It's going to get worse

[caminito]

If the ECB's Jean-Claude Trichet is right in claiming that Europe was on the brink of a 1930s financial cataclysm a year ago - and I think he is - it is hard see how the threat is any less serious right now.

Fall-out from Greece flattened Portugal and Ireland last week. It is engulfing Spain and Italy, countries with €6.3 trillion of public and private debt between them.

Yields on Italian 10-year bonds hit a post-EMU high of 5.3pc on Friday. This is not just a theoretical price: the Italian treasury has to roll over €69bn (£61bn) in August and September; it must tap the markets for €500bn before the end of 2013. The interest burden on Italy's €1.84 trillion stock of public debt is about to rise very fast.

Spanish yields punched even higher, through the danger line of 5.7pc. The bond markets of both countries are replicating the pattern seen in Greece, Portugal, and Ireland before each spiraled into insolvency. And the virus is moving up the European map. French banks alone have $472bn (£394bn) of exposure to Italy and $175bn to Spain, according to the Bank for International Settlements.

"We believe the European sovereign crisis might be entering a new phase with contagion reaching the larger economies," said Jacques Cailloux, chief Europe economist at RBS.

[Chrisjay]

Not much change of getting pension parity any time soon then 

[Angelo]

You are right its going to get worse !

[Maisie]

Perhaps this is beginning of the collapse of Capitalism in the West?

[Angelo]

Maisie, what is going to replace it ?   

[caminito]

When the British government rescued banks to the tune of £65 billion (of direct costs) in 2008 it was not just about £65 billion, a massive amount of cash as it was. These £65 billion ended up in banks coffers filling up the liquidity hole which was created by the banks running a giant pyramid scheme. Banks did not start lending and it was obvious that they could not have started doing so. So £65 billion did not end up in real economy but in the banking system securing interbanking transactions against toxic waste which were generated by the pyramid process. Needless to say these £65 billion generously helped to fund the financiers remuneration.

This £65 billion debt is not just a normal government debt as it would have been if this money had been spent in the economy through tax cuts or public spending. If the banking system was relatively healthy (i.e. did not require rescuing and was not such a pyramid as it is) and the government borrowed additional £65 billion, to fund tax cuts or to spend on public investment programme to stimulate the economy, then through the healthy banking system credit creation cycle this £65 billion would have been multiplied seven to ten fold. Therefore the debt directly generated to rescue the banks in the UK in real economic terms cannot be considered as additional £65 billions on the government balance sheet but as £455 billion to £650 billion lost opportunity costs of the real economy.

[Oldtimer]

I complained to Barclays about being charged £22.00 for being £2.25 overdrawn for one day. I bank on line and Saturday and Sunday when I usually sort my accounts they where closed for maintenance.
I politely ask for the CEO's address so I could congratulate him on my addition to his bonus and they had the cheek to send me an application for a Barclay Card.
I do not have any credit cards just debit cards to keep control of my expenditure>

[Maisie]

Maisie, what is going to replace it ?   

I have no answers - only questions. Perhaps something modelled on the Swedish system?

[xetog]

Capitalism relies on making a profit.  No profit, no pay, no jobs.  Capitalism as we know it may not work, but nor has any other system, so as you say, what else!  Banks and politicians are at the seat of our difficulties, they see change as a threat to their featherbeded existence.  Just watch, we will end up spending a lot more billions baling out the Euro "for our own good" only to be ignored when we are suffering because of it.  On Newsnight last night the question was asked whether we should go back to the days when the Government controlled wages via a Wage Review Board and everyone laughed.  Some control has to be exercised.  get out of the EU I say and whilst we are at it get out of every other corrupt and wasteful international organisation from the UN to UEFA. Stop the £8 billion of foreign aid (it's only paid in a vain attempt to prevent the Chinese gaining influence) and that alone would go a long way to paying off the nations debts.
M.

[caminito]

xetog said..
Stop the £8 billion of foreign aid (it's only paid in a vain attempt to prevent the Chinese gaining influence) and that alone would go a long way to paying off the nations debts.

Charles Dickens wrote about a character in Bleak house called "Mrs Jellyby"
She cared more for a far off people called the Borrsoboola-Gha ,totally neglecting her own children !
Sounds like David Cameron to me  

John Ruskin's idea about wealth and bankers say it all ..
There is Well'th and there is Ill'th
It's what we do with the money that makes the country good or bad !

[Angelo]

Remember Churchills words ! Beware the sleeping tiger. It won't be long before they are running it all !
They have long memories and they don't like the British for what we did yesterday. (historicaly speaking).

[Papaumau]

I think that the two BIG words here are "speculation" and "interest" !

Speculation

What I mean by that is that the "speculators" that play games with OUR money, whether this money is in pension-funds or in our savings that have been moved sideways so as to get them into the money-markets and stock-markets, has been so injected into those "pyramids", that Caminito talks about, that so long as there is growth and these pyramids don't collapse our money will be safe.

After 2008, we now know that our money is NOT safe in their reckless hands.

Interest

It seems that even when countries lend to each-other they like to screw the interest charges in proportion to the amount that is owed and the risk that is attached to the debt and THAT, if nothing else, is what is bringing a lot of these previously-viable countries to their knees.

I cannot see why they cannot play fair with the interest charges so that these large debts don't get unmanageable !

 

[Oldtimer]

Get your wheelbarrows out ready to carry your money to go shopping when Inflation strkes!!

[Oldtimer]

Charity begins at home.Edwina Curry read this!!
People starving in the UK.
Charities running short of funding to supply food parcels to the needy.
Moneies being sent to India when they are sending it to South Africa.
What a mad country we live in.
Cameron and Clegg wake up!!This is the 21st Centuary

[Angelo]

What I dont get is American companies paid to tell investors what the credibility of countries should be, resulting in panic of markets. Just who are these people & who gives them the right to do this on a specultive basis.
Say for example if all europe is put in the situation on not being able to finance thier indiuvidual countries. Where does that leave America ? With a clear playing field ? Sole trader with China India & South America, whilst all ohters excluded. That would be nice for Uncle Sam ?