Yesterday's Congressional grilling of Tony Hayward for 6 hours gives kangaroo courts a bad name. I was proud the way Tony Hayward, faced with this mainly sleazy group of grandstanding US politicians seeking re-election, stood his ground and kept his cool despite some deeply insulting and unjustified goading. I was impressed however by the background research on BP these congressmen had at their fingertips and the presentation of supporting documentation. The best thing however was their maturity and obvious previous life experience outside politics. These were clearly serious representatives unlike our Spad boy politicians here in the UK
The media labelled Hayward's performance a PR disaster. For what? For refusing to answer questions for which there was no answer at present. For pointing out there could be no clear answers until the defective blow out preventer, a US, Houston, Texas manufactured component from Cameron Iron Works, was retrieved from the sea bed, brought to the surface and examined by engineers. BP shares rose again this morning by 3.5% so clearly the markets thought otherwise about Hayward's performance.
Spain yesterday sold 3 billion euros of 10-year debt at an average yield of 4.864%. Just prior to the auction Spanish 10 year bonds were trading at 5.04%.
Demand was 1.89 times the amount on offer. Spain also sold 479.2 million euros of 30-year debt at 5.908 percent, and the bid-to-cover ratio was 2.45, higher than the 1.38 at the previous sale in March.
The EU hailed the auction as a success, the Euro rose and the Spain-German bond spread fell. So was it a turning point for Spain enabling them to tap the money markets once more? As I wrote earlier this week most of these bonds will be bought by national banks having their arm twisted by their politicians. Remember Obama's shake down of BP on Wednesday! Also with the ECB prepared to accept these bonds in their Repo Ops banks will get their Euros back pronto and earn a nice little turn of 3% roughly. Nice business if you can get so the banks have their money back and the Spanish government, who sold the bonds get the money as well. Magic! So where did the money come from? The ECB printed it! Its the Robert Mugabe solution once more.
The investment bank economists have already pointed this out:
Deutsche (Dodgy) Bank said about this auction, “With the current liquidity arrangements in place (Repo Ops) there seem few doubts about the ability to find buyers but the quality of the order book (difficult to find out in an auction ie who bought the bonds) is important.”
“Greece started to have real problems when the market started to realize that domestic banks were making up a sharply higher percentage in the third of the three syndicated deals earlier this year,”
In plain English the results of these auctions were fixed under national political pressure to buy the crap.
Spain faces a number of financial concerns. It will need to pay back investors 24.7 billion euros in July. It has announced austerity measures to cut its deficit and is recapitalizing some of its banks. Like Greece the tourist trade will keep a lid on things until mid September but then the riots will start.
The main reaffirmation of long term strategy came yesterday from Barroso speaking to the European parliament:
'Once again, we can see that a crisis can accelerate decision-making when it crystallises political will. Solutions that seemed out of reach only a few years or even months ago are now possible. As the history of European construction reminds us it is usually in times like this, in times of crisis that we can make progress in the European project.' ie more power to Brussels.
Nothing new there. Monnet said it 50 years ago, "Great things are almost always done in crises," Its a pity the boy David does not listen. Adolf Hitler laid it all out in Mein Kampf what he intended to do do but none of our craven politicians could be bothered to read it and listen to what he said. Politicians talk incessantly about learning lessons but they are talking about other people not themselves.