Financial fuckery thread

[Scribbly]

I honestly don't think German financial services think in terms of absolute gain. 

Partially because there is a nasty whiff of neo-Nazi sentiment wafting out of the offices of Frankfurt nowadays, with lots of whining about Muslims and inferior races and the like.  And that kind of sentiment tends to be a very zero-sum type of personality, the "I'll fuck the world over, but damnit, I'll be the King of this pile of ashes" mentality.

It might hurt Germany in the long run, but it will hurt everyone else first, and that is what really matters.

That sort of rhetoric seems to be on the rise everywhere. People in power seem convinced that it is best to drag everyone down, if it means that their relative position gains.

I blame Capitalism = Competition thinking. Because the important thing is to win, as though at some point someone is going to call time, tot up the scores and declare an overall victor.

[Cain]

http://www.guardian.co.uk/commentisfree/2011/dec/13/left-right-challenge-eu

Owen Jones is suggesting here that the whole German treaty thing will likely be renegotiated once the Socialists sweep to power in France.  However, because the UK dropped the veto bomb, it will not get a say in the process.

Oh well, I'm sure the French Socialists will staunchly defend the interests of the City of London 

[Cain]

Speaking of the French....

http://www.bbc.co.uk/news/uk-politics-16222988

Finance minister Francois Baroin has become the latest French figure to allege weaknesses in the UK economy.

It comes a day after the chairman of the French central bank suggested the UK's credit rating should be downgraded - ahead of France.

Mr Baroin said: "The economic situation in Britain today is very worrying."

Downing Street has said the coalition has a credible plan for the economy. Meanwhile UK officials are to join continuing eurozone talks.

Britain will be involved despite Prime Minister David Cameron's veto of an EU-wide treaty change involving all states.

'Rather be French'

France has been warned by US credit ratings agency Standard and Poor's that it could lose its triple-A credit rating over the eurozone crisis.

But Mr Baroin told Europe 1 radio: "The economic situation in Britain today is very worrying, and you'd rather be French than British in economic terms."

On Thursday, the chairman of the French central bank, Christian Noyer, suggested that any downgrade should instead start with the UK "which has more deficits, as much debt, more inflation, less growth than us".

[Scribbly]

Speaking of the French....

http://www.bbc.co.uk/news/uk-politics-16222988

Finance minister Francois Baroin has become the latest French figure to allege weaknesses in the UK economy.

It comes a day after the chairman of the French central bank suggested the UK's credit rating should be downgraded - ahead of France.

Mr Baroin said: "The economic situation in Britain today is very worrying."

Downing Street has said the coalition has a credible plan for the economy. Meanwhile UK officials are to join continuing eurozone talks.

Britain will be involved despite Prime Minister David Cameron's veto of an EU-wide treaty change involving all states.

'Rather be French'

France has been warned by US credit ratings agency Standard and Poor's that it could lose its triple-A credit rating over the eurozone crisis.

But Mr Baroin told Europe 1 radio: "The economic situation in Britain today is very worrying, and you'd rather be French than British in economic terms."

On Thursday, the chairman of the French central bank, Christian Noyer, suggested that any downgrade should instead start with the UK "which has more deficits, as much debt, more inflation, less growth than us".

Moody's has pretty much said it is going to do just that this morning.

Good thing remaining out of the eurozone agreement is going to keep our financial sector so secure!

[Cain]

I notice the BBC carefully worded its piece on Moody's.  Two bits of praise to every one bit of criticism.

[Cain]

Richard Seymour has a great piece on his blog about the collapsed pension negotiations in the UK

http://leninology.blogspot.com/2011/12/from-clutches-of-partial-victory.html

It can't be that often that a Tory minister, anxious to look smart, does something stupid.  Can it?  I have watched this government with some perplexity, wondering if I have underestimated its cunning, or if they really do think they can arouse the whole labour movement and organised left in unified opposition, and trounce them in a jiffy.  Their complacency as they embarked on a structural adjustment programme more extreme in its intended effects than anything accomplished by Thatcher, whether the blowback comes in the form of student protests, riots or strikes, seems extraordinary.  Seemingly convinced that they need not offer any material substratum to secure the consent of a viable social bloc for their agenda, they simply turn to harsher policing.  Apparently unable to imagine the riff-raff posing a real threat to them and their superior class allies, they forget the old salami-slicing praxis and just revel in the reluctance of their opponents to fight, pushing them around, taking their provocations to indulgent, extravagant new levels. 

And just when it seemed that the government had finally revisited the old techniques of divide-and-rule, offering just enough concessions to win tacit acquiescence from Unison and GMB leaders while attacking and isolating the PCS, Pickles goes and spoils it all by saying something stupid that destroys it.  For sure, the deal announced between the government and (some) unions over pensions was awful, so awful that it was a real question whether rank and file workers could be made to swallow it.  The government conceded nothing in terms of its bargaining totals, nor the principle issues over which the two sides were in negotiation.  Even a moderate, media-friendly Labourite like Sally Bercow was denouncing the agreement as a sell out yesterday.  The idea that those who hit the pickets and streets on 30th November were more likely to take such a deal is dubious.  But evidently the union bureaucracies who have been most reluctant to fight are now the most eager to call of hostilities and negotiate the terms of surrender.  Without the support of union leaders in the big Labour-affiliated unions, getting strike action back on the agenda for the New Year is that bit harder.  So, it is only reasonable to infer that Pickles just blew a tactical victory for the government.

The problem now is that the government and the union leaders will be back around the table to patch this up quickly, rush the deal through and make it a fait accompli as soon as possible.  Trade unionists are now planning an emergency lobby of the TUC over this, to go with the emergency meeting (you should go) and emergency statement (I invite you to sign).  This is a pivotal moment in the struggle against austerity.  So much hangs on whether the organised labour movement will even put up a fight.  That will make all the different between the vindication of Tory arrogance, and its humiliating reproof.

[Scribbly]

Richard Seymour has a great piece on his blog about the collapsed pension negotiations in the UK

http://leninology.blogspot.com/2011/12/from-clutches-of-partial-victory.html

It can't be that often that a Tory minister, anxious to look smart, does something stupid.  Can it?  I have watched this government with some perplexity, wondering if I have underestimated its cunning, or if they really do think they can arouse the whole labour movement and organised left in unified opposition, and trounce them in a jiffy.  Their complacency as they embarked on a structural adjustment programme more extreme in its intended effects than anything accomplished by Thatcher, whether the blowback comes in the form of student protests, riots or strikes, seems extraordinary.  Seemingly convinced that they need not offer any material substratum to secure the consent of a viable social bloc for their agenda, they simply turn to harsher policing.  Apparently unable to imagine the riff-raff posing a real threat to them and their superior class allies, they forget the old salami-slicing praxis and just revel in the reluctance of their opponents to fight, pushing them around, taking their provocations to indulgent, extravagant new levels. 

And just when it seemed that the government had finally revisited the old techniques of divide-and-rule, offering just enough concessions to win tacit acquiescence from Unison and GMB leaders while attacking and isolating the PCS, Pickles goes and spoils it all by saying something stupid that destroys it.  For sure, the deal announced between the government and (some) unions over pensions was awful, so awful that it was a real question whether rank and file workers could be made to swallow it.  The government conceded nothing in terms of its bargaining totals, nor the principle issues over which the two sides were in negotiation.  Even a moderate, media-friendly Labourite like Sally Bercow was denouncing the agreement as a sell out yesterday.  The idea that those who hit the pickets and streets on 30th November were more likely to take such a deal is dubious.  But evidently the union bureaucracies who have been most reluctant to fight are now the most eager to call of hostilities and negotiate the terms of surrender.  Without the support of union leaders in the big Labour-affiliated unions, getting strike action back on the agenda for the New Year is that bit harder.  So, it is only reasonable to infer that Pickles just blew a tactical victory for the government.

The problem now is that the government and the union leaders will be back around the table to patch this up quickly, rush the deal through and make it a fait accompli as soon as possible.  Trade unionists are now planning an emergency lobby of the TUC over this, to go with the emergency meeting (you should go) and emergency statement (I invite you to sign).  This is a pivotal moment in the struggle against austerity.  So much hangs on whether the organised labour movement will even put up a fight.  That will make all the different between the vindication of Tory arrogance, and its humiliating reproof.

I'd totally missed this, and having read up on it...

I genuinely think that the Tory government is looking to rile up the left as much as possible. The general population can then be convinced that these greedy bastards are going on strike completely unreasonably and making THEIR lives difficult because the Unions want more money at a time when we have no money.

Then the left wing can be smashed.

David Cameron has already talked about making it illegal for unions to fund political parties, which would be the death knell of the Labour party. He wants to cripple or destroy any opposition the Conservatives might possible have, because it is unthinkable for any other force to gain ground in our systems which isn't one of the major three parties.

[Cain]

Well, I would say the unions are an adjunct to the Labour Party and so part of the three party system, but point taken.

Bueno de Mesquita is proven right again: generally what leaders care about most is preserving their political power, at the expense of internal rivals.  Labour buys votes with public spending, the Tories attempt to undermine Labour and....well, the theory fails to explain the actions of the Lib Dems, but nothing's perfect, right?

[LMNO]

Not a surprise, but the data is new...
Wealth Gap Between Lawmakers, Constituents Grows

The Times reports that the median net worth of a member of Congress climbed 15 percent from 2004 to 2010, to $913,000; meanwhile, the median net worth for all Americans dropped 8 percent over that same period, to roughly $100,000. The lawmakers' gains are even more noteworthy because over that same period the net worth of the richest 10 percent of Americans remained essentially flat, based on inflation-adjusted figures.

There is broad debate about just why the wealth gap appears to be growing. For starters, the prohibitive costs of political campaigning may discourage the less affluent from even considering a candidacy. Beyond that, loose ethics controls, shrewd stock picks, profitable land deals, favorable tax laws, inheritances and even marriages to wealthy spouses are all cited as possible explanations for the rising fortunes on Capitol Hill.

Substitute "shrewd stock picks" with "insider trading", and you're all set.

[Cain]

Yeah.  They don't call it the military-industrial-Congressional complex for nothing.

"Oh, looks like that bill approving 145,000 acres of land for a new Lockheed Martin factory in Jefferson County is going to pass, now we've finally confirmed we have the votes for tomorrow.  I wonder if this will affect stock prices?"


Anyway, it looks like some conservatives have realized Wall Street is playing them for suckers:

http://www.hughhewitt.com/transcripts.aspx?id=938b9e1b-caba-4327-8e3d-509d1922eecd

Kevin Williamson: Well, I don't know that they're necessarily all that anti-Romney, although they're certainly more pro-Obama. The thing is that there is a great misconception that Wall Street is politically conservative, or even that big business, high finance in general is politically conservative. It's not. If you look at the kinds of issues that most American conservatives really care about, where they are culturally, where they are morally, where they are religiously, these guys aren't there. And not only are they not there, they're actively opposed to it. I mean, these are guys making five, six, seven hundred thousand dollars a year who live in Manhattan and getting manicures and sending their kids to Choate and places like that. They're not showing up at parent's day in a Sarah Palin T-shirt. That's just not who they are, not what they believe. But the one thing that they really are good at is using the rhetoric of being pro-business and being pro-free enterprise to kind of buffalo us conservatives, and get us to agree to all sorts of favors and subsidies and handouts for them.

Other conservatives are not as quick up the uptake, though

Hugh Hewitt:  I'm just not going to buy that. I do think they might show up in a Sarah Palin T-shirt, and I do think that they are generally often quite conservative, very Evangelical. Some are deeply Roman Catholic, traditionalist, generous, high-minded people.

[Juana]

This could be interesting. Thanks Cain.

[Cain]

I suspect such heresy will not spread too far, based on my reading of Corey Robin's book on conservatism. 

Anyway.  In more good news for 2012, Craig Murray is predicting a crash in the UK housing market.  His logic seems to support his conclusions:

Average house prices currently stand at over 6 times average earnings. That compares to a long term average since 1945 of under 4, which charts show to be the norm.

People simply cannot afford to buy homes at six times their earnings. People living on average earnings, and paying the high rents such high property prices entail, would take ten years to save one years earnings, which would give them a deposit. They then would need five times earnings (or two and half times joint earnings for

[...]

I expect the massive decoupling of house prices from average earnings will end in 2012 or 2013 and we will see a major crash in house prices. It may not begin in 2012 – possibly it can be delayed until 2013, but I predict that by 2015 we will see house prices to earnings ratios back to four per cent. And as I see no significant increase in average earnings over that period, that means a fall in nominal house prices of over 40%.

House prices currently bear no relation to the ability of people to buy them to live in. They are like a rock balanced on an apex, requiring only a little push to crash them down. A number of pushes are coming:

- Cuts in housing benefit. The whole rush to the private rented sector has been underpinned by artificially high rents forced up by government payment of housing benefit. I am of course extremely sorry that individuals may be hurt by the implementation of these cuts. I also expect some backtracking as it dawns on MPs that the £2,800 per month does not actually go into the pocket of the Daily Mail's Sudanese refugee family, it goes into the fat pocket of some Tory landlord. But the housing benefit cuts will reduce returns to landlords and knock house prices.

- Unemployment. The main impact of public spending cuts is yet to feed through in terms of higher unemployment – you ain't seen nothing yet. Tories like unemployment – it reduces the costs and leverage of labour. 2012 is the year that it will really hit. By the end of 2012, repossessions will be very high. This would always spark a drop in house prices; people have not yet got their heads round what a fall it will be this time.

- Interest Rates. The key factor in balancing that house price boulder has been the lack of any high wind of interest rates. The short term outlook is for base rates to remain real terms negative (which is undeniably true yet strangely almost never said). But that will not last forever either...

The coming crash in house prices is of course going to have a huge effect on the viability of the financial sector, and will join together with sovereign bond defaults in precipitating the fall of the casino capitalists who live on our labour and have the rest of us in their lockhold.

I do not share his optimism about how a crash will play out.  I suspect it will be more along the lines of "and lots of blood will be spilt, and it probably wont be spilt in guarded compounds in Chelsea or Kensington".  But the rest seems fairly accurate.

[Cain]

It's a common misconception that Germans, as a people, suffer from a lack of a sense of humour.  If anything, they have an abundance of it, if especially dry humour is your thing.

However, they are branching out into satire and parody, if this is anything to go by:  http://www.youtube.com/watch?v=CC6f2RB9iO8&feature=related

The BBC explains:

http://www.bbc.co.uk/news/world-europe-16377189

A 1963 British comedy sketch which is cult New Year's Eve viewing in Germany has inspired a YouTube hit featuring Angela Merkel and Nicolas Sarkozy.

The heads of the German Chancellor and the French President have been superimposed on to the two characters in the 18-minute sketch Dinner For One.

Ms Merkel "plays" 90-year-old Miss Sophie whose butler, "Mr Sarkozy", impersonates her imaginary friends.

The original is hugely popular in Germany but is little known in Britain.

It is traditionally broadcast by several different German TV stations on New Year's Eve, and its popularity in both Germany and Scandinavia has made it one of the world's most repeated television shows.

During the routine, British comedienne May Warden plays upper-class Miss Sophie who is hosting a dinner for her four close friends to mark her birthday.

But because she has outlived them all, her butler James - played by Freddie Frinton - impersonates each guest, getting more drunk with each toast.

'Triple A'

In the YouTube version, Angela Merkel's "guests" include former Greek Prime Minister George Papandreou, former Spanish PM Jose Luis Rodriguez Zapatero and British PM David Cameron - all impersonated by "Nicolas Sarkozy".

"Mr Sarkozy", pretending to be Mr Cameron, tells "Mrs Merkel" in English, "You are looking younger than ever", before switching to German and saying, "You look richer than ever".

"Mrs Merkel" tells "Mr Cameron" during a toast: "Don't forget we speak German in Europe".

As "Mr Sarkozy" scurries around the table in an ever more drunken way, the narrator says: "This is what happens every euro rescue summit, whether or not anyone else is there, it is just these two doing everything themselves".

The parody ends - like the original - with the butler taking the old lady up to her bedroom. In the original, James asks Miss Sophie whether it will be the "same procedure as last year" then promises to do "his very best".

In the YouTube version, "Mr Sarkozy" tells "Mrs Merkel" he will give her his "triple A".

[Scribbly]

"What do you do then?" asks Prof Hudson. Either you enter a process of debt deflation and "concentrate property at the top of the income distribution", he says. "Or you write down debts to amounts that can be paid, in which case you can keep a middle class." If these are the alternatives, jubilees may yet stage a comeback.

Michael Hudson, an economics professor at the University of Missouri, has said what anyone who has looked at the state of the global economy knows; there is too much debt to be paid back. Martin Sandbu's article is a confused and ill-researched mess, but I'm glad to see the call for a debt amnesty getting some ground.

Coupled with the possibility of a massive housing crash in 2012/13, which would see even more people with mortgages suddenly locked into houses which are worth massively less than they are paying for them, I think this point of view might just gain ground.

It'd destroy the banks, and people tend to get this strange ethical righteousness whereby they don't want to see people who owe money saved from paying it back because they are immoral or something  . I don't think it is likely, but I'll keep my fingers crossed!

[Scribbly]

If you need more proof regarding how weak the banks are...

Last night the European Central Bank's 'Marginal Lending Facility' lent €15.012 billion. On Monday they lent €14.8bn, and last Thursday they leant €17.3bn, which was the highest day since June 2009.

The Marginal Lending Facility is the banking equivalent of a crisis loan used to get emergency liquidity when they have reason to expect they won't be able to meet their obligations. It has been suggested that they are taking these loans to try and make their balance sheets look artificially stronger before they are revealed to shareholders, rather than for this purpose. Either way, the Marginal Lending Facility has very high interest rates and so is only turned to when nobody else is available.

The banks aren't lending to one another again; they are bracing for one or more to go down. The loans are anonymous, but we do now that since Thursday, almost €50bn has been leant out. For comparison, the greek bailout has totalled €110bn since May 2010.