could all share the same currency and the same interest rate. There’s also human agency involved. A large part of it is the fault of the European Central Bank.

Here’s Milton Friedman:

But when Anna Schwartz and I examined the history of that period in detail, we found that the situation was very different. In the United States from 1929 to 1933, the quantity of money declined by a third. Similarly in Britain, it declined till 1931, when Britain went off the gold standard. In France, the reason the contraction kept on until 1936 was because France insisted on staying on the gold standard and kept the money supply declining. To go back to the United States, at all times from 1929 and 1933, the Federal Reserve had the power and ability to have prevented the decline in the quantity of money and to have increased the quantity of money at any desired rate.

So in our opinion, the Great Depression was not a sign of the failure of monetary policy or a result of the failure of the market system as was widely interpreted. It was instead a consequence of a very serious government failure, in particular a failure in the monetary authorities to do what they’d initially been set up to do.

A bit wonkish, agreed, but the basic point being made is that if the amount of money in circulation starts to fall then the economy is going to fall, contract, along with it. So the first thing you have to do as a central bank is make sure that the money supply doesn’t fall.

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Posted: 11th, November 2011 | In: Money | Comment

China Sets A Minimum Wage: Send For The Tibetans

IN Guangdong, China, workers will get a new minimum wage from Jan 1. Wages could go up by 20 percent. Will prices for goods go up? Or will China just make the stuff you buy somewhere else?

For decades, Guangdong province and China’s Pearl River Delta have been at the heart of China’s economic rise. And while larger manufacturers and state-owned companies have contributed greatly to the boom, smaller and medium-sized private firms have also helped propel China to become the world’s second-largest economy.

As wages, raw material costs and other costs rise, those smaller businesses say they’re being cut out of the mix.

Lau said at the current rate, he expects 30 percent of factories in Guangdong to reduce production or close down this year, in the wake of a minimum wage increase last year. Another 18-20 percent pay rise would decimate the industry.

But Crothall is less than sympathetic, noting that although China’s inflation rate has slowed somewhat, China’s workers still need more to get by.

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Posted: 11th, November 2011 | In: Money | Comment

Scotland Can’t Afford Independence: Windmills Will Bankrupt It

SCOTLAND can’t afford independence. This is a fun little set of numbers:

David Cameron has endorsed an expert report that warned Alex Salmond’s plan for a renewable energy revolution would increase the average household power bill by £875 in an independent Scotland.

Here’s how the number works out.

All those lovely windmills, the solar panels, the attempts at clean coal, all these different methods of trying to make sure that Gaia doesn’t boil us all, are paid for through the electricity bills. There’s no actual tax money (or very little rather) that goes to fund them, the cost of all these things is added to the ‘leccie bills through the feed in tariff (FIT). For example, solar panels installed before now get 45p or so per unit of ‘leccie produced (coal perhaps 10p) and we pay for this by all of us (no, not just those who sign up for “green power”) paying more on our ‘leccie bill.

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Posted: 9th, November 2011 | In: Money | Comments (6)

Better Than What the Cat Dragged In: Battersea’s Collars And Coats Celebrity Gala Ball

ON November 11th, I’ll be video blogging from the Collars And Coats Celebrity Gala Ball on behalf of Battersea Dogs Home hosted by Peter Andre, who undoubtedly empathises with the cause.

There will be a headlining performances from LULU, straight off of Strictly Come Dancing and Status Quo putting the “old dogs new financial tricks question“ to the test.

Battersea has rehomed over 3 million pets since it’s inception in 1860 and the deliciously  luxurious auctions from fashion labels  like Alexander Mcqueen, Prada and Aspinal alongside  holiday packages will finance aid to the constant influx of needy dogs and cats dependant on donations.

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Posted: 9th, November 2011 | In: Money | Comment (1)

Malinda Dee: One Alleged Crooked Banker Gets Close To Severe Smack On The Wrist

BankerincourtANOTHER in Anorak’s occasional studies of the banking beast.

Meet former Citibank manager Malinda Dee(aka Inong Malinda) left, being shepherded into a Jakarta District Court today. Lots of pushy journalists were making her planned haute couture entrance a smidgeon shabby. Malinda is accused of embezzling around 17 billion Indonesian Rupiah (about a million quid) in customers’ funds, and faces up to 15 years in prison and Rupiah 200 billion in fines if found guilty.

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Posted: 8th, November 2011 | In: Key Posts, Money | Comment

Some Good Sense On The Robin Hood Tax

THIS, it’s absolutely correct in every single particular:

The Commission itself points out that a European financial transaction tax would have a serious impact on European growth. It would hit the UK economy, it could reduce European GDP by up to 3.5pc. The Commission takes the central view it would only reduce European GDP by 1.76pc. That is their central estimate that is going to cost 500,000 jobs across the European continent. Those are not my figures, these are the commission’s figures. We have just spent the whole of rest of the morning about how we can get the European economy going, how we can create jobs, how we can make sure we are not priced out of the global economy and then we have discussion about a proposals that commission itself says is going to reduce growth and costs jobs.

“We have to be realistic and truthful to our publics about who pays this tax. There is not a single banker in this world who is going to pay this tax. There are no banks who are going to pay this tax. The people who will pay this tax are pensioners, with pensions. They are taxpayers through their governments because they have to raise money on through sovereign debt auctions. This is not a tax that is paid for by bankers or banks. I am all in favour of taxes that are paid by bankers and banks that is why I have introduced a bank levy in the UK paid for by banks and their shareholders. A financial transaction tax is paid for by the end beneficiaries of financial transactions and that is pensioners. So if you want to go and introduce a big tax on pensioners that is the end result. But at least be honest about who pays this tax.

“We are not being honest about the revenue that is supposed to come from this tax even if all the business didn’t leave the European continent and we were able to collect it. This money has been spent four times over by the people around this table. It is supposed to be contributing to the EU budget, which is the commission’s proposal. It is supposed be helping national government’s fill the hole in their public finances. The third use, is to spend the money on the aid commitments that some countries around this table have not delivered on. The fourth idea, is that it should be spent on climate change commitments. So the same money has been spent four times over.

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Posted: 8th, November 2011 | In: Money | Comment (1)

Yes, Europe’s Going Bust!

YES, Europe’s Going Bust! I think we all pretty much knew this was happening, there have been enough stories about it just recently. But it does really rather look like Europe really is going bust.

Eurozone finance ministers will on Monday night begin a frantic search for new sources of capital to boost the area’s main bailout fund to €1 trillion after the US and emerging powers refused to commit fresh funds at the G20 summit last week.

Here’s the thing you need to understand. That €1 trillion bail out fund, the one that’s going to save everyone and everything. They want to go and borrow the money for that €1 trillion bail out fund. And no one wants to lend them the money: quite wisely really.

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Posted: 7th, November 2011 | In: Money | Comments (3)

Finding Complete Bollocks In The Guardian: Banking Balls

NO, no, I know, it’s not a total surprise is it, finding something in The Guardian which is simply complete, total and utter bollocks. And yes, it’s in the comments section but it is still important. Important both for who said it and for who believes it.

Of course banks handle deposits, but as anyone who has reviewed rates available to depositors for the last few years will know just how contemptuous banks have been of those who wish to use their services for this purpose. There is good reason for that: banks do not (and never have) needed depositors for enable them to make loans. The simple fact is that the money banks lend is created by them out of thin air. It’s offensively easy for them to do so. All that happens when someone asks for a loan is to credit a current account with the amount of the loan and debit a loan account with the same sum. That’s it: that is how 97% of all money in the UK is created, but as is clear, deposits play no part in that process. Instead banks literally create the cash they lend and can get away with this trick so long as people think they’re good for their promise to pay – which they will be so long as, as is now the case, the government clearly considers them too big to fail and explicitly and implicitly guarantees all they do. The insult to the injury is that having made this cash out of thin air they then charge heavily for it – vastly more than they pay for deposits. No wonder an organisation that can costlessly create what it sells is so profitable.

Bob Diamond acknowledges none of this, and the fact that much of the profit he and his colleagues supposedly generate is effectively licenced to them by the fact that the government has failed to claim for itself the right to he profit made on the creation of money; money which only the state can legitimise, but which banks have claimed for thei own benefit and which they have used to speculate at considerable social cost to society at large, as Adair Turner and others have noted.

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Posted: 4th, November 2011 | In: Money | Comments (5)

The Robin Hood Tax Will Give London The Entire EU Financial Market

THIS has to be the best paragraph in any of the newspapers today. The Guardian reports:

Treasury sources said Britain would hit the 0.7% target without an FTT, adding that the European commission’s plans would see individual countries using the extra revenue for deficit reduction rather than development. They added, however, that the UK would not seek to prevent other countries introducing an FTT if they wanted to do so.

It’s all about the financial transactions tax, that Robin Hood tax thing. The idea being floated at the moment (‘coz Bill Gates supports it) is that in comes the FTT, then the money is used to provide aid to poor countries. Or, as the European countries are suggesting, to prop up the shaky finances of the European countries.

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Posted: 3rd, November 2011 | In: Money | Comment (1)

The New £50 Note Is An Object Of Desire

HAVE any of you been fed a new £50 note? Right now, only four cash machines in the UK hold the note. Can you guess where they are? Hull? No? Tony Blair”s wallet? Could be. The City of London? Yes!




Posted: 3rd, November 2011 | In: Money | Comment (1)

Ultimate Greek Tragedy: A Tale of Well-Heeled Swine Bankers

swine “EUROPE’S leaders should have paid more attention to the distress of ordinary Greeks and less to the distress of well-heeled European bankers. Rather than trying to punish the “profligate,” they should have thought about the consequences of condemning Greece to years of negative growth, soaring unemployment and rising taxes with nothing promised in return except that maybe, a decade from now, its ratio of debt to gross domestic product might get back down to the problematic levels of 2008-9.”

So says the The New York Times.

An opinion most could agree with:

Maybe We Finally Get to Jail A Banker: The MF Global Dream
Bankers: Prosecute The Swine
Sexy Fred Goodwin’s Grubby Secret: Shagging On The Glass Ceiling

As the The New York Times Comment says in its punchline paragraph:

“Chancellor Angela Merkel of Germany, President Nicolas Sarkozy of France and others are now rushing to blame the Greeks for the summit package’s rapid unravelling. They need to take their own full share of responsibility for this crisis — and finally fix it. “

Posted: 3rd, November 2011 | In: Money | Comment

So Is It Going To Be France Next To Go Bust After Greece?

SO. Is France alls et to follow Greece? Well, no, obviously it’s not going to be France going bust next: we’ve Spain Italy and Portugal to get through first. But the markets are moving to the point where France might well start to look like it’s in trouble.

Yields on French 10-year government bonds just exploded, now up over 6% on the day to 3.14%.

The spread between French 10-year bonds and German bunds is up even more dramatically — more than 10 bps or a full 9% on the day.

You need another little bit of information to understand this:

Casualty of “market conditions” on Wednesday – the EFSF’s latest bond issue.

The EFSF had mandated Barclays Capital, Credit Agricole and JP Morgan on Monday to price off a ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche, due in November.

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Posted: 2nd, November 2011 | In: Money | Comment

Maybe We Finally Get to Jail A Banker: The MF Global Dream

ARE we about to finally jail a banker? That would be nice, wouldn’t it? finally being able to sling into prison a banker or two?

And it really could happen too. No, not because they lost all our money playing silly buggers with houses and the like, not because they’ve been lending money to Southern European spivs.

Rather, a company called MF Global has just gone bust. Used to be part of the Man Group (same people who brought us the Man Booker prize for books) but was sold off in 2007. Not exactly a really sexy company, it was a futures broker more than anything else. Basically ye people who took your phone order and went and did the actual trade for you if you wanted to lose your money in pork bellies and the like.

They brought in the ex-head of Goldman Sachs (and then Senator and Governor of New Jersey), a bloke called John Corzine, who decided to make it a much more sexy company. Instead of just processing orders for other people and taking a few cents on each, they’d start playing in futures with their own money and make fortunes!

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Posted: 1st, November 2011 | In: Money | Comment (1)

How To Really Make Money on the Stock Market: The Misinformation Edge

IT’S very difficult to make money on the stock market: most fund managers don’t even manage to bet the general rise (or fall) in the main markets themselves. And if those peeps making £hundreds of thousands a year can’t do it, why would we think that we would be able to do it?

The answer lies in the information edge. If you know something that the rest of the market doesn’t then you can make money: if you don’t have that extra knowledge then you can only make money through pure blind luck. And today I’m going to give you one of those pieces of extra knowledge:

If the Proshares are underperforming, there’s a simple arbitrage here. Take the ‘Ultras’, which offer 2x leverage, and the ‘UltraShorts’, which offer the opposite, -2x exposure. Going short both stocks generates a very low-risk portfolio pair, because on a daily basis when one goes up 1% the other will almost surely go down about 1% by design; the positions will offset each other. But the drift for both is negative, as they burn money. Since ProShares has been very busy adding ETFs, this simulated strategy started with 23 pairs in 2008, and is now up to 45. Below is a graph of the total return to going short all the Ultra and UltraShort pairs offered by Proshares since 2008. I rebalanced every week. The annual return was 14%, and the annualized standard deviation was 12%.

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Posted: 31st, October 2011 | In: Money | Comment

Gaia Will be Angry With Us: Solar Power Subsidy Cut

GAIA will be angry with us. But we should still welcome this as good news.

Under current plans, the level of the feed-in tariff is likely to more than halve, from 43p per kWh to 20p. The solar industry says it can broadly live with that level, but some companies warned that schemes to provide disadvantaged communities and households with low-cost power and heating would be the most likely to be scrapped under the changes.

We might want to ask ourselves why, if the solar companies can live with this lower level of subsidy, they’ve been allowed to stick their hands into our wallets for the higher amount. Subsidy should be, after all, only just enough to get things moving, not twice the amount it needs to be.

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Posted: 28th, October 2011 | In: Money | Comment

Don’t Fear The Greek Default: It’s A False Alarm

TO a large extent all this alarm about what’s going to happen when Greece defaults is just that: alarm. Alarm with no real basis in anything that’s really likely to happen.

There’s two things you need to know, over and above the usual background.

That usual background being that Greece owes around €350 billion and there’s no way it can pay it back. So, default it will have to be.

The two things? The first is that banks don’t just sit there and wait for the default. They do what is called “mark to market”, or at least are supposed to, and this means that when a loan or a bond is going sour they write down the value of that bond or loan. In effect, they take the loss they think they can see coming now, rather than waiting for that loss to actually arrive. We’ve seen in recent days that RBS has written their Greek debt down to 50% of face value and so too has Deutsche Bank. We’re pretty sure actually that all of the UK and most of the German banks have done this. We worry a bit that most of the French ones haven’t but that is Sarkozy’s problem, not ours.

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Posted: 27th, October 2011 | In: Money | Comment (1)

Facebook Founder Sean Parker Finds Being Stinking Rich Awkward: He Is The 0.0000001%

SEAN Parker was once the President of Facebook. He’s now very rich and lives in a house so large you can see the curve of the Earth in his TV room. Parker want you to know that life is now all easy. Being stinking rich is hard. He tweets:

“You guys are really attacking me for being the 1%. I was broke and couch surfing just a few years ago… I have a whole new set of problems to deal with now: security, extortion attempts, kidnapping threats, death threats, etc. Life better b4?

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Posted: 27th, October 2011 | In: Money | Comment

Occupy Michael Moore: How Rich Is Mr 99%?

MICHAEL Moore explains the percentages.Piers Morgan wants him to admit that he is more 1% than 99%:

MORGAN: I need you to admit the bleeding obvious. I need you to sit here and say, I’m in the one per cent, because it’s important.

MOORE: Well, I can’t. Because I’m not.

MORGAN: Because the validity of your argument – you are, though.

MOORE: No, I’m not. I’m not.

MORGAN: You’re not in the one per cent?

MOORE: Of course I’m not. How can I be in the one per cent?

MORGAN: Because you’re worth millions.

MOORE: No, that’s not true.

MOORE: I don’t associate myself with those who do well …

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Posted: 27th, October 2011 | In: Money | Comment

If The Euro Fails, Europe Fails: Hurrah!

ANGELA Merkel tells us that if the euro fails then Europe fails: to which the correct response is Hurrah!

Germany’s chancellor Angela Merkel today warned that the failure of the euro would lead to the fall of Europe as she outlined a plan to bail out Greece’s stricken economy.

However, rather sadly, this isn’t in fact true. If the euro fails it does not mean the failure of Europe, nor even of the European Union. It means just the failure of a particular idea of it. Sadly here can be a matter of taste of course: I’m so eurosceptic I’ve even stood as a UKIP candidate, a position that I’m aware quite a lot of you won’t share.

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Posted: 26th, October 2011 | In: Key Posts, Money | Comment