Just in -- the eagerly awaited Italian debt auction has finished (earlier than we'd indicated). The good news is that the auction was a success, with Italy finding buyers for the full €3bn of debt. The less-good news is that the yield jumped to 6.29%, from 5.3% at a similar auction last month. That means that investors demanded a much higher interest rate in return for buying the debt. The bid-to-cover ratio came in at 1.469%, up from 1.34% in October. So, more demand, but only at a much higher interest rate.
Hang on...there is an alternative to this crisis of moribund STATE MONOPOLY CAPITALISM - A SOCIALIST UNITED STATES OF EUROPE! Capitalism is doomed by it's inherent contradictions of class struggle over the division of surplus value and the antagonisms of nation states through economic competition. You know as well as I do that the class nature of the system makes genuine, lasting international economic co-operation impossible. Capital, in the hands of a few private owners, in the current crisis, is being used in more and more dangerous ways which is destroying whole economies; the ultimate being WORLD WAR. (militarized economics). All in vain attempts to recuperate ever increasing losses. It's akin to watching Rome burn slowly as mindless idiots pore more fuel on the fire! Our lords and masters won't accept that their economic mode is finished for obvious reasons. They are the modern dinosaurs. They sincerely believe that wealth can be created by throwing a few chips on the table! Capital is a social product which belongs to everyone. It should be used in a balanced, constructive manner across the globe. This requires an end to the blind anarchy of markets which serve the interests of the few. Then there will be no need for different currencies or destructive speculation. We've all been brainwashed into believing that Socialism will always turn into a Stalinist nightmare. What about another Fascist nightmare which I have hinted at in my recent postings?... In October EFSF came up with a plan to Guarantees the new European bonds by 20%However 2 weeks later this plan has been a failure. The reasons are: Unlike the Brady Bonds ( South American debt restructuring by consolidating the old debt and making the banks take haircuts plus Guarantees from the US Treasury) The EFSF plan would not restructure existing debt hence carrying the problem forward ; the Guarantee's are too small- 20%. even 30% is doubtful as enough : the fact the debt is being guaranteed by countries in a basket of defaults does not give lenders any confidence ; 800 Billion Euros of guarantees is available but the debt to be refinanced is 2000 Billion. A shortfall of 1200 Billion...So now France and Germany want to get out of this plan as they will not allow the ECB to buy the debt.
6 comments:
The world is awash with money trying to find a home. There is trillions of it
which cannot find a new profitable investment, because consumers are tapped out already. Government bonds were seen as safe investments, since traditionally most government just print up more money to cover them. Interest rates will therefore probably not increase much. Supply exceeds demand.
With the creation of the Euro currency, the EU member states lost control of their own money supply and instead it was privatized by the banking industry. A great wheeze at the time, but now it is unraveling.
The problem is that all Euros are created as debt and now the borrowers cannot repay them.
At least one and probably both the technocrats foisted on Greece and Italy played a leading role in creating the problematic euro arrangements. . Perhaps they should be setting up poachers to be gamekeepers, but you have to wonder about their ability to take an objective view of the project they are supposed to rescue.
Concentrating on the euro is taking our eye off the ball. In or out, we are well stuffed on every conceivable scenario. The devaluation advantage of remaining out is not working in the sense that it is not creating sufficient demand for UK goods and services.
As it stands the eurozone is forcing contraction on its weaker members, this will not get the deficits down. This will not get the debts repaid, this will not sustain demand for British or German goods and services. Everyone will be a loser.
If the weaker members exit the zone, there will be further defaults and an exacerbation of the banking crisis with more bale outs everywhere
If Germany exits the zone as advocated in today's Observer, Germany will experience a haircut on all its foreign held debt then being repaid at a fraction of its former valuation forcing German into a massive rescue of all its banks at the same time as the rest of the zone prices itself out of imports from Germany.
These are the questions we should be considering.
How are we going to manage a long period of depression, economic contraction and mass unemployment. Where are the investment and jobs going to come from? Set against these questions, currencies are an irrelevance.
Unless the Eurozone can get its act together the value will fall, nothing surer. Who wants to invest in a currency likely to fail?
All currencies issued as debt under the fractional reserve banking system are subject to inflation. Since the creation of the banker owned Federal Reserve in 1913 the US dollar has lost 96% of its purchasing power due to inflation. This happens because more money has to be continually created (as debt) in order to pay the compound interest, which results in exponential growth of the money supply.
You are way too charitable. Those who campaigned for UK entry into the Euro are silent and unapologetic. They were vigorous in the pursuit of a policy that would have been a disaster for the wellbeing of this country. They are guilty of failing completely to properly consider the inevitable consequences of the single most important economic decision facing the United Kingdom. They are utterly reckless and completely discredited in all matters of economic policy.
A roll call of the worst offenders:
Tony Blair
Hugo Young
David Aaronovitch
Diane Coyle
Andrew Rawnsley
John Monks
Richard Lambert
Andrew Gowers
Philip Stephens
Adair Turner
Colin Marshall
Niall Fitzgerald
Polly Toynbee
Peter Mandelson
Ken Clarke
Will Hutton
Michael Heseltine
Charles Kennedy
David Simon
Neil Kinnock
Paddy Ashdown
And as the people that opposed them, the ‘Little Englanders’, those on the right side of history:
David Owen
William Hague
John Redwood
Margret Thatcher
Gordon Brown
Ian Duncan Smith
Ambrose Evans Pritchard
Ruth Lea
Digby Jones
Bankers ran things for their own profit for 15 years, bankers broke the system worse than anyone in history, bankers have had the biggest begging bowel in history for the past 3 years and counting AND NOW
bankers are taking over unelected to run countries.
Come on!
Stop complaining, if I had vested interests I would want my mates running things to make sure they were protected and improved at any cost.
On the BBC yesterday they said technocrats have no political motivation and nothing political to benefit from.
No, they just have personal economic motivation and can only benefit from the wealth they can create for them and their mates.
If you are a banker, we are talking win/win/win/win/win/win/win/win this morning. Give yourself a record Christmas bonus, even larger than the one already planned, not as if anyone is going to stop you now, is it?
Merkel has faced strong domestic opposition to the idea of Germany simply picking up the bill for the debts of Greece (and now Italy?).
The German chancellor told her audience that the structure of Europe need to be "developed" - a repeat of her call last week for treaty changes that would enforce tighter fiscal controls on the members of the eurozone?
Merkel also reiterated her opposition to eurobonds, saying that "collectivism of debt" will not lead to a sustainable future.
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