And wouldn't you concede that Ashdown might nevertheless have been right? The Foreign office briefings to day lend some credance to it. The Europeans really are sick of our attitude, and personally I dont blame them. When I listened to Cameron and Osbourne lecturing them for the previous two months, while apparently arguing for more fiscal union, I found that both inept and distinctly fishy.
I actually agree with both you and Len Prague , my problem with Ashdown is a very pompous superior manner . It is interesting that Len's personal experience fits my perception . My problem is that the Lib Dems are now supporting policies which are not just slightly against technical details in their manifesto but run completely counter to issues at the core of their principles after years of claiming to be 'the nice guys ' of politics.
On your analysis Prague ,I agree ,I do think Cameron did fail in his initial negotiations and was left with nowhere to go.
I had to remove my earlier post due to a corruption of the paste function. I will try again my apologies to those that may have already read it. I would not usually bother but am concerned at the increasingly insular focus of the debate.
The Economist paints a good picture of the negotiations and there are some excellent comments on here.Living much of the past 15yrs abroad I am now detached from the machinations of the UK establishment but have experienced UK/ US banking and working with European companies I offer the following view:
<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> The Euro zone has done a brilliant job in producing a masterful distraction diverting our focus to a fiscal road map for the future while failing to address the meteoric crater on whose precipice we all now stand.Such failure can only result in the likelihood of there being no recognizable road to travel but instead of focusing on their continued failure to deliver a solution to their debt crisis we wallow in sideshow of a new EU “treaty” while they again “kick the can” down the road. With no advance warning, no public pronouncements, no proposals for sovereign state debate just an edict of a new treaty to be signed in principal or we go without you the only relevance of the “veto” is (as Len alludes [thanks for the link]) the usual “Euro Visionary” (EV) disdain for the democratic process. If you had any doubt your vote meant little you need have no more. Their actions in respect of a debt crisis they have tried to resolve for months are perverse.Offering (1) is to increase a bailout fund to 500bn which a) represents less than 40% of the estimated toxic debt in Euro Zone 1.3 trillion Euro: b) has no detail on how it is be funded or who will carry the risk.Offering (2) is to increase WMF contributions by 200mn Euro where UK & Germany have already vetoed use of WMF loans to bail out the Euro. Offering (3) is the “treaty” which resolves not one penny of the overriding debt. So as we again “contemplate our European navel” with many (inc. some on here) emblazoned in political colours waving their arms in varying degrees of angst the Germans/ French will get on with controlling Europe. An Economist tale of a French negotiating stunt maybe true but was it a French idea? Know that UK politics today determines only the shade of grey of our problems, dark funds more social spending, light reduces it and if you feel the veto was a politician protecting his contributors* you are looking to the past and not the legacy we leave our children. [*Tories protecting contributors is music to an EV but it was Blair/ Brown deregulated banks moving central bank control to industry regulators. Darling bailed them out. It is no accident Germany vets the Irish budget before it goes to the Irish Parliament.Emboldened by such precedent Germany now knows little can curtail their influence across Europe. Austria is the same country, Belgium & Luxembourg follow the crowd, and Finland is bankrupt while France, Italy, Spain, Portugal & Ireland without Germany stare into the abyss. Add the economic bastions of Cyprus, Estonia, Greece, Slovakia, Slovenia and Malta and the emergence of Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland, and Romania and only Netherlands, Denmark & Sweden offer any independent democratic economic nous. To be continued
And wouldn't you concede that Ashdown might nevertheless have been right? The Foreign office briefings to day lend some credance to it. The Europeans really are sick of our attitude, and personally I dont blame them. When I listened to Cameron and Osbourne lecturing them for the previous two months, while apparently arguing for more fiscal union, I found that both inept and distinctly fishy.
I actually agree with both you and Len Prague , my problem with Ashdown is a very pompous superior manner . It is interesting that Len's personal experience fits my perception . My problem is that the Lib Dems are now supporting policies which are not just slightly against technical details in their manifesto but run completely counter to issues at the core of their principles after years of claiming to be 'the nice guys ' of politics.
On your analysis Prague ,I agree ,I do think Cameron did fail in his initial negotiations and was left with nowhere to go.
Regarding the Lib Dems, it's very easy to be the "nice guy" when you are sitting on the sidelines and have no power, it's a bit different when you are in power and are responsible literally for the lives of millions of people... As they are finding out.
I can't help feeling that the stark contrast between DC and NC is that NC is proving time and again that he has no principles, whereas DC's principles (protect the City at all costs) could well have shafted this country for the next decade at least.
In 1973, when Edward Heath was taking us into the EU, I seem to recall that the main topic of debate on the pros and cons of joining the EU were a) How would it affect the price of peppers? b) Would we still be able to buy NZ butter and 3) the 'intellectual' position, joining = no more European wars. Little Englanders then and now. Don't get too concerned Grapevine, at least insularity is a stable factor ;-) Looking forward to P11.
Sorry Saga, the moment Clegg swung his votes to the Tories, he began to lose power. He can now be contemptuously brushed aside because Cameron knows Clegg can't resign and try to force an election because he'll never get voted in again. Clegg does rather seem to enjoy his moment in the spotlight but any power is totally illusory IMO.
"And as for No 1 in SL, if anyone can follow this - well done!! A sentence of over 150 words - wow!!!."
I did manage to follow it, mostly, and rather wish I didn't as, what he has to say is not good news at all. Thanks anyway.
What he says about salaries in the sector is a very interesting point. Other people have pointed this out.
Looking back at my post I can now see that I tried but failed to use a combination of industry speak and more straightforward terms to try and get my point across but still be understood by those who quite rightly are baffled by these financial products.
A point worth making on the above and one I'm sure that many on the outside looking in will find bewildering, is that the profits paid out by these banks to pay for wages/bonuses etc. are not all taken from cash in hand. A significant percentage of the declared profit will not be realised by the banks for many years (therefore these trades sit on the balance sheet as an asset) and by the end of the 10 year period could be realised at a much lower level of profit. A trader who sells a financial product that does not mature for say 10 years, will not want to wait until the end date to be paid for the profit that trade makes for his institution (he is more likely that not, to be long gone). What does happen, is that the trade is valued and re-valued over the life of the trade and the change in the asset value is attributed to the profit&loss as perceived market valuation changes and its from these that wages/bonuses can and are paid. Problem here is that for these complex trades, it is never easy to predict what might/might not happen and therefore the extreme risks are ignored, as in their self regulated minds it would be unfair and unrealistic to err that much on the side of caution and hence trades are more often than not overvalued. In the cases of the very complex, it is even more problematic as the only people deemed capable of assesing a trades value is the person who sold it ! go figure what happens.
As some of these products have long term lives for 5, 10, 20 25 even 30 years + unrealised gains will be paid away into the prockets of the "deserving" but when the merd hits the fan, it can not be reclaimed (unless you have a friendly government to help you out) and the real problems start.
To use your analogy it would be like football clubs paying players bonuses at the end of a season for getting promoted to the premiership out of their perceived future earnings from the premiership, only for Sky to go belly up a year later and the funds never arriving.
The thing that intrigues me -- and I'd love to know the answer -- is what would happen if governments agreed to declare all of those toxic derivatives, or betting slips, null and void? And obviously ban all future development or trade in such things.
And while they're at it, make the selling of shares that you don't own a criminal offence.
And make it a legal requirement to hold any share you've bought for some minimum period (a day might do).
Not sure that this could happen. It is unimaginable what mayhem this would cause and the knock-on effects could be catastrophic. So many banks insolvent, major companies who need the banks to fund their businesses etc etc. it is not just the banks who issue these products, but virtually every major company you could think of issue debt this way as a means to raise funding on the cheap.
If that were to happen, I would guess that the vacuum could not be filled and the system would collapse. At least the way they are going at present, leaves an opportunity to fudge it somehow with collective help.
"And as for No 1 in SL, if anyone can follow this - well done!! A sentence of over 150 words - wow!!!."
I did manage to follow it, mostly, and rather wish I didn't as, what he has to say is not good news at all. Thanks anyway.
What he says about salaries in the sector is a very interesting point. Other people have pointed this out.
Looking back at my post I can now see that I tried but failed to use a combination of industry speak and more straightforward terms to try and get my point across but still be understood by those who quite rightly are baffled by these financial products.
A point worth making on the above and one I'm sure that many on the outside looking in will find bewildering in, is that the profits paid out by these banks to pay for wages/bonuses etc. are not all taken from cash in hand. A significant percentage of the declared profit will not be realised by the banks for many years (therefore these trades sit on the balance sheet as an asset) and may by the end of the 10 year period could be realised at a much lower level of profit. A trader who sells a financial product that does not mature for say 10 years, will not want to wait until the end date to be paid for the profit that trade makes for his institution (he is more likely that not, to be long gone). What does happen, is that the trade is valued and re-valued over the life of the trade and the change in the asset value is attributed to the profit&loss as perceived market valuation changes and its from these that wages/bonuses can and are paid. Problem here is that for these complex trades, it is never easy to predict what might/might not happen and therefore the extreme risks are ignored, as in their self regulated minds it would be unfair and unrealistic to err that much on the side of caution and hence trades are more often than not overalued. In the cases of the very complex, it is even more problematic as the only people deemed capable of assesing a trades value is the person who sold it ! go figure what happens.
As some of these products have long term lives for 5, 10, 20 25 even 30 years + unrealised gains will be paid away into the prockets of the "deserving" but when the merd hits the fan, it can not be reclaimed (unless you have a friendly government to help you out) and the real problems start.
To use you analogy it would be like football clubs paying players bonuses at the end of a season for getting promoted to the premiership out of their perceived future earnings from the premiership, only for Sky to go belly up a year later and the funds never arriving.
I can't help wondering how some of these banks got clean audit reports looking at what you've said.
There seems to be a large material element of anticipating unrealised profits which goes against all the traditional accounting conventions and concepts.
But then clean audits haven't bothered the EU for 16 years or so....
"And as for No 1 in SL, if anyone can follow this - well done!! A sentence of over 150 words - wow!!!."
I did manage to follow it, mostly, and rather wish I didn't as, what he has to say is not good news at all. Thanks anyway.
What he says about salaries in the sector is a very interesting point. Other people have pointed this out.
Looking back at my post I can now see that I tried but failed to use a combination of industry speak and more straightforward terms to try and get my point across but still be understood by those who quite rightly are baffled by these financial products.
A point worth making on the above and one I'm sure that many on the outside looking in will find bewildering in, is that the profits paid out by these banks to pay for wages/bonuses etc. are not all taken from cash in hand. A significant percentage of the declared profit will not be realised by the banks for many years (therefore these trades sit on the balance sheet as an asset) and may by the end of the 10 year period could be realised at a much lower level of profit. A trader who sells a financial product that does not mature for say 10 years, will not want to wait until the end date to be paid for the profit that trade makes for his institution (he is more likely that not, to be long gone). What does happen, is that the trade is valued and re-valued over the life of the trade and the change in the asset value is attributed to the profit&loss as perceived market valuation changes and its from these that wages/bonuses can and are paid. Problem here is that for these complex trades, it is never easy to predict what might/might not happen and therefore the extreme risks are ignored, as in their self regulated minds it would be unfair and unrealistic to err that much on the side of caution and hence trades are more often than not overalued. In the cases of the very complex, it is even more problematic as the only people deemed capable of assesing a trades value is the person who sold it ! go figure what happens.
As some of these products have long term lives for 5, 10, 20 25 even 30 years + unrealised gains will be paid away into the prockets of the "deserving" but when the merd hits the fan, it can not be reclaimed (unless you have a friendly government to help you out) and the real problems start.
To use you analogy it would be like football clubs paying players bonuses at the end of a season for getting promoted to the premiership out of their perceived future earnings from the premiership, only for Sky to go belly up a year later and the funds never arriving.
I can't help wondering how some of these banks got clean audit reports looking at what you've said.
There seems to be a large material element of anticipating unrealised profits which goes against all the traditional accounting conventions and concepts.
But then clean audits haven't bothered the EU for 16 years or so....
the regulators dont ask difficult questions as a) they dont want to drive them away from London b)the proper knowledge of the market doesnt exist within them anyway ...its not a very good recipe
So long as they stick to the rules, auditors will sign off, auditiors fully understanding the valuations on the other hand is another debate, but if those sent into these banks had the skills to unravel the underlying issues, then they wouldn't be auditing, but would more likely be taking better paid positions at the banks.
Sick of reading the BBC's euro propaganda every morning, their supposed to be impartial for goodness sake. They've not once acknowledge that 60% of people have supported Camerons decision and that because of the veto Conservative have subseqeuntly caught up with Labour in the opinion polls. The only reason they want to remain a part of Europe is because of the 125 million they pick up every year. There's a lot of misguided information in this thread. We barely take any trade from Europe, they take a lot more from us than we do them!
Hardly supports your contention that we "barely" take any trade from the EU.
Both numbers have grown considerably since we joined the EEC and eight of our top ten trading partners are in the EU, the other two being China and the US.
It would be foolish to cut off an important and growing market.
I'd be wary about citing opinion polls as being significant of anything other than a measure of short-term popularity. Economics and science work on the basis of what is demonstrably provable, not what is popular. Cameron's veto might therefore be popular, but we'll have to wait and see how advisable it was.
To demonstrate that here's another poll - detailing that around half of British people don't believe in evolution:
Apparently around 20% of Brits believe in creationism or intelligent design. I suppose the good news is that 80% of us don't believe in creationism, but that's not much to boast about.
So long as they stick to the rules, auditors will sign off, auditiors fully understanding the valuations on the other hand is another debate, but if those sent into these banks had the skills to unravel the underlying issues, then they wouldn't be auditing, but would more likely be taking better paid positions at the banks.
That's the crux of it I agree.
There's a lot of talk about more regulation to "curb the bankers etc" but, arguably and ironically, a lot of this started years ago because of the sub prime crisis in the USA which, to my simplistic mind, arose because the US Government instructed (under duress) banks to lend to people who would not normally pass the risk criteria.
The problem was then further exacerbated by the banks attempting to mitigate their enhanced risk by selling CDSs (Credit Default Swaps or, to use your excellent phrase posh betting slips). These then got sold on and on so that firstlyany audit trail or accountability disappeared totally and secondly Governments thought they'd have some of that but caught a massive cold when it all went pear shaped for the banks.
Meanwhile Fred the Shred et al had taken their profit (realised or not) walked away and left the rest of us to clear the mess up.
There's a lot of talk about more regulation to "curb the bankers etc" but, arguably and ironically, a lot of this started years ago because of the sub prime crisis in the USA which, to my simplistic mind, arose beause the US Government instructed (under duress) banks to lend to people who would not normally pass the risk criteria.
..........
As I understand it events it was the other way around, with the banks and business lobby in the US who are ferocious in getting what they want, demanding less regulation and oversight. The US has had a series of scandals over the last few years - Savings and Loans in the '80s, the whi=ole junk bond thing in the late 80s, to Enron etc and now this. The problem is to get elected in the US takes billions and the only place that political candidates can get that kind of money is from big business. Naturally they expect a return on their investment.
I read recently but can't at this moment find the link that the top 30 US corporations spend more PA on lobbying than they do on tax.
What brought the problem in the US to a head was Alan Greenspan slashing interest rates to virtually zero after September 11, with few people investing and incredibly cheap credit a lot of people took on board loans and mortgages which they never had a hope of re-paying once interest rates rose.
Governments love an industry that pay a significant proportion of tax revenue. Industry love a government who give it back with interest when they have them stuck in a corner with a gun pointed at their heads.
It's an interesting post, but I am not quite sure where you stand on how to resolve the crisis (es). I detect that you don't much trust or even like Germany.
Me, i don't much trust any national governments to behave in the long term interests of their voters. I don't trust the UK, or Merkozy. My trust as you reach the EU periphery, like the country where I live, descends even further. they are a bunch of thieves. So when I hear everyone moaning about sovereignty, I get a little bit sceptical. It make a national government sound like a wonderful pure entity, doing all the right things, which will be stopped by some new European super-government. That is not the case, is it? The Maastricht Treaty is a basically a club. It has club rules. Trouble is, none of them, on their own, stuck to the rules. The Germans and the French were the first to break Maastricht fiscal discipline. If there is a supra-national body which stops European politicians breaking the rules in the future, you know what, I think that is not a fundamentally bad thing.
Thanks for your description No.1. I always thought that with the markets, where there were winners there was an equal number of losers.
It's obvious that without firm foundations, any paper business can flounder on the whim of a Government or an individual - or in this case on everyone gambling on red because it cane up 20 times in a row, only for it to be black on the 21st spin.
Hard times for the vast majority of us for the forseeable future. Perhaps it is time to become insular and try and support our own life functions rather than worrying about the political games being played in Europe.
It seems to me the big players in the Euro Zone are just arranging the deckchairs whilst the Titanic sinks. At least Cameron has us in the lifeboat.
Thanks for your description No.1. I always thought that with the markets, where there were winners there was an equal number of losers.
That should be the way it works, but it gets a little bit complicated when the losers don't have the ability to pay and the winners have already spent the winnings to reward the magician who worked the three card trick.
I actually have time for the German approach. Do I suggest their increasing control is the result of a long term master strategy of “The Fatherland?
No, the Germans are as sick of EU excesses as the UK, especially when they have to keep picking up the tab. Remember most Germans don't hold credit cards for a reason. They do borrow but usually via bank account credit zones. Credit is tightly controlled.
They are furious with the slack governmental & personal borrowing seen elsewhere across the EU and at the exposure they now carry as a result. They have ambitions as global financiers but view<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> the UK/ US finance culture of the last decade as an anathema.
I sold banking products to German companies and worked with German teams to construct a global financial product.The experience was frustrating but also uplifting.Painfully slow in decision making Germans are the masters of detail, thoroughness and risk evaluation.
Consequently they traditionally invest for the long term and for the most part get things right.These are the traditional values the UK used to share. Reminds me of the story of the tortoise and the hare
Where does their increasing control leave the British people?
Not for the first time we (including the Scots?) face the decision of ploughing a lone (very difficult economic) furrow resplendent in our independent democracy or enjoying a still challenging economic future in the embrace of the European collective where Eurocrats will increasingly erode your and your child’s democratic legacy.
It is not an easy choice or one to be made overnight. For all the noise of recent days, there is not yet a decision to make. Cameron can sign a treaty next week, next month, next year it matters not a jot if the Euro zone fails. I believe Greece will default (a problem for French banks). If Italy fails then I believe German banks will have a problem. So, as nobody knows how the economic landscape will look until the Euro resolves its DEBTS there is no decision to make. Cameron may have tried to play a hand to win some advantage and failed but who knows what cards will be dealt in the next hand? This story has a long way to run To be continued
A succinct and excellent anaylsis Grapevine. Sometimes one is faced with a choice simply between the unpalatable and the awful. Regardless of his tactics, IMHO that was Cameron's position last week and it is the position of the Eurozone members dealing with the actual debt crisis of the periphery and the latent banking crisis at the core. For them it is a case of picking your poison. Understandably the Germans cannot bear the thought of the ECB printing as the Fed and BofE have but sooner or later it will have to come to that.
"Franco-German hopes for a sweeping new treaty to bind the region's economies more closely came under strain on Tuesday as several European Union leaders warned of difficulties pushing a far-reaching pact through their national parliaments.
The pressure was particularly acute in non-eurozone countries, where at least four governments warned that the precise legal text would determine whether they could sign up to the treaty or otherwise join the UK on the sidelines.......
Even inside the 17-member eurozone, cracks emerged, with Irish opposition leaders calling on Enda Kenny, prime minister, to allow a referendum on the new pact – a vote that would almost certainly fail – and pro-EU opposition parties in the Netherlands attacking the minority government of Mark Rutte, prime minister, for his handling of the deal..."
So it would start to appear that we are not out on a limb - obviously some others are having a re-think and not standing up to the Franco-German bullying tactics.
It will be interesting to see what the next couple of weeks brings.
I do not see a problem sitting outside of the treaty for the time being. Indeed other than a bit of amusement at our expense by the French press and the French government saluting the robustness of Sarkosy nobody else seems overly bothered
Sitting back however is not an option. It is all very well pillorying whatever politician happens to be in situ but the fact is the UK electorate and its scizophrenic relationship with Europe has hardly helped this situation.
To secure their election the UK 's last 2 governments were elected on the same basis – no more power conceded to Europe without a referendum. Blair/ Brown appeared to weasel their way out of a referendum. Many would argue if Cameron had signed the treaty he will also have breached his referendum election promise.
Indeed many are demanding a referendum even though he has not signed the treaty. Cameron could argue that unless he had secured the concession he sought he could not agree to the new treaty without such proposals being put to our parliament and the people.
A referendum now in probably the most difficult and uncertain times since the 1930's is lunacy but our arms length approach to Europe is unlikely to be sustainable for much longer.
It could be argued this generation (my generation) have compromised the futures of generations to come. When the average age of first time house buyers is 37, when future university students face incurring substantial debt simply to enjoy the same education we enjoyed for free, when there are 1 million young people out of work, when in some areas 50% of school leavers cannot read and write their own language to any meaningful level the argument has some merit.
In the interests of our children we have to take a long term view of where the UK will best prosper in an increasingly populated, well educated and competitive world. In doing so we will have consider our natural resources, our footprint, our culture and our heritage.
We do have to consider and never forget the continuing failures of the European Insitutions who were constructed to SERVE US but by the same token we should not forget the influences on our heritage from the Romans, the Vikings, the Angles, the Saxons and the Normans.
Now I wonder where they all came from.
I understand the attraction of a standalone option, but I fear it will very much be standalone. I enjoyed working in the US with many very good people, but they are overwhelmed by a culture of vested self interest. You need only look at that country's governmental disdain of its own citizens in the aftermath of Hurricane Katrina to determine the nature of the beast. The US has its own problems it would have little interest in ours.
I noted at the outset my "detachment from UK politics". In truth the labels which UK politicians wear today are meaningless. Messrs Cameron, Clegg, Ashdown, Milliband are just temporary players in our lives and the lives of our children. I would however offer the following suggestion.
For the simple reason he is the man in situ. Cameron should remain so until the next election. I recognize the difficulties many are facing but any additional uncertainty will merely exacerbate our financial problems in the short term.
If he deems it appropriate to return to the EU negotiating table he should do so in the pragmatic support of our key trading markets with the proviso that in doing so he will have to place the UKs continued participation of the EU before the British people at the next election.
In that scenario you have relative short term stability, allow the government to take whatever steps needed to manage what may become unprecedented circumstances, but allow the fullest possible positioning of the arguments for and against UKs continued participation in the EU before the electorate.
On completion of that election any new government will not only have the mandate to implement its policies but also whether such policies are to be implemented within or without the EU.
To move forward I think we all need that clarity and certainty of direction
Comments
And wouldn't you concede that Ashdown might nevertheless have been right? The Foreign office briefings to day lend some credance to it. The Europeans really are sick of our attitude, and personally I dont blame them. When I listened to Cameron and Osbourne lecturing them for the previous two months, while apparently arguing for more fiscal union, I found that both inept and distinctly fishy.
I actually agree with both you and Len Prague , my problem with Ashdown is a very pompous superior manner . It is interesting that Len's personal experience fits my perception . My problem is that the Lib Dems are now supporting policies which are not just slightly against technical details in their manifesto but run completely counter to issues at the core of their principles after years of claiming to be 'the nice guys ' of politics.
On your analysis Prague ,I agree ,I do think Cameron did fail in his initial negotiations and was left with nowhere to go.
Aye, or at least is now being marketed as such.
There was more than just that when I had dealings.
I had to remove my earlier post due to a corruption of the paste function. I will try again my apologies to those that may have already read it. I would not usually bother but am concerned at the increasingly insular focus of the debate.
The Economist paints a good picture of the negotiations and there are some excellent comments on here. Living much of the past 15yrs abroad I am now detached from the machinations of the UK establishment but have experienced UK/ US banking and working with European companies I offer the following view:
<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />The Euro zone has done a brilliant job in producing a masterful distraction diverting our focus to a fiscal road map for the future while failing to address the meteoric crater on whose precipice we all now stand. Such failure can only result in the likelihood of there being no recognizable road to travel but instead of focusing on their continued failure to deliver a solution to their debt crisis we wallow in sideshow of a new EU “treaty” while they again “kick the can” down the road.
With no advance warning, no public pronouncements, no proposals for sovereign state debate just an edict of a new treaty to be signed in principal or we go without you the only relevance of the “veto” is (as Len alludes [thanks for the link]) the usual “Euro Visionary” (EV) disdain for the democratic process.
If you had any doubt your vote meant little you need have no more.
Their actions in respect of a debt crisis they have tried to resolve for months are perverse. Offering (1) is to increase a bailout fund to 500bn which a) represents less than 40% of the estimated toxic debt in Euro Zone 1.3 trillion Euro: b) has no detail on how it is be funded or who will carry the risk. Offering (2) is to increase WMF contributions by 200mn Euro where UK & Germany have already vetoed use of WMF loans to bail out the Euro. Offering (3) is the “treaty” which resolves not one penny of the overriding debt.
So as we again “contemplate our European navel” with many (inc. some on here) emblazoned in political colours waving their arms in varying degrees of angst the Germans/ French will get on with controlling Europe.
An Economist tale of a French negotiating stunt maybe true but was it a French idea?
Know that UK politics today determines only the shade of grey of our problems, dark funds more social spending, light reduces it and if you feel the veto was a politician protecting his contributors* you are looking to the past and not the legacy we leave our children.
[*Tories protecting contributors is music to an EV but it was Blair/ Brown deregulated banks moving central bank control to industry regulators. Darling bailed them out.
It is no accident Germany vets the Irish budget before it goes to the Irish Parliament. Emboldened by such precedent Germany now knows little can curtail their influence across Europe.
Austria is the same country, Belgium & Luxembourg follow the crowd, and Finland is bankrupt while France, Italy, Spain, Portugal & Ireland without Germany stare into the abyss.
Add the economic bastions of Cyprus, Estonia, Greece, Slovakia, Slovenia and Malta and the emergence of Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland, and Romania and only Netherlands, Denmark & Sweden offer any independent democratic economic nous.
To be continued
Regarding the Lib Dems, it's very easy to be the "nice guy" when you are sitting on the sidelines and have no power, it's a bit different when you are in power and are responsible literally for the lives of millions of people... As they are finding out.
I can't help feeling that the stark contrast between DC and NC is that NC is proving time and again that he has no principles, whereas DC's principles (protect the City at all costs) could well have shafted this country for the next decade at least.
Looking back at my post I can now see that I tried but failed to use a combination of industry speak and more straightforward terms to try and get my point across but still be understood by those who quite rightly are baffled by these financial products.
A point worth making on the above and one I'm sure that many on the outside looking in will find bewildering, is that the profits paid out by these banks to pay for wages/bonuses etc. are not all taken from cash in hand. A significant percentage of the declared profit will not be realised by the banks for many years (therefore these trades sit on the balance sheet as an asset) and by the end of the 10 year period could be realised at a much lower level of profit. A trader who sells a financial product that does not mature for say 10 years, will not want to wait until the end date to be paid for the profit that trade makes for his institution (he is more likely that not, to be long gone). What does happen, is that the trade is valued and re-valued over the life of the trade and the change in the asset value is attributed to the profit&loss as perceived market valuation changes and its from these that wages/bonuses can and are paid. Problem here is that for these complex trades, it is never easy to predict what might/might not happen and therefore the extreme risks are ignored, as in their self regulated minds it would be unfair and unrealistic to err that much on the side of caution and hence trades are more often than not overvalued. In the cases of the very complex, it is even more problematic as the only people deemed capable of assesing a trades value is the person who sold it ! go figure what happens.
As some of these products have long term lives for 5, 10, 20 25 even 30 years + unrealised gains will be paid away into the prockets of the "deserving" but when the merd hits the fan, it can not be reclaimed (unless you have a friendly government to help you out) and the real problems start.
To use your analogy it would be like football clubs paying players bonuses at the end of a season for getting promoted to the premiership out of their perceived future earnings from the premiership, only for Sky to go belly up a year later and the funds never arriving.
Not sure that this could happen. It is unimaginable what mayhem this would cause and the knock-on effects could be catastrophic. So many banks insolvent, major companies who need the banks to fund their businesses etc etc. it is not just the banks who issue these products, but virtually every major company you could think of issue debt this way as a means to raise funding on the cheap.
If that were to happen, I would guess that the vacuum could not be filled and the system would collapse. At least the way they are going at present, leaves an opportunity to fudge it somehow with collective help.
I can't help wondering how some of these banks got clean audit reports looking at what you've said.
There seems to be a large material element of anticipating unrealised profits which goes against all the traditional accounting conventions and concepts.
But then clean audits haven't bothered the EU for 16 years or so....
http://www.taxpayersalliance.com/eu/2011/11/eus-accounts-signed.html
http://tutor2u.net/blog/files/EU_Revision_UK_Trade_with_EU.pdf
Exports to the EU in 2007: £139bn
Imports from the EU in 2007: £185bn.
Hardly supports your contention that we "barely" take any trade from the EU.
Both numbers have grown considerably since we joined the EEC and eight of our top ten trading partners are in the EU, the other two being China and the US.
It would be foolish to cut off an important and growing market.
I'd be wary about citing opinion polls as being significant of anything other than a measure of short-term popularity. Economics and science work on the basis of what is demonstrably provable, not what is popular. Cameron's veto might therefore be popular, but we'll have to wait and see how advisable it was.
To demonstrate that here's another poll - detailing that around half of British people don't believe in evolution:
http://www.guardian.co.uk/science/2009/feb/01/evolution-darwin-survey-creationism
Apparently around 20% of Brits believe in creationism or intelligent design. I suppose the good news is that 80% of us don't believe in creationism, but that's not much to boast about.
That's the crux of it I agree.
There's a lot of talk about more regulation to "curb the bankers etc" but, arguably and ironically, a lot of this started years ago because of the sub prime crisis in the USA which, to my simplistic mind, arose because the US Government instructed (under duress) banks to lend to people who would not normally pass the risk criteria.
The problem was then further exacerbated by the banks attempting to mitigate their enhanced risk by selling CDSs (Credit Default Swaps or, to use your excellent phrase posh betting slips). These then got sold on and on so that firstlyany audit trail or accountability disappeared totally and secondly Governments thought they'd have some of that but caught a massive cold when it all went pear shaped for the banks.
Meanwhile Fred the Shred et al had taken their profit (realised or not) walked away and left the rest of us to clear the mess up.
There's a lot of talk about more regulation to "curb the bankers etc" but, arguably and ironically, a lot of this started years ago because of the sub prime crisis in the USA which, to my simplistic mind, arose beause the US Government instructed (under duress) banks to lend to people who would not normally pass the risk criteria.
..........
As I understand it events it was the other way around, with the banks and business lobby in the US who are ferocious in getting what they want, demanding less regulation and oversight. The US has had a series of scandals over the last few years - Savings and Loans in the '80s, the whi=ole junk bond thing in the late 80s, to Enron etc and now this. The problem is to get elected in the US takes billions and the only place that political candidates can get that kind of money is from big business. Naturally they expect a return on their investment.
I read recently but can't at this moment find the link that the top 30 US corporations spend more PA on lobbying than they do on tax.
What brought the problem in the US to a head was Alan Greenspan slashing interest rates to virtually zero after September 11, with few people investing and incredibly cheap credit a lot of people took on board loans and mortgages which they never had a hope of re-paying once interest rates rose.
Thanks for your description No.1. I always thought that with the markets, where there were winners there was an equal number of losers.
It's obvious that without firm foundations, any paper business can flounder on the whim of a Government or an individual - or in this case on everyone gambling on red because it cane up 20 times in a row, only for it to be black on the 21st spin.
Hard times for the vast majority of us for the forseeable future. Perhaps it is time to become insular and try and support our own life functions rather than worrying about the political games being played in Europe.
It seems to me the big players in the Euro Zone are just arranging the deckchairs whilst the Titanic sinks. At least Cameron has us in the lifeboat.
That should be the way it works, but it gets a little bit complicated when the losers don't have the ability to pay and the winners have already spent the winnings to reward the magician who worked the three card trick.
I actually have time for the German approach. Do I suggest their increasing control is the result of a long term master strategy of “The Fatherland?
No, the Germans are as sick of EU excesses as the UK, especially when they have to keep picking up the tab. Remember most Germans don't hold credit cards for a reason. They do borrow but usually via bank account credit zones. Credit is tightly controlled.
They are furious with the slack governmental & personal borrowing seen elsewhere across the EU and at the exposure they now carry as a result. They have ambitions as global financiers but view<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> the UK/ US finance culture of the last decade as an anathema.
I sold banking products to German companies and worked with German teams to construct a global financial product. The experience was frustrating but also uplifting. Painfully slow in decision making Germans are the masters of detail, thoroughness and risk evaluation.
Consequently they traditionally invest for the long term and for the most part get things right. These are the traditional values the UK used to share. Reminds me of the story of the tortoise and the hare
Where does their increasing control leave the British people?
Not for the first time we (including the Scots?) face the decision of ploughing a lone (very difficult economic) furrow resplendent in our independent democracy or enjoying a still challenging economic future in the embrace of the European collective where Eurocrats will increasingly erode your and your child’s democratic legacy.
It is not an easy choice or one to be made overnight. For all the noise of recent days, there is not yet a decision to make. Cameron can sign a treaty next week, next month, next year it matters not a jot if the Euro zone fails. I believe Greece will default (a problem for French banks). If Italy fails then I believe German banks will have a problem.
So, as nobody knows how the economic landscape will look until the Euro resolves its DEBTS there is no decision to make. Cameron may have tried to play a hand to win some advantage and failed but who knows what cards will be dealt in the next hand?
This story has a long way to run
To be continued
A succinct and excellent anaylsis Grapevine. Sometimes one is faced with a choice simply between the unpalatable and the awful. Regardless of his tactics, IMHO that was Cameron's position last week and it is the position of the Eurozone members dealing with the actual debt crisis of the periphery and the latent banking crisis at the core. For them it is a case of picking your poison. Understandably the Germans cannot bear the thought of the ECB printing as the Fed and BofE have but sooner or later it will have to come to that.
In tomorrow's FT:
"Franco-German hopes for a sweeping new treaty to bind the region's economies more closely came under strain on Tuesday as several European Union leaders warned of difficulties pushing a far-reaching pact through their national parliaments.
The pressure was particularly acute in non-eurozone countries, where at least four governments warned that the precise legal text would determine whether they could sign up to the treaty or otherwise join the UK on the sidelines.......
Even inside the 17-member eurozone, cracks emerged, with Irish opposition leaders calling on Enda Kenny, prime minister, to allow a referendum on the new pact – a vote that would almost certainly fail – and pro-EU opposition parties in the Netherlands attacking the minority government of Mark Rutte, prime minister, for his handling of the deal..."
http://www.ft.com/cms/s/0/3d75ccb8-25b5-11e1-856e-00144feabdc0.html?ftcamp=rss#axzz1gSJJm75G
So it would start to appear that we are not out on a limb - obviously some others are having a re-think and not standing up to the Franco-German bullying tactics.
It will be interesting to see what the next couple of weeks brings.
I do not see a problem sitting outside of the treaty for the time being. Indeed other than a bit of amusement at our expense by the French press and the French government saluting the robustness of Sarkosy nobody else seems overly bothered
Sitting back however is not an option. It is all very well pillorying whatever politician happens to be in situ but the fact is the UK electorate and its scizophrenic relationship with Europe has hardly helped this situation.
To secure their election the UK 's last 2 governments were elected on the same basis – no more power conceded to Europe without a referendum. Blair/ Brown appeared to weasel their way out of a referendum. Many would argue if Cameron had signed the treaty he will also have breached his referendum election promise.
Indeed many are demanding a referendum even though he has not signed the treaty. Cameron could argue that unless he had secured the concession he sought he could not agree to the new treaty without such proposals being put to our parliament and the people.
A referendum now in probably the most difficult and uncertain times since the 1930's is lunacy but our arms length approach to Europe is unlikely to be sustainable for much longer.
It could be argued this generation (my generation) have compromised the futures of generations to come. When the average age of first time house buyers is 37, when future university students face incurring substantial debt simply to enjoy the same education we enjoyed for free, when there are 1 million young people out of work, when in some areas 50% of school leavers cannot read and write their own language to any meaningful level the argument has some merit.
In the interests of our children we have to take a long term view of where the UK will best prosper in an increasingly populated, well educated and competitive world. In doing so we will have consider our natural resources, our footprint, our culture and our heritage.
We do have to consider and never forget the continuing failures of the European Insitutions who were constructed to SERVE US but by the same token we should not forget the influences on our heritage from the Romans, the Vikings, the Angles, the Saxons and the Normans.
Now I wonder where they all came from.
I understand the attraction of a standalone option, but I fear it will very much be standalone. I enjoyed working in the US with many very good people, but they are overwhelmed by a culture of vested self interest. You need only look at that country's governmental disdain of its own citizens in the aftermath of Hurricane Katrina to determine the nature of the beast. The US has its own problems it would have little interest in ours.
I noted at the outset my "detachment from UK politics". In truth the labels which UK politicians wear today are meaningless. Messrs Cameron, Clegg, Ashdown, Milliband are just temporary players in our lives and the lives of our children. I would however offer the following suggestion.
For the simple reason he is the man in situ. Cameron should remain so until the next election. I recognize the difficulties many are facing but any additional uncertainty will merely exacerbate our financial problems in the short term.
If he deems it appropriate to return to the EU negotiating table he should do so in the pragmatic support of our key trading markets with the proviso that in doing so he will have to place the UKs continued participation of the EU before the British people at the next election.
In that scenario you have relative short term stability, allow the government to take whatever steps needed to manage what may become unprecedented circumstances, but allow the fullest possible positioning of the arguments for and against UKs continued participation in the EU before the electorate.
On completion of that election any new government will not only have the mandate to implement its policies but also whether such policies are to be implemented within or without the EU.
To move forward I think we all need that clarity and certainty of direction
Grapevine49
http://www.telegraph.co.uk/finance/financialcrisis/8954772/Confusion-over-Britains-30bn-share-of-IMF-rescue-for-Europe.html
Looks like we will have to contribute £30 Bn to save Europe via the IMF
And how much have we already paid to bail out the shitehouse bankers who still call the shots.