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I listened to interview with Swedish FM, Anders Borg, & heard essentially the type of message I've heard from Canadian FM, Jim Flaherty: Sweden & Canada were in relatively strong, regulated, financial position going into 2008. They were running on surplus. But let me emphasize, both were strongly regulated, & that is a key difference from US & UK both of whom appear yet (at this late date) struggling with financial reform.
I don't believe that the Eurozone leaders are making it up as they go; rather, they are sticks in the mud of legality, regulation, and doing things - slowly & correctly which can make it seem at times that they are standing perfectly still & doing nothing. e.g. FTT which will be imposed across at least 17 EU countries, if not the full 26 - less Britain.
Mistakes have been made - big ones - such as not enforcing a forensic audit before the entry of each country. Such an audit would have turned up valid vs. odious debt, would have sought write-off of odious doubt, leaving a valid debt to be dealt with. These audits would've made it impossible for countries to play very serious financial games with such products as unregulated derivatives which now pollute EU debt. Oh, how much suffering (austerity) could have been saved if only forensic audit came before EU entry.
Can EU work? Yes, but I keep waiting for - even at this late date - forensic audits to separate valid from odious debt, write off the odious debt (which no doubt would leave many guilty banks - all too big to fail - screaming across the Atlantic), and ease significantly the peoples' austerity. I wonder where the credit-rating agencies would be with this one!
France should not have sniped at UK, but I saw their point: Things seem to point to a US/UK covert alliance where UK can get away with far more than the Eurozone; this may or may not be true; it just seems this way to me, but this does not leave the UK better off; in fact, it is not.
The EU should - must - do the right thing. The EU should - must - carry out (late but better than never) forensic audits to ascertain where austerity is really required, and where the matter is really one of nefarious, potentially ILLEGAL FINANCIAL PRODUCTS THAT SHOULD - MUST - BE WRITTEN OFF, even though some banks will be bowled into the gutter (where they likely belong), and from where they will never again see the light of day.

Is posting working?

Posting in Parts 1

If one even thinks about the EU not being fit for purpose one is moving back towards the pre war position and we all now where that led. (At least I used to think that the majority of the British and European people knew about war in Europe and its causes and that these causes were considerably aggravated and magnified by economic stupidity. For this reason if the EU ceased to exist one would have to immediately re-invent it.

However I do remain optimistic that common sense will prevail, but I do concede that there has been a tremendous increase of ignorance in Europe that ignores the past and its economic causes. To say that Europe is not fit for purpose is saying that all man made institutions are unfit and need to be constantly perfected. But to say as Europe is not fit for purpose as a precursor to destroying the means of creating solidarity between the bellicose people of Europe is completely another thing.

Let me argue that the British Establishment is just as unfit for purpose and that the UK needs to be updated becasue of the appalling economic consequences of the way that all parties have sucked the wealth from the British people and given it to a City Elite. Let Cornwall, Wales, Scotland, Ireland, The North East, The North West and the Midlands break away from the City of London.

Posting in Parts 2

To say that the EU is unfit is just the same as saying that the USA is unfit or the United Nations is unfit or the League of Nations is unfit. The solution is to improve the fitness of the EU. To argue anything else must also be to argue that the UK is unfit and the USA is Unfit as they are the same argument.

The first thing that the people of Europe need is to take responsibility for those that organise our government and to elect by universal suffrage a President and an Executive. We Europeans need someone we elected to blame! I maintain that this gross democratic deficit is a major contributory factor in exacerbating the present trials and tribulations. Why we can elect our leader and management is down to the selfishness and stupidity of the state leaders and their misplaced belief that they must not let power be in the hands of the people. The people of Europe are not children: we can handle the weight of deciding who should run us. It is up to the people of Europe to demand that our petty nationalistic leaders organise a more democratic leadership for Europe.

As to money: the ratings agencies say that the Euro can't be fixed. However what is also true is that Sterling and the Dollar can't be fixed either. The problem is one of arithmetic. The problem is that the entire Western World has lent far more in un-repayable debt than can possible be even rolled over. These loans are far larger than the security on which they have been lent. We have spend our Children's pensions. There is only one arithmetic solution and that is to make the sum balance and the market 'knows' this. All the minor tinkering with Synthetic Financial Instruments and moan about certain types of Exchange Traded Funds is simply a pointless diversion.

Posting in Parts 3

Economic history indicates what happens and this is unavoidable. It happened in the 1870s and the 1930s debt vanishes. The assets that were supposedly the security for the debt are sold at far lower prices into the market. Sometimes the prices is nil as with the stock of bust banks, but the arithmetic of a functioning economy has some residual or price for land and buildings provided they can still be put to use. This price is that which permits their economically rational use. In the case of shops, for example, the rent is that which is affordable for its use that is the rent than can be paid by an occupier to run a profitable business. Similarly for houses: the price is that which can be afforded out of the wage of the occupier. All this is arithmetic. It is not politics.

Th reason that property based Depression (e.g. 2008 and 1870s) take such a long time to turn around is the fact that property has some residual use price. Unlike the 1930s when stock lending had a zero residual price. It is just an arithmetic fact of way the market operates - prices take a long time to fall and during this time banks slowly go bust and wages and rents remain uneconomic. This is why the ratings agencies are being quite so pessimistic today, but in the longer term all will be well. Let me be clear the longer term is 30 years, not 30 months!

There is another aspect of the recovery and that is the rent price of money itself. It is worth noting that some countries in the EU are paying over 6% to borrow. This forces them to cutback, but it also provides the lenders with a reasonable return on their investment and so some money to spend. This is in fact an element in the path to recovery and a good thing as the prudential price of money is being reasserted and so Capitalism is being saved. The reason that the UK and the USA (and Japan) will remain in deep recession and depression for far longer than the likes of Italy is that the price of money remains far too low for the necessary correction to be started. This aspect of recovery is observed in detail in studies of the 1930s. So long as money remain imprudently priced the recession/depression goes on and gets deeper. This is nothing at all to do with any moral argument about supporting savers who are suffering badly yet they did not cause the problem. It relates to the nature of running a working Capitalist economy. (I'll not wander off into the many historic studies that explain why Capitalism regularly goes through these agonies as I am sure anyone who is interested can read them up for themselves. Marx etc.)

So in summary: Capitalism always needs prudentially priced money. A set of badly educated regulators forgot this and created a huge volume of un-repayable and un-serviceable debt. The debt must evaporate. People need to stick together and work together and so the institutions need to be properly and democratically managed as fixing this debt overhang will inevitably give rise to severe tensions and we need to do everything to foster institutions for cooperation and solidarity. So fix the EU's fix the UK's and fix the USA's institutions! To argue otherwise is a direct move towards protectionism (of places like the City of London) and that itself has been shown (read the history of the 1930s) to be a substantial aggravating factor in prolonging recessions and depressions so it must be avoided at almost all costs.

John_from_Hendon

I always read your contributions with interest and generally agree with the picture you paint. However I am always disappointed (as in this case) with the assumed negation -- when discussing the UK and the EU in one breath-- that Britain itself is incapable of accepting the EU ideal. It is not wished by the British parliamentary ´System´ (the ´Oath´) to question the assumption that the interest of the ´Monarch´is identical with that of UK citizens.

With the title ´The EU: no longer fit for purpose ?´-- the question of whether Britain was ever ´Within the EU -- fit for EU purpose ?´ is again side-tracked. I can only speak about UK and German societies --and having reached diametrically opposed conclusions for both societies. While the ´Sozial Marktwirtschaft´( Social Capitalism) gives social inclusion for its citizens -- the British monarchial parliamentary system -- gives social exclusion for its citizens. While in Britain `Sovereignty´ generally means -- the rights of ´The Sovereign´, other EU societies use it to describe the power of their elected governments --answerable only to their citizens and protected by their courts (if necessary).

The question I face -- is whether Britain has the qualification to be in the EU-- without having equal rights for its citizens at the EU level-- as yet, no arguments have convinced.

-- although 90 years old--

Empire Settlement Act 1922
Empowered the Secretary of State to formulate and co-operate in migration and settlement schemes to encourage Britons to settle in Her Majesty’s Overseas Dominions.

--- I see little mentality change -- away from one-sided Feudalism and few arguments why the EU and its citizens should uphold it with exceptions and opt-outs.

J_f_H

-- What do you think of this article -- Armageddon on the doorstep ?

J_f_H

-- It´s already at the dinner table !

7 and 8 quietoaktree:

To hypothecate or not to hypothecate , or to claim hypothecation of assets... Hmm

Lending assets is tricky and to do so without a very clear agreement freely entered into is daft. I don't have access to the legal documents in the HSBC case so can't say where the right is, however not to adhere to the terms of a commercial contract is leaving the offending party open to being sued. But suing someone who is essentially bankrupt is a waste of money if there is a vanishingly small probability of getting financial redress even if the case is won!

The problem is similar to that of stolen goods being sold on to an innocent party in good faith. Generally the buyer does not get good title (except in special circumstances.) Was this the case in HSBC vs MF Global? Would the mechanism permit the state to rob the people - well yes as the state can do pretty much what it wishes to do!

Ripping the people off is always been prevalent in most countries - in the end the powerful get the law they pay for!

On the UK/EU question

Leaving aside the sovereignty of the Westminster parliament question; it is my opinion hat pragmatic answers prevail. General De Gaulle's view was that the UK was not a fit partner for the rest of Europe because of the established predilection of the British people to be excessively insular, at least between wars. Despite a further forty years exposure to Europe the British people remain, both bellicose and selfish, according to their media.

I remain an optimist that the worst of outcomes can be avoided but it must be said that the recent developments do challenge this outlook!

The greatest misfortune is that we have a terribly weak government that is completely enthral to its extremists. These are the same lunatics that dress up a Nazis for 'fun' and then are forced to apologise in writing to the Board of Deputies of British Jews. It is noteworthy that at the gathering there was a speech made in praise of the Führer. How on earth can these 'politicians' have passed through the British Education system - perhaps they just paid for the qualifications! These are very dangerous people in very dangerous times.

Every sane individual must stand up against these forces of selfishness and xenophobia lest what has happening twice in the last century happens again. This is one of the reasons that I want to see direct election of a European President. At this time of raised tension it is doubly important to cling together- Cameron should remember this! It is definitely not the time to be walking away from the table or refusing to take one's part in fixing problems.

One must wonder about the EU using the very financial instruments that caused the financial collapse to fund the current debt. The bankers are in control so it matters little what the political landscape looks like. There is no independence from the bankers. the PM took the side of the London bankers who were afraid they may actually have to contribute to the mess they created. Accountability and responsibility are not terms associated with banking and financial services. They provide fraudulent reports to bolster political agendas and in return extort from nations. Four years of satisfying the wealthy and no attention to the economies of nations. Some day the people will wise up to what is going on. The bankers will steal your money if you are independent or part of a larger group..they don't discriminate..

I have a feeling that the Euro will outlive the EU! The eurozone countries are going to have to go it alone if they want a common fiscal policy. The EU constitution is not designed for a two-speed Europe.

The FT's Wolfgang Munchau writes correctly that a EU consisting of the deepening union of the eurozone and the 'I want to go it alone' UK is not going to work. Any attempt to circumnavigate EU Treaties will fail. Currently any fiscal union is outside of any existing Treaty, so a new one needs to be writen. Considering the Lisbon Treaty took ten years to achieve; getting a new one by March 2012 is fantasy.



I have to agree with Anatole Kaletsky that this 'fiscal compact' will lead to disaster - a 'paradox of thrift' to use Keynes' term. What Europe (including the UK) and the US needs is growth not a balanced budget. When Keynes was arguing that the UK needs to stimulate the economy in the thirties because growth is more important than balanced budgets, the UK public debt/GDP ratio was 250%!! Today it is 'only' 70%!!

Anyone who thinks the UK economy will be fine by 2015 because the OBR says so needs their head examined.

11. dceilar wrote: "Anyone who thinks the UK economy will be fine by 2015 because the OBR says so needs their head examined."

Totally agree.

However I remain concerned that the requirements for a recovery are not in place. Specifically every previous Depression FIRST needs to free itself from the historic baggage that caused the thing in the first place - in our case overpriced property financed by insane lending.

Create a Keynesian monetary bubble, but only AFTER fixing the overpriced assets problem or these assets will simply kill the recovery stone dead as they are doing presently.

What this means is that bust banks must go bust and overpriced property must fall substantially in price BEFORE Capitalism can restart creating jobs and a thriving economy. The reluctance to free ourselves from the past cripples our recovery.

J_f_H

-- Rather than consoling the the average UK citizen, the 2015 and 2019 dates should be having them in panic. It appears to be an admission that the casino banks will be rescued with taxpayers money --´until death do us part´. If this is the UK response to show the Eurozone how quickly one should react to expected banking catastrophes -- who are they taking for a ride ?

Yesterdays meeting with Westerwelle and Hague has probably only cemented the 26:1 -- I find it strange that Cameron and his Party cannot see that their behavior is only forcing Germany to take the leading European role -- it would rather not have. Germany will protect its ´Social Capitalism´ system at all costs -- while trying its best to ´help out´-- if it does not danger the well-proven Social Contract with its citizens.

I agree with you wholly -- that more pain must and will come -- with usual economists agreeing--




The latest stats. from Germany are much better than expected -- probably to the consternation of ---

A more detailed story about the ´tax fight´ is in ´Spiegel´ (German) --but with original document.



-- Answer from ³ÉÈË¿ìÊÖ link--



-- This should really be an EU problem to be discussed --and not only Ireland´s low Corp. Taxes.

13,14. quietoaktree


The banks caused the problem (along with their ineffective regulatory puppets) so it is only to be expected that they first and foremost want to protect themselves. The cries of pain from Europe's banks only indicate that they want to maintain their position as modern-day robber barons.

1. The Der Spiegel article (and I haven't read the article in German this time!) features bankers wanting more and more money whilst being completely unable to reduce their own personal expectations.

Now what they see as to their own benefit depends on their financial position and exposure to un-repayable debt. Most German banks have at least a folk memory of the Weimar inflation and know that it will destroy them.

2. Twinning - buffoons - to scrap twinning means that the counsellors will not get the foreign holidays paid for by the council tax payer! Seem to have shot themselves in the wallet here. This story was widely feature in the UK press - praised by the anti-foreigner media and derided by the rest.

3,4. HMRC - That is what one should expect from Administrative Grade Civil Servants - this is why the structure of the Civil Service needs radical reform. Those that know aren't in change - true of buying IT as much as Tax Law and most importantly running the economy (hence my campaign to fire the Permanent Secretary of HMT)

#15 J_f_H

What makes me laugh at times is the general ignorance of many who are unaware that within societies, most decisions are made by unelected officials -- and that is one of their main complaints about the EU. The tax ´avoidance´ is pandemic all over Europe and America -- at the expense of the ´common good´-- with the society being ´blackmailed´ at almost every opportunity by banks and big business -- if they are not permitted to choose the taxes (if any) they pay.

The latest news from ´Spiegel´is 523 banks have borrowed 0.5 Billion from the European Central Bank (with all their risky bonds as collateral ) -- as much as they wanted --with inflationary risk.

I agree with a comment --- `The banks must really be in a mess !

Reuters--

J_f_H

--The loans are for 3 years -- do you see any connection with the 2015 date ?

--- you are the expert is this area.

I have been following the news carefully since the Cameron veto of the Eurozone summit negotiations. ³ÉÈË¿ìÊÖ News carried a portion of the tense EU Parliament discussions following the summit. They tried to keep the debate civil including allowing Nigel Farage, a strong critic of the Euro, a few short minutes. It is still too early to make an assessment of the crisis but I do not detect any movement to oust Britain from the EU suggesting that they think Cameron can still be persuaded to rescind his veto. My take of the crisis is that the Eurozone is headed for a partial or though less likely a complete breakup early next year. Staying out of the Eurozone has been favorable for Britain's own economic/monetary crisis strategy but again it is still to early to come to any conclusions. The real problem which has been obscured by the sovereign debt crisis is as Ann Pettifor has said the bankruptcy of the Eurozone banks.