Sunday, 30 January 2011

Phoney War

I have found little to write about recently as the Eurozone conflict seems to be in a  quiescent phoney war stage. Rivers however frequently seem calm just before they disappear over a waterfall. The EU is currently twisting arms and buttering up China and Japan to keep buying their toilet paper and the US continue to print dollars but this cannot go on indefinitely.

I found Simon Heffer's Saturday piece in the DT on the subject of Lord Taylors recent criminal conviction entertaining. His only claim to political fame was once he lost an election for the Tories. If you are the right colour that is quite sufficient for a seat on the the red leather.  As neo Con Baroness Warsi, who was rejected even as a candidate by a number of constituencies shows, even contesting an election is no longer a pre-requisite for elevation if you are the right colour and religion. in Dave's new rainbow paradise.  I fear Mr F fails the ethnicity test for red leather duties.

Are people in the light of the phone hacking story at last waking up to how inadequate and political our police force is? I certainly hope so but remember how quickly a student was charged and jailed for 30 months for dropping a fire extinguisher off a high building. I know of no charges brought against any police officer for assaulting Mr Tomlinson in an earlier demonstration. Mr Tomlinson died shortly afterwards. As the Coalition cuts bite and civil disorder really hots up Egyptian style things may turn very nasty in the UK..

Tuesday, 25 January 2011

The French screw the Germans who screw the Irish etc

I never cease to be amazes at the number of otherwise normal people who are like little boys, in love with train sets. Rail is to me a hugely expensive and inflexible 19th century technology, prone to strikes, and of limited use in the 21st century.

The Europhiles built themselves a railway tunnel under the English Channel, La Manche to the Frogs. It was sold as running direct trains through from Glasgow/Manchester to Holland, Germany and Switzerland but somehow the Glasgow/Manchester end never materialised, operational difficulties old boy so lets just stop at London. The operators of the service, Eurostar and Deutsche Bahn   want however to open up the European end past Brussels and Paris but need new trains to do it with and after assessing their requirements chose the German Siemens over the French Alstom to manufacture their new toys. I digress, but does it not show how far we have sunk as an engineering nation that we who invented railways no longer have a manufacturer to do this work!

The French are furious and in true protectionist mode for which they are famous have declared these Kraut specials as unsafe and cannot be allowed on to the sacred soil of France. The international commission the IGC with UK, French and German members which rules on these things signed off the Siemens design! The French promptly sacked their members of the commission for agreeing to this design and the whole thing is now in the hands of the High Court and the EU commission. UK train buffs Philip Hammond and the aptly named Lord Adonis now see their beloved UK high speed link delayed or scuppered altogether by French intransigence. It was ever thus in dealing with the French! We should have left them to the Germans in 1914.

Those good Europeans across the Irish sea are now getting screwed by the German banks. They were forced by the EU to accept loans at a punitive 3% over bunds in their bail out. All these lovely Euros go to Irish banks who are required to repay their under performing loans to yes German banks. Meanwhile in Euroland, Euro stability fund bonds with an AAA rating are selling like hot cake with the latest offering going at 48 basis points over bunds. So the EU are screwing a 2.5% turn out of the Irish!

This may turn out badly for the EU. Ireland is the first country whose government has fallen because of the Eurozone problems. Greece or Portugal will be next. When the facts I outlined above play out in the imminent Irish election as they will there will be huge resentment in Ireland against the EU. The Irish were of course willing bribed into the ERM as a means of dishing the Brits. Perhaps they should have taken a longer spoon to sup in Murphy's Brussels bar.

Thursday, 20 January 2011

UKIP thoughts

Jim Hacker when Minister for Administrative affairs had a good line about his leader to his PPS Bernard, "The PM's motto is in defeat malice, in victory revenge". Mr Bannerman, who not only stood against NF but strongly criticised him on his lack of interest in policies will be destined for a large dose of the latter, ditto Mr Batten who ran Tim Congdon's campaign and who is even now suffering from a whispering campaign against him for his troubles. Only Winston is safe protected by our race relations laws.

I recommend Mr Moneybags Wheeler, UKIP's latest acquisition, acquires a very long spoon and also keeps his cheque book tightly shut. It is as Warren Buffet might say, when a sharp businessman meets an unscrupulous politician its invariably the politico who comes out on top.

On to the next by-election. Who will UKIP's high profile candidate be? Godders is my current favourite but I am open to suggestions which may be left on this blog.

Monday, 17 January 2011

Gatwick Chaos

Arriving back at Gatwick on Saturday evening the passport checking hall was overcrowded disorganised chaos overseen by a fat presumed BAA employee sitting on his bum studiously ignoring the melee around him. Outside at the car park bus collection pick up point it was the same. No organisation, no police to enforce parking restrictions and of course no BAA management to be seen. Its not just snow that causes chaos at Gatwick they just cant handle passengers either. They need more and better trained staff but that's what you get when you allow an indebted Spanish builder to take over the busiest airports in the UK.

Meanwhile in Euroland the ECB rulebook continues to be ignored. Irish banks have insufficient eligible collateral to borrow what they need from the ECB so they are using dross collateral to borrow from the Irish NCB, a recipe for future trouble. European finance ministers are having yet another meeting to expand their ever increasing bail out package for profligate PIGS. With rules being ignored with such frequency it is difficult to know what will happen but it won't be good and Joe Public will end up paying. What is the point of imposing yet more financial regulations when the Franco Prussian elite blithely ignore the current rules?

The Chinese continue to buy up Euro sovereign debt as a way of keeping the value of their currency down and their exports cheap. Will the Swiss do the same?

Sunday, 16 January 2011

Back from my Swiss sojourn

I always find something different to admire in Switzerland each time I go there. This time it was their daily rubbish collections! How can they do it in very difficult terrain and ice and snow covered roads and we did not have our rubbish collected for three weeks. The answer seems to be they have a lot of guys and gals out there doing the job rather than legions of politically correct commissars pushing paper.

It was the same on their railways that I used extensively. Lots of front line staff, tickets were checked properly, trains ran to the minute and most noticeably all the staff were Swiss nationals who could speak French, German and English. Compare that to UK railways and London underground.

The end result is Switzerland provides permanent jobs for her nationals not Johnny Foreigner. Why? Well as one UK  guest at our hotel remarked there is no ruling permanent political class in Switzerland only lots of Swiss working hard at real jobs. If the small central government tries anything the people don't want then it is easy to call a binding national referendum in which the people can vote down any government proposal. The government cannot resist or enforce its demands as every male Swiss over 22 has their own personal automatic rifle and ammunition in their bedroom. There is little gun crime or mass shootings in Switzeralnd. Any who try end up dead very quickly.

So back to the UK where from the Faragistas I read of Comrade Nuttall's great result for UKIP in Oldham. Saving your deposit in a fptp election is a decent achievement but not a great one for a party like UKIP. The missing information is how much did UKIP spend to achieve the extra 500 votes and where did this money come from?

Lunch calls but more tomorrow.

Friday, 7 January 2011

Ils ne passeront pas says Madame Lagarde

On last night's Newsnight the delicious Christine Lagarde, French Finance minister, speaking English better than the BBC interviewer stated all current members of the Euro would remain members. She said there will be no more bail outs. She was sure no country within the zone would have difficulties financing itself in the year ahead.  It was a “Crisis, what crisis?” moment, a “Let them eat cake” or as Marshal Petain ,defender of Verdun, a later head of the Vichy Nazi government, said , "They shall not pass. "

      The BBC’s Economics correspondent afterwards told us the Euro political classes are in denial about the Eurozone's problems. He likened it to the run up to World War I. All we need is the spark of a Balkans assassination to bring the whole Eurozone edifice crashing down. The current situation cannot be sustained.

As John Redwood put it, "politicians have to keep spinning through whatever the odds. If they once suggested there could be another bond crisis, or another bank shake up, or further deterioration in one of the struggling economies, they would hasten just such an event.

The Euro, just like the Exchange Rate Mechanism before it, forces politicians either to fly in the face of reality or to keep quiet. Markets want to go in the opposite direction to the politicians. In such circumstances careless talk can cause great economic and financial damage."

Madame Lagarde had to say what she said but she is too clever to believe it. The Germans are not going on paying for the profligate PIGS without controlling the PIGS domestic economic policies just like Adolf did 70 years ago. Guaranteed to upset the PIGS.

Another group in denial is the Bank of England's monetary policy committee, chaired by Governor King. Inflation is picking up big time all over the world, China, India, Brazil and now Oz. Interest rates have to rise in the UK very quickly. Again the politicians will be upset but they are only out to save their skins and have no regard for the well being of our nation.

I will spend next week in the supremely well run and expensive country of Switzerland. From my Alp I will view the UK's political giants fight it out in Oldham. Not so much the War of the Roses but the battle of the stinkers.

Thursday, 6 January 2011

Default risk rises to top of worry list

Two things make me write on this. First, M Barnier the French EU economics commissioner will be putting out a 'consultation paper' on ways the taxpayer can be shielded  from bank crises. 'We are pursuing the idea of a debt write down or conversion to stabilise a failing bank and reduce the need for public funds' is his quote in AEP's piece in today's DT. This is Eurospeak for bond defaults with the bondholders left to take the hit.


Assessing credit risk, pricing credit default swaps and valuing defaulted bonds is what investing in bonds is all about and M Barnier the bond market has been doing this for hundreds of years. Also M Barnier there is no such thing as a free dejeuner. Remove a bond's government guarantee, its credit risk rises, investors demand a higher credit premium to compensate, the bond price falls and its yield rises. Thus Portugal managed to sell €500 mn of 6 month bills yesterday but had to pay twice the interest rate it paid in September!

The canny Swiss central bankers are doing what I recommended to our lot on Irish debt. Don't take it as OMO collateral at any price! Would we followed the same hard nosed approach but of course as good Europeans, mugs is a better description, we are obliged to take Eurocrap in our OMOs.

AEP also points out that Merkel lost her majority in the Bundesrat 2 days after agreeing to bank roll the Greek bailout! Pity we dont have some MP's who are not pre-occupied with their expense claims and put their country's needs first.

Wednesday, 5 January 2011

Johnny Foreigner has gilt edged indigestion

This is my conclusion from today's DT article stating sales of new gilt issuance in November to Foreigners are well down at £3.3 bn with the shortfall being made up by UK bank purchases of £10bn, the biggest since last January and of course boosted by Wee George's money creation programme. Over the first eight months of last year as a whole Johnny F bought £50.6bn gilts out of a total of £107.8bn sold so the news he is losing his appetite is bad form the Coalition. It was the first sign of the Greek crisis when foreign demand for their paper dried up!

Put this against last year's flight of capital from the Eurozone and it becomes even more worrying. Also expected gilt interest payments of £44bn in 2011-12 are expected to increase to £63bn in 2015-16 slightly more than the latest VAT increase will bring in to HMT assuming the economy holds up. In order to keep gilt yields and eventually mortgage rates low banks will have to be fed more new money to buy gilts. Conventional Gilts do no look attractive to pension funds with RPI inflation now at 4% plus. Its all looking very much like a Greek tragedy.

Meanwhile back at the big house in Westminster the the usual Tory suspects unhappy bunnies are being joined by many of the new intake who are pissed off at having to back LibDem inanities and nonentities as Heffer points out in his piece today. The PIGS will be wanting more of our dosh and the Irish have already got their Euro mitts into our pockets up to the elbows. Its not just the NHS and Overseas Aid budget that is ring fenced. Not only are UK contributions to the EU ring fenced but they are unlimited!

Milliband II has an open goal. A UK government that supports foreign workers and penalised our own!

Sunday, 2 January 2011

There is still hope to get out of the EU

Several former UKIPers have asked me what do we do now to try and get out of the EU given Farage's UKIP is doing nothing on this front only blocking those who do want to try and save out country. That is why the BBC establishment promote Farage's UKIP to the detriment of other anti-EU movements. The Beeb, the Tories and the rest of the establishment feel secure and comfortable with Farage running UKIP. They know he poses no threat to the EU but there is always hope and often it comes from unexpected quarters.

Today's Sunday Telegraph reports that there is a Tory rebellion looming in Parliament on Cameron's useless EU bill with its hollow promises of a referendum on future power transfers to Brussels. Its a story we have heard many times before so why might it be different this time? Well the Tories are in coalition with the rabidly Europhile LibDems and are deeply unhappy about having to vote in favour of other half baked LibDem policies like AV. There are also many ambitious young Tories on the bank benches seeing LibDems occupying government jobs which should by rights be theirs. In short they are not happy bunnies.

The other area of hope is the slow motion Eurozone crash. The Euro always contained within it the seeds of its own destruction and now the huge refinancing needed by the PIGS is bringing things to a head. As Jane Daley writes also in the Sunday Telegraph today the Eurozone will not collapse just slowly disintegrate in a manage manner served with huge doses of fudge, deceit and duplicity by the EU and UK political class.  But it will happen. Economic pressures cannot be gainsayed forever. It may be our Stalingrad that halts the so far monotonic increasing expansion of Brussel's powers.

But what of the Coalition? Oldham and Saddleworth will return a Labour MP and a collapse in the LibDem vote. But what effect will this have on the Tories. I opine they will do the electoral calculation that with a LibDem collapse they will win big in the South, enough to compensate for Labour wins in the North in a 2011 General Election. Cameron does not have the election weapon at his disposal himself but his troops do! We live in interesting times.