Wednesday, 30 November 2011

Yanks show the EU how its done

The Stock market roared up today on the back of the Fed reducing the costs of dollar swaps to European banks thus ensuring they could access the dollar funding they need. The Fed could do this as they control the US currency and Bernanke can act as he sees fit. In the Eurozone the EU crats continue to squabble, no one is in charge and no one really owns the bastard currency. Whilst this persists there will be no lasting solution to the Eurozone's problems.

I did a Q&A session today for website. It was pretty wide ranging and I tried to explain a number of the Eurozone money problems in everyday language. This interview should appear on the web site in due course.

Meanwhile our day of action has come and gone. I have lost out on my pension by the change from RPI indexation, which is what I agreed to, to CPI indexation which was introduced as the governments preferred inflation measure by Gordon Brown for short term political expediency. Like his sale of our gold and his robbery of private sector pension funds in 1997 it was a very bad decision for the UK but it was politically easy. Says it all about our politicos. The more they talk about tough decisions you know they mean the easy politically expedient decisions. Similarly hard working families means benefit claimants who don't work and have no intention of ever working.

The difference between what the Con Lib coalition is doing and what Labour proposed doing is tiny compared with the huge problems facing our country.They choose to fight over this square metre of mud to avoid talking about the real issues. Its the same approach they use to avoid talking about the dire effect the EU has on our country. This has to be put on the agenda very soon or we will face huge civil unrest as people lose their remaining confidence in our devalued democracy.

Tuesday, 29 November 2011

Italian interest rates up, UK borrowing up where is UKIP?

Osborne's latest budget called the Autumn statement now admits that UK gilt issuance in this fiscal year will rise to £178.9 bn from the £167.5bn forecast in the budget 6 months previously. That is a £11.4 bn jump in 6 months. The bond market's reaction will be interesting to say the least.

Reuters reports that .Rome had to offer a record 7.89 percent yield to sell 3-year bonds, a huge leap from the 4.93 percent it paid in late October, and 7.56 percent for 10-year bonds, compared with 6.06 percent at that time.

These borrowing costs were above the levels at which Greece, Ireland and Portugal applied for international bailouts, but European stocks and bonds rallied in apparent relief at the strong demand, with the maximum 7.5 billion euros of Italian debt sold.
The unknown is who bought the debt. I suspect it was bought by French & German banks acting under pressure from their governments. These banks will very quickly sell the debt on to the ECB to add to what by now must be at least a  €250 bn pile of Eurobonds it already has. I was amused to see Rumpy and Barroso with Obama yesterday with complaints they had got the wrong Europeans. Where was Frumpy? Surely she would not miss such a chance to do her Xmas shopping.

Merkel has them by the balls. She is squeezing hard and will continue to do so until she gets the Treaty changes she wants consolidating her power over Club Med. She has her towel on the pool lounger and she is not shifting it yet. She is playing a very tough game as her electoral survival depends on it.

I was amused by the Mary Riddell peace in today's DT saying, "This will be a terrible week for the Tories, but does the Opposition have the wit to capitalise?"

This is exactly the question I have been putting to Farage's EUKIP this last year. It has been a horrendous year for the Eurozone. Does EUKIP have the wit to capitalise on their misfortunes?  No is the resounding answer. Yes UKIP is up to 8% in the polls but at such a low level the margin of error is larger than the usual 2% for a party with around 30% of the poll. I opine the reasons for the increase in UKIP support is purely domestic reflecting dis-satisfaction with the Con Lib coalition from disgruntled Tories. Farage and EUKIP do not have the ability to connect Eurozone cock up to UK malaise in UK voter's minds. They are second rate politicians and will continue to miss open goals in the best tradition of Tranmere Rovers.

Monday, 28 November 2011

UK needs the Anglo Saxons not the EU squabbling mid Europeans

I will always remember how bitter my New Zealand and Australian friends were in 1971 when it became clear that Heath was going to sell them out for his European dream. I contacted them in late 1972 to point out how Heath had also sold out his own countrymen, our fishermen, to secure his appalling European deal. I well remember during the All Black 72/73 tour that coincided with Parliament's vote on Heath's sordid deal the New Zealanders in the crowds chanting 'Give them the EEC' as the All Blacks defeated most of the UK opposition but inexplicably lost to the French!

A history programme this weekend on the defence of Tobruk against Rommel's Panzers lead by Aussie part time General Leslie Morshead inflicted the first ever reversal of a Panzer attack suffered by  the Germans made me think about how much we owe to the ANZACs, the Canadian,  the Indian and other Commonwealth soldiers along with the Yanks who fought and died for our country during two world wars. Morshead's well organised defence of Tobruk turned the war in Africa in our favour. Without the Aussies there could have been no El Alamein. Who would you rather rely on in a fight, the Italians and French or the Aussies and New Zealanders?

Heath and his chums were obsessed with fighting the last war not preparing for the next. It has been the British Sandhurst way throughout history and persists today in Afghan. They talk endless twaddle about learning lessons but always miss the big points. Their laudable aim of no more European wars sounds eerily like the WWI slogan, the war to end all wars. That slogan led to the millions being killed.

The EU claim supported by the UK euro philes that the EU had kept the peace in Europe these last 60 years is patent nonsense. Last time I looked at the map the Balkans were part of Europe and 200000 people were slaughtered there while the EU political elite squabbled. It was only when an American led organisation called NATO steeped in and bombed Serbia to the negoriating table that the killing largely stopped. The  EU  want to air brush NATO from history as did De Gaulle successfully in France I remember French Euro crats in Brussels telling me France was liberated in 1944 by De Gaulles's Free French forces! De Gaulle of course then went on to do his best to sabotage NATO and undermine the US dollar. As Churchill remarked the cross of Lorraine was the hardest cross he ever had to bear in WWII.

What we are seeing now in this latest Euro crisis is a rerun of the traditional mid European squabbles. The EU should read European history and learn from it a and stop trying to rewrite it. Orwell in his novel 1984 pointed out where that leads to. The horrible scare tactics used by the EU to cow the populace is terrifyingly like the Big Brother tactics in the novel with Barroso as big brother.

The pseudo economic arguments used in 72 and 76 and peddled by the EU philes today on the advantages of UK membership of the EU are as false today as they were 45 years ago. The EU is a mature flat lining market dominated by the huge ultra efficient German economy. The only UK businesses that will benefit are  UK importers of Mercs, BMWs etc. The new expanding markets where UK industry can succeed are in the Pacific Rim and India. That's right the very countries Heath and his chums betrayed to join the then Common Market. The other growth area is of course financial services centred on London and based on the fair play enshrined in UK common  law. In which jurisdiction would wish to argue your case, UK or France?

I have no idea where this Eurozone crisis will go now. The rational economic solution is to break up the Euro into at least two parts. The people in charge however are not capable of rational thought in this matter. Their reputations, beliefs and whole raison d'etre depend on the Euro. They will go piling insanity upon insanity. I opine the hated Anglo Saxon Yanks will have to step in and rescue them eventually as they have done before as one possible scenario.

The two lessons the UK government should learn are you will never stop squabbling mid Europeans fighting each other and second the UK's true interests, economic and political lie with the Anglo Saxon countries with which we share a common language, culture and legal system. Its time to remember who our real friends are.

Saturday, 26 November 2011

Prepare for riots in euro collapse FCO tells embassies

Thus reads the headline in today's DT. I think I wrote this about 18 months ago but of course the FCO are always the last to know  what's happening. An unnamed UK minister is quoted as saying Britain is planning on the basis that a euro collapse is just a matter of time. "It is in or interests that they keep playing for time as that gives us more time to prepare" is the verbatim quote. So in the current metaphor lets hope they keep kicking the can down the road but what happens when they reach the brick wall at the end?

Riots and social unrest opines the FCO, along with bank failures and UK citizens left unable to access their bank accounts. This from the organisation that gave you the Maastricht Treaty setting up the Euro, a currency without an emergency exit. Investors are getting their cash out of the Eurozone as fast as possible and are clearly not buying even German bunds on this weeks auction results.

Politicians are very good at conning the general public. The general public think they are listening to people with the same moral standards and sense of right and wrong as themselves. They are of course total mistaken in this belief. Politicians of all parties and countries are  largely amoral, self serving and interested only in saving their electoral skins and keeping the other lot out of power.

Bankers on the other hand operate with the same complete lack of decency as politicians so are not susceptible to the con men that form our political elite. In short the politicians fine words and ringing phrases cut no ice with our hard nosed self serving bankers. Hence the reception each gale of hot air from the Eurozone elite on the unthinkable break of the Euro gets from the financial markets. An initial positive response rapidly followed by a much larger reverse. You can't con a banker with half baked political rhetoric or threats of financial Armageddon. They know whatever happens they will be needed by whoever is in government, Generals, Colonels or despots.

I did enjoy Nigel Farage's, 'who elected you', attack on the three EU stooges at the Euro talking shop. It was good knockabout stuff and  I am sure UKIP's rank and file will enjoy it on YouTube. Its a pity more of them do not realise the party they belong to is EUKIP, emphasis on the first two letter.

But it was always thus. As Dr Goebels realised a big lie is always better than the truth. If you want to extract some semblance of  truth from the statements of politicians reverse. An example of the big lie is the way our MPs refer to themselves as honourable or right honourable. The expenses scandal showed the truth about these people was the exact opposite. So when they say the Euro will not be allowed to fail you now know what they mean. You can't con an old Bank of England sceptic!

Friday, 25 November 2011

Another disastrous bond auction twists the Euro death spiral

 Italy paid a record 6.5 percent today for 6month money far above levels seen as sustainable for public finances.

The auction yield on the six-month paper almost doubled compared to a month earlier, following the failure of  a German bond auction earlier in the week.

Italy managed to raise the full planned amount of 10 billion euros (8.6 billion pounds), at  the highest borrowing costs since it joined the euro. Investors are scared and bond yields hit record highs on the secondary market.

Yields on two-year BTP bonds soared to more than 8%in response, a euro lifetime high, despite clear  purchases by the European Central Bank.

The ECB was buying Italian and Spanish bonds in an attempt to shore the market up. But given its public reluctance to prop up high-debt eurozone governments, its bond-buying programme lacks conviction in the market's eyes.

These yields threaten Italy's planned gross issuance of 440 billion euros for 2012 as interest payments on the country's  debt stock rise. Maybe Mario is not so super after all!

The Euro seems to have entered a self fulfilling,  self induced death spiral. Only the ritual electoral suicide of Dr Frau Merkel falling on her pickelhauser spike and allowing the ECB to buy Euro sovereign debt in gigantic quantities can now save this ill conceived and deeply flawed currency and that will only give a temporary respite.

Two big mistakes were made by the Eurocrats. Forcing banks to mark sovereign debt to market instead of using its par value immediately confirmed sovereign debt was any thing but risk free. Second the decision to force banks to accept write downs 'voluntarily' on sovereign debt to avoid triggering Credit Default Swap contracts and hence avoid a public default made these CDS contracts worthless. Banks can no longer use them to insure against sovereign bond losses so banks have decided not to hold these bonds at all. The ECB have been the only buyers and must by now have a huge pile of crap Eurobonds on its balance sheet.

The suggestion by the FrancoPrussians that Greece might be kicked out the Euro let the cat out of the . bag. Why stop at Greece? Why not Portugal, Ireland etc. Currency risk was now on the banks agenda big time. Their response? Cut lending to the Eurozone as fast as possible.

Truely a cock up of Napoleonic proportions. Remember what happened to his Grand Armee in Russia, 500,000 men at the start of his Russian campaign and 10,000 at the end. Let us hope the great EU project meets a similar fate.

Thursday, 24 November 2011

Dave has to choose, the City or Brussels

The boy is not looking too well recently as Barroso and the other EU crats gradually force him into a corner. He has either to choose the EU, sacrifice the City and face his enraged back benchers and more importantly his City backers or defend the City and his country and be hurled into the European outer darkness and face an early election in the UK. Dave is between a rock and a hard place. Just what he deserves.

The Euro crisis rolls on and is now lapping at the shores of the Fatherland. Italian bond closed at 7.17% tonight with German bunds now yielding more than UK gilts. The Eurozone economy is in dire straits. As for the UK EU philes with their 40% of UK exports go to the EU well 40% of zero is zero and thank God we have still got 60% left at worst. The lesson for UK business and UK governments is don't put all your eggs in one basket. Since the days of Henry VIII no good ever came to the UK from being in Europe but the siren voices as always sing its different this time. The war to end all wars, peace in our time and the biggest current lie the EU has kept the peace in Europe since 1945. Well no did not. The American lead NATO did that despite De Gaulle's best efforts to sabotage it.

Is EUKIP well placed to capitalise on this once in a lifetime opportunity? Is it ready to mobilise a mass campaign to leave the EU on the streets of the UK? Well no, it spends most of its time in Brussels working for the EU.

I have great faith in the ordinary British people. I hope for a great grass roots uprising driven by mass unemployment, falling living standards and a burning sense of financial injustice. John Redwood wrote a very amusing piece on the army pointing out that as the army shrinks the number of top brass increases. We could put three battalions of Lieutenant Colonels, some 1800 men in the field tomorrow. We have three full Colonels for every battle tank. Great except none of them no how to drive the things. So no danger of the army being used in a Churchillian manner to quell  the rebellious plebs. They are all driving desks in Whitehall.

We have not had a good revolution for a while and by Jove we need one now to save our country from the LibLabCon, BBC watching Guardian indoctrinated political elite.

Wednesday, 23 November 2011

German bond auction disaster

The German 10 bond auction today with half the offering unsold and German rates going higher than US rates for the first time in recent years, 2.04% compared with 1.96% for the US. This was a real confidence breaker for the Eurozone with Italian 10 year bonds ending at 7.01% and Spanish bonds ending at 6.66%. UK gilts ended at 2.14% a record low spread to bunds.

The EU response was as always to call for more fiscal control from Brussels and demanding that national budgets should be submitted to Brussels for approval before they are seen by national parliaments! THe main blame for this of course must lie with these parliaments who like our own have handed over power wholsale to Brussels. Its going to be a hard sell to their electors so I anticipate more techno/euro crat governments soon.

Eventually they will learn as have many US presidents that the bond market is the most powerful force on God's earth! The lesson will be a hard one with much pain but not of course for the Eurocrats who will go on demanding inflation busting pay rises.

Treaty changes will soon be demanded by the EU. Boy Dave will have to put up and call a referendum or kow tow to the LibDems and shut up. Either way he is toast but what and who comes next? Comments please.

Monday, 21 November 2011

Another election but Brussels still rules

I returned from France yesterday to find no change on the UK or European scene. The Spanish have had their election. Its run on a party list system like our European elections and elects a parliament as powerless as the European talking shop our MEPs go to. As in the UK the Spaniards do not vote for the candidate they want. The candidates are chosen by the party leadership and they owe their loyalty to the party leadership. They do not give a stuff about the voters so its just like EUKIP. It is the European way to ensure Brussels rules Ok!

As I write the ten year bond rate for Spain is 6.59% and Italy 6.67%. Compare that with Germany,1.91%. The ECB has of course been buying Spanish and Italian bonds on the quiet in the secondary market just to keep rates  at these unsustainable levels.

I am  not a great fan of Roger Bootle or indeed any big name UK economist but his piece in today's DT business is very good. He points out that UK policy is driven by those politicians and diplomats obsessed with having a seat at the 'top table'. Overweening pride and arrogance is the characteristic of all political elites. Its a seat that has cost the UK dearly and has delivered nothing for the ordinary people of the UK. As Bootle says such UK influence as we have exists because we are the Eurozone's single biggest export market! So if we were to leave the EU the Merkozy countries would lose much many jobs than the UK if they did not strike an immediate trade deal  with us.

It is not tax harmonisation, a common currency and regulation will not deliver jobs for any country, only successful businesses can do that. The Eurozone is at best a stagnant/declining market. The growing markets are in India, China and South America. Markets where pre 1972 the UK was strong. We should return to these markets asap. Our Europhile political elite is fighting the last 39/45 war in the finest British tradition rather than looking ahead at what is coming out of the East.

I want a country with a rising per capita GDP. A country with a weak government responsive to and under control of the ordinary people like Switzerland. Look where strong government has led us, Iraq, Afghanistan with worst of all a huge sacrifice of young UK men and women.

Let us return to our own country. Rid ourselves and our business of the intrusive EU regulation and recognise that the Euro is a failed project of a failed state.

I opined many months ago that this whole sorry tale will be settled in blood on the streets of the capitals of Europe. I pray the boy and his chum Gideon will put the interests of the UK people first and not their deck chair location on the EU Titanic.

Monday, 14 November 2011

Italians pay record high rates on their 5 year bond today

The 10 year rates that are usually quoted are taken from a yield curve fit to the latest traded prices of all Italian bonds in the secondary market. It does not give the price that Italy is paying but an estimate of the price Italy would have to pay if it issued a 10 year bond today. Yield curves generally slope upwards with bond maturity so the yield on a 10 year will be higher than the yield on a 5 year which will be higher than the yield on a 2 year etc. Today Italy sold 3 bn € of a 5 year bond and had to pay 6.29% roughly twice what it paid on its last 5 year offering. this is going to go on and on as Italy has to roll over its debt portfolio and boy does iTALY HAVE A LOT OF DEBT TO ROll over, 350 bn € in the next 12 months.

This will start eatig lasrger and larger chunks out of Italy's falling tax revenues out of which it has to pay for schools, police, hospitals etc not to mention chauffeur driven limos for their MPs and the 100000€ a year barber they employ to cut Berlusconnis few hairs. Yes he like our own GB is still an MP.

The ECB have been very naughty. They had been buying up Italian debt like billy oh and has 200 bn € on its books already but last week it stopped its purchases. Yields soared and as a result Berlusconni fell. Now that hhe has gone and Monti is in the ECB will resume purchasing Italian bonds in the secondary market. Italian yields have fallen back about 80 basis points and this has been hailed a technocratic triumph. for Monti. The markets are not that easily fooled but you will get a lot from the Eurocrats about their wonderfull regime change effect.. Its pure EU propagnada.

The Italians have a long tradition pre Mafia of knifing their leaders. Ask JC. I would advise Signor Monti not to visit the forum.

Any way I am off to Sarky land tonight for a few days. The only decent WiFi connection there is in MacDonalds but my wife does not like to be seen there so I may be incommunicado for a while.

Sunday, 13 November 2011

Lions led by donkeys all over again

Today I went to the Armistice day service in our local village church. I did it for my grandmother whose adored elder brother, Sergeant William MacKenzie a regular with the Royal Scots died at Loos in 1915. There can be very few UK indigenous families who did not suffer a similar loss. I detest those who now claim British citizenship and denigrate and demonstrate against our armed forces whilst hiding behind their human  'rights'. These rights were bought with the lives of these brave men and women who fought and died for this country.

Loos ended as a bad reverse because of French insistence to attack over ground that Douglas Haig regarded as unsuitable. Have we learned nothing in the intervening 100 years about bowing to French dictates? Its always paid for by sacrifice of  British interests

I have always regarded the First World War as a Franco Prussian war we should never have been involved in. It ruined this country morally and financially. John Redwood wrote a piece today confirming he shares my views on WWI.

"I developed more of a dislike of the politicians who thought this was a necessary and worthwhile war. The first war lacked the cause that a hated ideology and the fanatical treatment of non Germans by Hitler gave to the second. It lacked the sense that the UK had to stand alone and fight to preserve her independence from tyranny that the nation shared in 1940. In 1914 the Uk went to war over the Balkans and ended up fighting shoulder to shoulder with France in what was yet another Franco-German dispute. The Uk could have stayed out of it, safe in the knowledge that her mighty navy shielded the homeland from threat and her Empire offered her trade and commercial interests."
John Redwood then goes on with another argument that I have made and EUKIP should be making but of course are not/

"If there was a strand of common policy that provided some justification in the twentieth century it was the wish to avoid any single power dominating the continent. How ironic that today the UK’s foreign policy seems based on encouraging France and Germany to unite, when the twentieth century saw us fight two huge wars to prevent just such an outcome. We can be proud of and grateful to our armed forces. We should pause to ask if the politicians spent too many lives and too much treasure in European interventions."

As I opined yesterday this minority Tory government whose only interest is in staying in office does not have a European policy. The vacuum is filled by the EU worshipping Lib Dems. It's a disaster for the UK if this is allowed to continue.

There is one small ray of hope. Despite its hopeless and inept leadership the EUKIP vote has gone up to 7% in the polls. This indicates the huge anti-EU feeling now in the country. The last time something like this happened was just before the 2010 European election when the main three political parties all managed to shoot themselves in both feet over the expenses scandal. EUKIP doubled its expected number of MEPs on the back of this good fortune. Farage of coursed just pissed this away. His overweening hubris, EUKIP c'est moi, as they say in Brussels, stopped UKIP from backing Nikki Sinclaire who was doing such great work getting a parliamentary debate for a referendum and mobilising voting support in Parliament.

It is time for the ordinary branch members of UKIP to support Nikki and kick out Farage and his loathsome Cabal. Take a leaf out of the Merkel's EU book and install a group of technocrats to run UKIP properly and on a sound financial basis. The feeling in the country against the EU is now so strong that all UKIP has to do is wait, keep its nose clean, support Nikki  and the prize will fall into our lap. Having people like Hamilton prominent in UKIP is barking mad. UKIP now needs people  probity, honesty,integrity and competence to succeed electorally in Westminster elections. That's what Merkel is trying to achieve in Italy and Greece. Just imitate her and succeed! Spivs and failed disgraced politicians equals Berlusconni in the electorates now opened eyes.

Friday, 11 November 2011

Cameron has not a clue what to do about Eurozone crisis

I wrote yesterday about the weird out of character performance of my former Bank of England colleague Matthew Hancock now a Tory MP on A Neil's lunch time programme. I opined the only reason I could think of was that his old boss G Osborne had not a clue what to do. Today's DT centre page piece by Iain Martin entitled 'Dithering is leaving Britain without a role' implies neither does Boy Dave! He has been led by the nose by the EU loving FCO into an impossible position.

The FCO's whizzo idea to increase UK influence in the EU and consequently decrease Franco Prussian effect was to support increasing the size of the EU. It failed! We ended up with a huge influx of mid Europeans taking our jobs, houses etc and Sarky and Merkel not only still run the EU but have tightened their grip and power in Brussels. They have successfully pursued regime change in Ireland, Portugal, Grrece and Italy. In the last two they have successfully installed their puppet Eurocrats, described as technocrats, as PM.

How is it in British interests to support a Franco Prussian hegemony in the EU? How was it in British interests to support Christine Lagarde, a prospective French presidential candidate as the managing director of the IMF, a role she now combines with her membership of the ruling EU politburo!

Cameron is running scared. He wants to hang on as PM. Why? What is he achieving? Better to have another election now which would at least oust the EU phile Lib Dem bums from government seats. An election the Tories would easily win. Is Millipede II a credible electoral threat?

As Iain Martin writes Cameron should tell the FCO to convene a summit of the group of 10 in London asap to stick it to Sarky and Merkel. If the FCO don't like it start firing the Permanent Sec plus a few ambassador and fill their jobs with outside appointees untainted by the love Johnny Foreigner and to hell with British interests culture that pervades the FCO.

Yesterday's DT business gave the figures for September's UK Italy trade. UK exports to Italy, £803m. UK imports from Italy £1.2bn! That is pretty well the pattern across all UK EU trade explaining our £12 bn trade deficit last month fueled of course by the BoE's money printing  to boost UK demand whilst of course the  German's keep the screws on EU demand through their control of the ECB. Again UK policy helps Johnny Foreigner not British workers. Lets not forget the EU phile claims that 3 mn British jobs(no source ever given!) depend on the EU market. On these figures 4.5 mn EU jobs depend on the British market but of course all we ever hear from on the BBC is 'British business'. Presumably the same British businessmen that awarded themselves 50% pay increases last year whilst laying off the few UK workers not yet replaced by low cost immigrants.

Remember it was British business that urged UK membership of the ERM. Now ho much did that cost? Who cares they still got their obscene bonuses for lousy performance.

I expect to soon see more trouble on the streets of Europe as austerity really bites. We will not be immune.

Thursday, 10 November 2011

Its Serious

I heard Ollie, the Spad from The Thick Of It, on breakfast time TV talking about how what he regarded  as silly comic ideas that went out in the series suddenly appeared as 'new political initiatives'. He cited the idea of a national database of spare rooms as one which was trialled on the Tick of It which has now emerged as a government proposal.

I switched on A F Neil's Daily Politics at lunch time to find my former Bank of England colleague Matthew Hancock MP on with Lib Dem MEP Sharon Bowles to discuss the Eurozone crisis. Its serious said Matthew to be followed up by at least a dozen repetitions of the same phrase with accompanying chorus of its serious from La Bowles.Indeed the its serious comment was all a pissed off Andrew Neil could get out of him. This discussion first took place in a Yes Minister episode with Jim Hacker and I think banker Sir Desmond Glazebrook who managed to keep a 5 minute scene going just using the its serious phrase.

Politics does indeed follow fiction. I suspect the reason for Matthew's confusion is that his old boss Wee George has not a clue what to do about this crisis and Matthew did not want to stick his neck out.  Ms Bowles was quite sensible for a LibDem.

Meanwhile back on the markets Italy raised 5bn € at 6.06% in a twice covered one year bill auction today, double the rate they paid only a month ago. This will have to be repeated again in 12 months time. This auction was of course carefully stage managed to ensure it was not a complete disaster, i opine most of the issue will be sold to the ECB within one week to join the 120bn€ + of BTPs the ECB already has on its books. Merkel's objection to the ECB buying outright BTPs is purely for domestic political consumption. The ECB has been buying Italian bonds in the secondary market each week for the last 6 months and will continue to do so indefinitely.

Ten year bond yields tonight were Italy 6.95%, France 3.47%, UK 2.23%. I don't understand why Gilt yields are so low. It can't last.  The ECB will be in the market tomorrow buying BTPs in an effort to keep the yield below the psychologically important 7%. They got a bad fright yesterday.

Wednesday, 9 November 2011

How the EU is destroying our democracies

As I write Italian 10 year bond rates have hit 7.4%. a spread to bunds of  5.5%/ Italy has to fund 300bn € debt next year/ That will now cost them an extra 16.5bn € per annum in interest payments compared to Dr Frau Merkel. Eyewatering, and remeber the Italians have nearly 2 trillions of government debt.

The response of the EU is to urge an Italian  government of national unity headed by a 'technocrat' former member of the ECB council ie an unelected, unaccountable Eurocrat house trained already to carry out Brussel's wishes. It is the exactly the same solution that the EU is imposing on Greece, a governament of national unity headed by a Eurocrat technocrat. This  is the death of democracy in both these countries. Neither has our 700 year democratic tradition to fall back and both have been within living memory military dictatorships. Note how even in the UK our government of national unity enabled the LibDems to tear up many of  their electoral pormises to our own students and kow tow to their Brussel's masters befouling our democracy in the process.

The EU has already exploited the Eurozone crisis to bring down the democratically elected governments in Ireland and Portugal and now Italy and Greece. It is destroying democracy and bring us all in to a Napoleonic  Soviet system with all power concentrated in a ruling politburo under the Reichsfuerher. Captain Mannering would  be more effective against this foreign takeover than  the current UK political class of juveniles and party arse lickers.

I wrote some time ago that the crucial conflict in the EU will be fought on the ground of EU Brussels interests versus national politicians seeking re-election. This is no where seen more clearly than in the current argument over the ECB printing money just like the Bank of England. The French and the Latins all want it but Dr Frau Merkel knows it would alienate her totally from the hyper-inflation scarred German electorate and lead her and her party to electoral annihilation. She is not a lady to be gainsayed.

Sarkozy whizzo idea that La France is so terrifically important that the world would bail him out met defeat at the hands of the US Sino alliance in Cannes. European solutions for EU problems is what Obama said to the would be Napoleon. The real one of course met his nemesis in a field just outside Brussels at the hands of the Prussians. I opine Sarkozy may meet a similar fate if only we Brits can pluck up the courage to do as we did at Waterloo and help the Prussians

John Redwood put it thus earlier this week:

The Euro destroys a big part of national democracy. The issue then is how do people change the policy if it is not working or they do not like it? Democratic consent relies on the ability to change policy as well as personnel and on  the hope of a better tomorrow. Euroland politicians have a big task in maintaining  that consent. Blocking the Greek referendum was a political mistake.
Euroland politicians also have a big challenge to set out a compelling vision of how this can work and why it might be better. If they do not allow sensible democratic opposition and proper consultation of the people affected by their one size fits all policy, people will find other ways of dissenting. That is how we have reached the point in Greece where many do not see the need to pay their taxes..

It is also important to know the enemy and understand how he thinks and operates. Thus Richard North wrote criticising Freddy Forsyth's lack of understanding of the acquis commutaire:

Most have nothing more than the vaguest understanding of the nature of the EU, its origins and its workings, their brains clouded by a fog of ignorance and incomprehension. Clear that fog and the issues become clear. We are in the European Union, and remain members bound by its rules, not because of the acquis, but because parliament permits it.

The European Union is not the problem. Parliament is the problem – and it is to there, not Brussels, that our wrath should be directed. The EU is not a matter of foreign domination, as so many eurosceptics wish to believe. It is what our parliament does to us. Everything else is babble.

When this is understood, we might start to get somewhere.

Dead right Richard and that is why Farage's EUKIP is so useful to the EU. It diverts almost the entire UK anti-EU effort from where the real battle must be fought to an unending series of Duchess of Richmond's Brussels balls. Britain's battles may have been won on the playing fields of Eton but they certainly will never be won in the pubs of Brussels or the impotent EU talking shop where Farage postures and preens himself.

Tuesday, 8 November 2011

Politicians propose, markets dispose

Poor wee George off to another useless finance ministers meeting today accompanied on Eurostar by Nick Robinson who reported that yet again no way forward found. George does his usual berating of the Eurozone apparatchiks which achieves nothing. Until the Eurofanatics take the reality medicine there can be no solution. Things will steadily get worse for the people of Europe. There is no money left as I think Mr Byrne said last year.

Italian 10 year bond rates closed today at 6.76% a spread to bunds of 4.96%. That's bail out country! French bonds, OATS, closed at 3.1% compared with the UK gilts rate of 2.27%.

I am amused at the ad hominen attcaks and language used by the EU crats to smear Papandreou and Berlusconi. David, Del and I suffered  the same from the Faragista Cabal on EUKIP's NEC. The Cabal embodies the true spirit of the EU. Delors would be proud of them.

Sunday, 6 November 2011

Eurozone countries sovereign bonds are not sovereign

A sovereign bond is one that is risk free and one that can always be repaid in any circumstances. This is because for a nation state issuing a bond in its own currency it can always repay the bond by printing more of its currency. This may of course have huge inflationary consequences but there can never be a default. For this reason such bonds are given zero risk weighting in BIS bank capital adequacy calculations.

So called Eurozone sovereign bonds are thus not sovereign because they are denominated in a currency which is not controlled and thus cannot be printed by  the country issuing the bond, even Germany. This means that there can be a default and the probability of a default reflects the market's perception  of the ability of the issuing country to repay its bond debt. Thus the price, interest rate, that different countries have to pay to raise money by issuing bonds, IOUs in everyday parlance, varies from Germany at around 2% to Greece at around 20% currently.

The root of the financial malaise currently gripping the Eurozone lies in the refusal of the EU political elite for their own political agenda to acknowledge these simple facts. All Eurobonds are not equal and some are decidedly less equal than others.

Because banks, driven by BIS capital adequacy rules, are huge holders of Eurozone bonds they are highly susceptible to problems generated by this lack of sovereignty. Thus we might well soon see runs on banks known to be large holders of Greek and Italian bonds extending even to all banks in particular countries eg France. For these reasons as I write corporates are transferring funds to banks in countries like Germany and out of countries like Italy. Bankers unlike politicians are rational people who generally have to pay for their errors with their jobs. Ask Fred the shred!

I have doubts about the current Merkel panzer approach. exemplifed by the latest pronouncement designed to frighten the Italians reported by Reuters.

ECB Governing Council Member Yves Mersch said.
"If we observe that our interventions are undermined by a lack of efforts by national governments then we have to pose ourselves the problem of the incentive effect," Mersch said according to extracts of an interview with Italian daily La Stampa to be published on Sunday.
Asked if this meant the ECB would stop buying Italy's bonds if it did not adopt reforms it has promised to the European Union, Mersch, who heads Luxembourg's central bank, replied:
"If the ECB board reaches the conclusion that the conditions that led it to take a decision no longer exist, it is free to change that decision at any moment. We discuss this all the time."

Wow! Just the thing to terrify Bunga Bunga man into submission? More likely to make him a national hero standing up against the jack booted Huns!

Friday, 4 November 2011

Merkel's Prussian boot is on Europe's throat

Almost 100 years ago the UK became involved in a horrendous European war that destroyed our country economically and morally to defend the sovereignty of what was then portrayed in the British papers as 'poor little Belgium. Now we have to endure Merkozy kicking the daylights out of the Greeks having three years previously kicked the Irish over the wrong referendum result and not one of our political leaders from any party dare say boo to this bullying Prussian woman and her evil manipulative dwarf French henchman.

Why do you thing the Greek finance minister came out at 4:00 am that morning to denounce the Greek referendum plan? He had a call from Merkozy. Its called interfering in the internal political affairs of another nation something that Adolf Hitler specialised in. This bullying Franco Prussian interference in the affairs of other sovereign European nations can do nothing but harm and lay the foundations for further European conflicts.

This is what loss of sovereignty means in practice. Its all been too boring for the British to bother about. You don't bother about it until the Prussian jack boot kicks your bum. Essex man and Essex girl with their City jobs are soon going to find out what Merkozy has planned for them.

I wish Merkozy's threat to kick Greece out of the Euro had been called. Why? I don't know how they would do it. Six years ago I participated in a half day meeting dealing with how a country could leave the Euro. Many of the City of London's best brains were all there but nobody had the slightest idea how exit from the Euro could be managed. I don't think Merkel or the dwarf has an clue how to do it either.

UK government policy is a shambles. Cameron said this afternoon the UK would contribute more to the IMF to help with the Eurozone crisis. That money is just a hidden bung for Merkozy's hubris. Its the ECB's job to print the money to do this and save the Eurozone from meltdown but the Huns with their inflation hang up wont let the ECB do this. Why do we have to pander to German paranoia while allowing the Bank of England to debauch our own currency? Cameron and Osborne should defend  British interests but they are enslaved by the Euro phile FCO plus the 56 LibDem MPs/ One simple number Cameron your 81 Tory rebels outnumber these Lib Dems yet they have no ministerial posts or salaries like Clegg and his awful cronies. The Boy could soon be toast.

The much vaunted Greek rescue deal is not about saving Greece but about saving the Euro. Mr Papandreou knows this. The other motivating force is that French banks are the counterparties in many Greek Credit Default Swap deals. These would be triggered in the event of a declared Greek default. Could these French banks meet their contractual obligations.Not a hope. They would be bankrupt and the French government could not raise the money to save them on their name. The would  have to grovel big time to Merkel and the Chinese.

I would not be surprised to see a military government soon in Greece. Time for the panzers Dr Frau Merkel?

Thursday, 3 November 2011

Greeks have the Eurocrats by the short & curlies

I am enjoying watching Sarky Merkel squirming and blustering over Mr Papendreou's intention to put their bail out to the Greek people. I am not surprised. The bail out is about saving imprudent French bankers who lent to Greece without doing their due diligence and the face of the Euro establishment. Its the Greeks who will have to pay and they don't want to The opinion polls say they want to stay in the Euro. Simples! I want it but I don't want to pay for it.

I opined many months ago that the Euro crunch would come when the wishes of the EU ie Sarky Merkel came into conflict with the interests of national politicians seeking re-election and Athens. That is what is now playing out in Cannes.

Look you Greeks says Sarky Merkel decide now if you want to stay in the Euro and if you don't give us the right answer your not getting your promised €8 bn. So Mr P seems to have had a change of heart, no referendum and and Dave and Nick type coalition. What will tomorrow bring?

The despised Anglo Saxons who run the international bond markets on hard nosed logical lines are not impressed. The Italian 10 year bond now yields 6.16% and the French bond spread to Gilts is now 0.76%.  The Chinese are not playing ball and the EFSF offering has been left on the shelf. Zut alors!

The Greek's will still call the shots because they can bring the whole EU house crashing down any time they choose. Bismark would have mobilised the Prussian army by now. I would not rule out a Greek army coup and a Greek default. They have done both before more than once. This story has legs.

Wednesday, 2 November 2011

Democracy is reborn in Greece

Its appropriate that the Greeks have re-invented the Athenian Boule of 500 BC where all citizens had a vote on government policy. Good for Mr P. It does not matter which way the referendum goes only that it is held! Its great that the hopeless Greeks can organise a referendum in a month but the Rolls Royce minds of the British political elite cannot organise one in two years! The reason is that the Greek politicians want a referendum and our political elite do not! Its their worst nightmare people voting.

Hannan's piece in today's DT entitled, "Eurocrats are utterly terrified of democracy" sums it up.One of the Greek MPs called it a catharsis. Spot on lady! Catharsis comes at the end of a Greek tragedy after the hubris that has gone before.

I would widen Hannan's argument. It applies to the political class in our own country just as much. Politicians hate elections and the democracy it brings. They prefer to work behind closed doors fiddling their expenses.

Is it a coincidence that the most prosperous country in Europe, Switzerland, is the one that has the most referendums and gives the least power to its political class. Obviously no coincidence given the number of times the Swiss have voted down their government's policies.

Poor old Mr P he will be ganged up on and beaten up in Cannes by EU's Gestapo and SS but his battle is our battle so I hope our MEPs will take every opportunity to support the Greek referendum.