You need a good virus checker

There is a saying that if you are going to sup with the devil take a long spoon. I occasionally look at Tony Butcher's Democracy Forum. Two days ago my virus checker stopped me accessing this site as my Norton system detected malicious software on the site. Norton say they have notified Tony Butcher of their findings.


Strange indeed but then I was contacted by someone who had had their email system hacked into and malicious emails sent out purporting to come from him. These fake emails were clearly meant to smear and damage this person's reputation.


This of course happened to me some months ago and emails advertising penile enlargement services were sent out to people on my mailing list purporting to come from me. It ended up amusingly when I was contacted by an  irate Cabal member saying they did not wish to receive these offers to which I could reply well obviously not as you are a big prick already.


The only connection between people suffering from these dirty tricks seems to be  EUKIP. If you are, or have been involved with EUKIP I suggest you get a good virus checker.


I see Farage's new UKIP constitution received a 91.9% Yes vote from the membership as reported by returning officer and Farage appointee Arnott. Such one sided support for a leader is usually only seen in third world dictatorships. When on the NEC I argued strongly for all UKIP ballots to be conducted by the Electoral Reform Society service to ensure there could be no questioning of the probity of the ballot. A pity this was not done for this latest UKIP ballot. The 91.9% Yes vote is bound to be questioned.




Trevor Colman and Tim Congdon at the Torquay conference successfully opposed Farage taking UKIP into a Pan European party. I warned Tim at the time that Farage would be back in the true EU way with the same proposal in a different envelope. Tim chose to accept Farage's reassurances on this matter, somewhat naive in my view.

EU deal to save Greece and the Euro starts to unravel

Or alternatively its the usual EU salami slicing approach. Nobody seriously believed this would be Greece's last visit with the begging bowl but already stories are emerging in today's Telegraph, quote 'Greece "to miss its budget targets" despite bail out deal'. 'Politicians prepare for Athens to receive first payment in latest lifeline' Well of course they are. Most of the money will be siphoned off into rapacious politician's pockets.


This not unusual. Nigeria has huge oil revenues 40 bn$ per annum but how much appears in the Nigerian government accounts. Zilch to be precise but of course Nigeria is a byword for corruption.


There is a lovely picture in the Telegraph of Jean-Claude Juncker EU crat and PM of Luxembourg trying to strangle the Spanish PM with the Dutch finance minister looking encouragingly on. I reproduce it below from the Telegraph online..


 





The EU can bully little Greece but Spain is a big boy and they have just waved two fingers to the EU fiscal pact invoking their status as a sovereign nation. Then of course there is Portugal which can be bullied by the Prussians and Italy which like Spain is too big to buly. Salami slice that if you can! 


More seriously there seems to be much discussion of how EUKIP will ever get us out of the EU. My view is its irrelevant. What will  get us out is when the EU's insane regualtions start to hit the City. Last night on Sky Tidjane Thiam chied exec of the massive Pru did not rule out relocating and re-centring their operations somewhere East of Suez because of the lates EU capital adequacy rules. These will simply put the Pru out of business competing with the Yanks outside the EU which is where all the growth business now happens.


David Nish from  Standard Life admitted on the same programme that their increase in operating profits came from their Canadian division and their UK/EU business was virtually flat.


Pru shares rose 4.81% after their results announced whilst Standard Life rose 0.4%. after their results. That says it all.


The big one will be if HSBC re-locates. The H stands for Hong Kong and the S for Shanghai. No prizes for guessing where they might re-locate too. The other bank with a move on the cards is Standard Chartered Neither took government cash post Lehman's and are to coin a phrase their own bank. I would not rule out a move for Barclays either! Where the big beasts go the parasites follow.


The City competes with the US corporates in banking, insurance and even law. Their business is mainly outside the EU. Forcing them to comply with insane EU rules will force them out of the EU and all these high paid jobs will leave London but not for Paris or Frankfurt SarkyMerkel. No, they will go much further East where the EU's writ does not run.


That is the economic reality that will force any UK government's hand on the EU. We simply cannot stand the loss of tax revenue these moves. That's why EUKIP and the ridiculous Farage is irrelevant to the decision.

EU fascists condemn Greeks to hellish existence

The EU fascists are congratulating themselves on keeping the Greeks in the Euro and in penury for a generation and preserving their reputation for undemocratic autocracy never seen in Europe since the days of Adolf Hitler. Euro comes before peoples welfare as long a they are not politicians.


The whole sordid deal is founded on unprecedented, unprincipled printing of money not seen in Europe since the last days of the same Adolf. Juergen Stark the former German representative on the board of  the ECB resigned some months ago in protest at what he could see coming. AEP writing in Thursday's Telegraph reported it thus:


'Jurgen Stark, the ECB's former chief economist and Germany's board member until two months ago, said the blitz of lending had corrupted collateral standards and risked inflation.

"The balance sheet of the euro system isn't just gigantic in size but also shocking in quality," he said.

Unlimited lending to banks for three years has pushed the ECB's balance sheet to over €3 trillion (£2.5 trillion), overtaking the US Federal Reserve to become the world's most activist bank.

The attack come days after Bundesbank chief Jens Weidmann complained that the ECB's payments system known as Target2 had caused the Bundesbank to build up €547bn of claims on the rest of the system, mostly from the central banks of Greece, Ireland, Italy, and France. He demanded measures to protect German interests.'

Printing money and devaluing currency is the traditional recipe for dictators with financial problems most recently Robert Mugabe in Zimbabwe. It just kicks the can down the road and leave a bigger mess. The Germans know this better than any nation in Europe . Its what the UK and the US are also doing it. It will spark of horrendous inflation eventually here, in the US and the EU. The difference is the UK and US are democracies so the people will eventual restore common sense to monetary policy. The EU is a dictatorship so revolution is inevitable. It will probably start among the impoverished Greek masses.

Having destroyed the CDS system no one in their right mind will lend to Greece, Portugal, Spain etc. Difficult like impossible for a country to grow its economy if no one is prepared to lend them money. The EU solution will be for the ECB to print yet more money to lend to these countries but the more Euros there are the less they are worth and inflation takes off big time. Eventually the Germans will force the Italian running the ECB to put up interest rates which makes the PIGS situation worse and violent revolution more inevitable.

The PIGS have been serial defaulters over the years. That is why I always opposed taking their bonds as BoE collateral. Its different this time was the cry. Famous last words as they say!

For sure people will be reading the covenants on their sovereign bonds much more closely! Once bitten twice shy. 

The markets believe the UK has never defaulted on its bonds, usually called gilts. One of my old BoE colleagues assured me in the early days of the bank it did happen but I can't find any record of it so lets just say it never happened. This, the probity and integrity of the English Common Law system plus the Llyods insurance market always paying are the three great foundations of the City. The EU has just destroyed its reputation and the PIGS will pay for it but of course the EU elite will be faultless. 

Roll on the revolution!

Greek default risk rises

The FT published an excellent piece on Monday on how the EU shenanigans has effectively wrecked the CDS bond default insurance market



I quote fom this piece


"Last Thursday’s “no default vote” by the determination committee of Isda, the trade body that represents the derivatives industry, means investors holding CDS may be paid less than they had hoped.


This could, therefore, deter bankers and investors from buying the instruments, jeopardising the future of the product, say traders. It could also prompt some funds and banks to sell peripheral eurozone bonds as they can no longer be sure of the instruments used to hedge the risk of holding the debt."


Its the old story. Insurers are happy to take your premiums but its a different story but when you have to make a claim. That's when you find out how good a credit your counterparty is. The reputation of the City of London was built on the reputation of the Lloyds insurance market always to pay. It did for the San Francisco earthquake and fire of 1906 and did for last year's earthquakes in New Zealand and Japan. 


Evading your liabilities is not just an EU practice its very common in the USA where large corporations employ huge teams of expensive lawyers to evade payment. Obama's disgusting emphasis of the word British in his press conferences on the Gulf oil spill shows how deeply ingrained this practice is in the US. When the American owned Piper Alpha rig went on fire in 1988  in the North Sea killing 167 people our PM Mrs Thatcher made no reference to the nationality of the owners, She treated it for what is was, an accident warranting a full investigation.


I was proud of Mrs T then as I was proud of Tony Hayward recently when he was being hounded by the low life that inhabits the US political system seeking to make political capital from a tragic accident. Neither sought to hide behind jingoism or lawyers.


The City has another excellent mechanism of default insurance called three name paper. When Baring's went bankrupt for almost £2 bn that system paid up without a quibble. Only those in the markets knew who paid or even how three name paper works for corporate debt..




CDS were widely used as credit insurance. If it is so easy to evade paying as the Greeks seem intent on demonstrating then people will be very wary of using them in future and the cost of borrowing will rise.


The FTSE was down 2% at cob today as the probability of a Greek debt default increased. Much publicity has been given to Greek and Eurozone banks accepting the draconian write down Merkel's plan entails. Its clearly in their interests and the interests of their politicians to do so but its what private bond holders  do that will decide. If they don't buy the deal then its a default and lots of Eurozone banks are bust and will need recapitalising by their governments very quickly. The ECB will take a huge hit.


Thursday will be an interesting day!

EUKIP, the pantomime goes on

I attended our village panto last night, Little Red Riding Hood, but I cast my mind back to last year's panto Aladdin and I was struck by its similarity to the latest goings on in EUKIP. New lamps for old was how the evil Abanazar persuaded Aladdin's newly acquired wife to part with the magic lamp.


Thus it s with EUKIP except its one old Tory, DCB out for another old Tory Roger Helmer in.  Aladdin is none to street wise and is easily hoodwinked by Abanazar pretending to be his uncle. In my metaphor Aladdin represents EUKIP's gullible membership. In the story Aladdin gets married to Princess Badroulbadour the Emperor's daughter. In my metaphor the Emperor is Cameron and thanks to Guido Fawkes' blog the princess is clearly Princess Top Tory Totty so I guess there was a young Tory involved in the exchange as well.


I leave it to you to identify and cast Abanazar. Its a hard one as there are so many possibilities in the EUKIP bazaars of Brussels.


Until someone comes up with the magic ring and gets its genie to make all these old Tories disappear in a puff of fag smoke there is no hope for EUKIP.


Far fetched? Well look at where EUKIP's last summer's old Tories recruits the Hamiltons are now. They are starring in Cinderella at the Kettering theatre with Christine Hamilton as the Fairy godmother (poor casting) and Neil as Baron Hardup so no change there then.


This is of course the Hamilton's second foray into panto. They previously appeared in Jack and the Beanstalk at the Guildford Theatre. Guildford was a Tory disaster in the 2001 election so clearly they needed Neil and Christine to cheer them up.


The star of last year's Strictly, Anne Widdecombe recently appeared in Snow White at Dartford. Click on link to view this triumph. Feel free to post your guess of who Miss W's partner is. 


Let us wind up with a true panto gag:

- Do you know what happens to people who don't tell the truth?

- No, what?

- They become Members of Parliament.

Banks deposit 777bn € back with ECB today

So what is going on? Banks borrow 500 bn € at 1%yesterday and deposit 777bn € today at 0.25% today. They are just hoarding cash to buy sovereigns at the next bond auctions. Lend it to productive business? Forget it. They might go bust with our money. Lend it on to other banks? Well they are all a bit dodgy as well so we will just keep it on deposit with the ECB where its nice and safe. Seventy five basis points is an insurance premium worth paying for safety.


The trouble with Drahi's reverse Ponzi scheme is that the ECB takes the best collateral from banks.and as senior creditor gets paid before anyone else who might have lent on the interbank market to that bank. That's the bit Draghi forgot.


In the good old days at the BoE when Eddie George who was a banker was running the show we did not remunerate any money left on deposit with us. This was a nice earner for us and acted as a powerful incentive for banks to lend on the money they borrowed from us in our Repo operations especially when Repo rates were around 5%. You see assessing credit risk is what bankers are supposed to do!


When the deluded economist MAK took overas Governor  his first 'reform' was to remunerate bankers balances with the BoE at 100 bps under repo so now British banks prefer to dump their cash back with the Old Lady where its safe rather than do what they are supposed to do, lend to business. Don't blame the banks for playing safe. Its King who makes the rules. It was the same with banking failures. Look at who made the rules and who did not enforce them to find the culprits for the mess we are now in. That's right the FSA, HMT and the BoE.

LTRO, Draghi's Ponzi scheme

Mario Draghi is the governor of the ECB. LTRO stands for Long Term Repo Operation in this case 3 years as opposed to the usual 2 week or one month refinancing central banks have previously used to supply liquidity to money markets.Charles  Ponzi was a crook who  in the US in 1920 took peoples money and promised wonderful returns which were in fact paid by the subscriptions  of the later entrants.


Draghi's one trillion Euro LTRO looks a bit like a Ponzi scheme to me. European banks can deposit sovereign bonds as collateral with the ECB and get for 3 years money at 1% on the market value if their bonds less a margin, usually less than 5%. Often there is no market for these bonds but no matter the ECB will fix a price for them and lend.


What do the banks do with these bonds? Well if its 10 year Italian or Spanish they earn 5% interest roughly which is a lot more than the 1% plus a bit financing cost they have incurred. Even better they can then recycle these bonds back to the ECB in regular repos to get yet more Euros.


The Ponzi bit comes in when these banks have to find the money to pay the repo interest rate. Where do they get it from? Easy the ECB just lends them more to pay the interest rate so I suppose its really a reverse Ponzi. 


Ponzi schemes come unstuck when they run out of new mug investors. Draghi's new Ponzi will come unstuck when inflation takes off and international investors demand higher rates. About this time say 3 years away the banks will have to start repaying their LTROs but they won't have the money to do so. Over to you Signor Draghi!


So he will have postponed the day of reckoning and created an even worse crisis that will submerge Italy, Spain, Portugal and the new communist paradise of M Hollande's France.