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Europe: Paying for its over-confidence

Robert Peston | 09:57 UK time, Wednesday, 26 May 2010

I've never met Tim Geithner, the US Treasury Secretary, so don't know if he's prone to say "tee hee".

Tim GeithnerBut he must surely feel tempted to say something of the sort to the European finance ministers and central bankers he'll be seeing today and tomorrow.

Because more-or-less all of them were prone to blame the excesses of US financial institutions for the banking crises of 2007 and 2008 - and tended to extol the putative prudence of European banks.

Well it's certainly true that the likes of Lehman, Merrill, Bear Stearns, Citi and AIG were reckless beyond reason during the boom years.

But in the subsequent clear up, they've been forced to raise tanker-loads of new capital - and Congress is well on the way to passing new legislation that would prohibit banks from activities deemed to be more speculative (see my note of Friday, "Obama gets his big bank reforms").

Where is the fault-line in the global banking system today? It runs through the heart of the eurozone.

Big European banks hold less capital relative to their loans and investments than their big US counterparts - which means they are less protected against losses.

And they are significantly more reliant for their funding on volatile and undependable wholesale markets.

So right now, many of Europe's biggest banks look significantly weaker and more vulnerable than America's.

When it comes to frailty, I am largely talking about continental banks: Britain's banks, having taken many of the same ill-judged bets as the Americans, remedied themselves on the same kind of early timetable adopted in the US.

Of course, it wouldn't matter that European banks have relatively less capital and less committed long-term funding if the prospects for these banks was tickety boo.

But you've been asleep this year if you think all is lovely in the European garden.

Just like the American and British banks, European institutions went on a borrowing and lending spree in the boom years.

Their big mistake was to help finance the spending binges by governments in countries such as Greece, Portugal, Spain and Ireland and also to provide the debt that pumped up the Spanish, Irish and British property bubbles.

If, as many now believe, many tens of billions of euros of government and property loans will have to be written off - and I've seen estimates of write-offs running to several hundred billions of euros - then some European banks may have to turn to their governments for support.

I should point out here that data on bank exposures to the overstretched borrowers I've mentioned is neither detailed or comprehensive - so the losses that emerge could turn out to be bigger or smaller than even the wide range of extant guesses.

That said, good regulatory policy is to hope for the best but prepare for the worst.

And what complicates those preparations is that some of the eurozone governments whose banks may get into a spot of bother are already perceived to have borrowed too much.

So if there were to be a second banking crisis, with its epicentre in Europe, there's a question about whether national exchequers would have adequate resources for any necessary bailout.

Which is why, to return to where we came in, Mr Geithner has a legitimate interest in probing those European finance ministers and central bankers on what kind of banking losses they anticipate and can underwrite - because, to rewrite the old markets cliche, if Europe catches a cold, the rest of the world may end up providing some of the medicine.

Comments

Page 1 of 2

  • Comment number 1.

    Pot calling the kettle black ? Or just his way of reminding people that we are all in this together ?

  • Comment number 2.

    Further, the periodic cycles of easy money and tight money that we initiate through our control of the Central Bank cause corresponding fluctuations in all markets. Our inner circle knows in advance the timing of these cycles and, therefore reaps windfall profits by speculating in commodity, stock, currency, gold, and bond markets. Monopolistic stock and commodity Exchanges are a vital adjunct to our power made possible by our Central Bank power. We do not allow a fair auction market to exist, but make a great show of "tough" government regulation to create a false sense of confidence among small investors. With the aid of our regulatory charade and financial power we are able to maintain Exchanges tailored to our entourage's need to manipulate stock prices at the expense of independent investors. Our privileged specialists on the floors of our Exchanges, aided by the propaganda of our financial press and brokerage houses, continually play on naivete and greed to drain the savings of the unwary into our coffers. The stock, commodities, and securities held in trading accounts by the Exchange and brokerage houses provides us with a clout far beyond our own actual holdings with which we can manipulate prices and win proxy fights for corporate takeovers.

  • Comment number 3.

    I must admit, I wouldn't mind being a fly on the wall during some of the conversations that Tim Geithner will have with his European buddies this week. I bet there will be a lot of finger-pointing going on.

    There is plenty of evidence to suggest that if European banks get into another round of trouble (and they will - just take the Irish for example vis AIB and Bank of Ireland who will both be getting more 'part nationalisation' before too long) then governments are not in a position to come up with further bailouts. There's a bit financial 'Niagara falls' coming by the looks of it. And American banks won't be immune either - they have plenty of exposure to what's going on in Europe - why do you think Obama was on the phone to the Spanish PM a couple of days before Spain announced its 'austerity' package.

    'Austerity' is the current buzzword. People will only take so much ....

  • Comment number 4.

    The USA was the heart of the 1930's Depression, but now with banking global the countries with the largest concentration of the largest banks must share the burden of blame for the profligate and uncontrolled creation of debt, and turning a blind eye to gambling banking.

    London often 'prides' itself as being the major banking centre outside the USA; so in logic, London must be a centre for creative global disaster. (London is, I recall, responsible for 80% of the derivative based Euro trading.) So it is quite reasonable to see London as the main epicentre of the destructive banking.

    The role of the Bank of England and the FSA in not even understanding the need to manage or control this enormous and totally unwarranted creation of excess money that led to the most destructive banking crisis ever, in the 350 year history of capitalism. Still they do not comprehend their absolute folly and are unable to accept responsibility. (And they still haven't been sacked!)

  • Comment number 5.

    I've just taken a look at the Eurozone in crisis graphs (http://news.bbc.co.uk/1/hi/business/10150007.stm) and am surprised at the position of Britain in this mess.

    Although our deficit is huge and unacceptable, I'm amazed at how well we compare to the Eurozone countries in terms of debt as % of GDP (although, admittedly, still not great), GDP, growth and unemployed rates (although still, obviously, too high).

    From what I have been able to make out from the media thus far, Britain is in the same dire straits as Greece and is doomed to becoming a third world country. Maybe it's not quite that bad after all?

  • Comment number 6.

    I hope I’m not judged off topic here.

    I was trying to explain to my son last night about the ‘austerity measures’ coming our way. And what had caused it. I can’t get the question and answers verbatim, but it went like this.

    Why are people going to have to make sacrifices?
    Well the creation of money as debt hasn’t been controlled properly.

    What is the creation of money as debt?
    It’s creating money against a promise to pay.

    What’s wrong with that?
    Nothing, until such time as you start creating money against promises to pay that aren’t any good.

    Why do they create money against promises to pay that aren’t any good?
    The creators of the debt are on a commission, the more they create, the more they earn, if the promise to pay goes bad, they don’t have to worry, because they’ve already got their commission.

    Why don’t we regulate the financial industry to stop them doing this?
    We do, they’ve been regulated by: The Bank of England, The Financial Services Authority, The Financial Ombudsman, The Treasury, The Basel ll Agreement, The European Union

    Well if they’ve been regulated by all that lot, why have we got a debt crisis?
    Because regulation doesn’t work.

    Why doesn’t it?
    God knows, but it doesn’t, because if it did we wouldn’t be in this mess.

    So:
    Is there anyone out there that can help me answer his last question?
    Namely:
    Can you give a reasoned explanation as to why the regulation of the financial industry doesn’t work?

  • Comment number 7.

    Are you talking about

    1) the Europe that contains Britain, or
    2) the Europe in which Britain is a separate, but slightly interested onlooker, or
    3) the Europe in which Britain is a remote island that couldn't give a hoot?

  • Comment number 8.

    #4 John_from_Hendon

    "The role of the Bank of England and the FSA in not even understanding the need to manage or control this enormous and totally unwarranted creation of excess money that led to the most destructive banking crisis ever, in the 350 year history of capitalism. Still they do not comprehend their absolute folly and are unable to accept responsibility. (And they still haven't been sacked!)"

    Spot on, I couldn't put it better.

    It's not just them (and the Treasury), it's just about everybody.

    Until folks realise what the problem is - uncontrolled credit - and do something about it, things will get much much worse.

    So far, we've done the opposite to what is necessary by creating more credit, a bit like permanently pumping up a punctured tyre instead of fixing it before it collapses entirely.

  • Comment number 9.

    If, as many now believe.....
    Just for info, my friends (Spanish) has some very large investments locked in to finance their 2 kids when they hit 21.

    3 months ago their Madrid broker phoned and advised them to pull everything out, they are with Europe's largest bank and several other major investment institutions.

    Now, understand, with the pull-out and currency conversion to the country where they now live, together with new charges and taxes, you are looking at huge losses of over 30%. And they still suggested my friends should do this - they chose not to.

    I feel the Eurozone now has a lot of free-fall ahead. And they are now very very worried. Santander was down 5% in a day yesterday. it is that day on day drip drip drip, not the big crash that will kill Europe this year and next.

  • Comment number 10.

    The calls for a public inquiry into the economic situation, asking many of the question posted here sounds like a good idea. It could bring these problems more into the public view with less political and vested interest spin and help explain to the huddled masses what its all about and possible solutions.
    Why not lobby our MPs to call for one?

  • Comment number 11.

    Mr Peston

    Two things:
    a) There are European banks with deadlines to repay previous bailouts and assistance. Raising capital is now too difficult for them to do this. The end result will be effective nationalisation, as is happening in Spain now. The bailout you speak of will not be necessary. The banks will be allowed to fail or seized by states. Banks will either comply with new regulations or be made to during the next wave of crises. The ultimate aim of deleveraging safely can only be done by directly (or via some quango) reducing private debt levels. This can only be done through manipulation of banks by states.

    b) It is desirable and in line with the EU state interests that the Euro devalue. It has two effects:
    b1) Unemployment increases will be counteracted by export demand from China and other surplus nations as the Euro devalues.
    b2) Paying off state debts to foreign creditors is on the whole simplified, as a lot of it comes from the US.

    My two cents. The ultimate source of the problem is the USD, which must be replaced as reserve currency in time.

  • Comment number 12.

    It's an economic war. US based speculators attacked Greece. The EU responded in such a way to devalue the Euro. The US will be enormously worried by this because the US is faced with a dillema: devalue the USD or face increasing unemployment. Either way is bad.

  • Comment number 13.

    6. At 10:31am on 26 May 2010, Dempster wrote:
    Can you give a reasoned explanation as to why the regulation of the financial industry doesn’t work?
    ---------------------

    Because the regulation too is designed for the enrichment of the financial lords.

    Read this, Dempster, it will give you answer to a lot of questions ... if you are ready to accept them, that is. Many aren't.

    http://www.rexresearch.com/articles/ocultech.htm

  • Comment number 14.

    My brother in-laws father (God rest his sole) was a Plymouth Brethren. My brother in-law can still remember the day an application for a "Barclaycard" came through the door with the tag line "Takes the waiting out of wanting." To say his dad went ballistic over this would be an understatement. His view that this was evil and promoted greed should perhaps have been headed by a wider audience than his family that day.

  • Comment number 15.

    I have an answer for Dempster...

    For a number of years I have been a 'journeyman' through the Compliance Industry working for Investment Banks, Market Makers and Brokers. I have never held a significant influence position or have been registered with the FSA as a Compliance Officer.

    The reason for this is that I actually believe in the principles and rules of the FSA pursuant to FSMA 2000, a sensible approach to regulating the financial services industry, and am not afraid of highlighting when transgression occurs. I am happy to report suspicious transactions, monitor the company which employs me for breaches of FSA rules and escalate matters through appropriate channels. I have been known to insist that any bonus I receive is not based upon the performance of the company but upon an independent set of deliverables. Therein lies the problem, why my career has been unimpressive and why I am leaving the industry.

    The majority of Compliance Officers and Risk Managers I have met seem to be of a certain type and are 'nice guys', manageable, often bullied and cajoled into towing the 'business line'. They are after all a cost to the business in most senior manager's eyes. A compliant Compliance Officer, if you like. I have lost count of the number of times that certain aspects of business or indiscretion have been noted and escalated only to be ignored. It never ceases to amaze me how many Compliance Officers fall back on the 'it is for the business to implement or reject' line. The business will nearly always choose the most profitable even if the business is clearly in breach of the law, leaving an impotent Compliance Officer in its wake.

    This is the nature of self regulation... the whole things need changing. The regulator should just put its people into authorised and regulated companies on a regular basis... not rely on firms to pay for their own 'self regulation' which is clearly conflicted. The revolving door between regulatory staff and the industry they regulate is also a cause for concern and, finally, one must remember that the FSA itself is also funded by the companies that it regulates.

    A radical re-think is necessary and although I generally detest taking any input from the U.S. A governmental body on par with the SEC to me looks like a step in the right direction as the regulator should only be accountable to the public (who have been shafted to the tune of billions) and not the industry it regulates.

  • Comment number 16.

    No reason for Geithner to feel smug anout things when a US city has to resort to calling in the National Guard because they have had to let so many police officers off becuase they could not pay them.

    http://www.mlive.com/news/flint/index.ssf/2010/05/flint_shootings_homicides_lead.html

  • Comment number 17.

    Who would ever have thought that the Mediterranean nations would have been a bad bet financially speaking?
    Ever worked there? Ever wondered why it takes 4-5 times longer to get a piece of work done in these countries than in northern Europe? Or why you have to do two deals to get a proiperty purchased (one in front of a lawyer, and one where the lawyer walks out of the room in order to "not see")

    Sometimes stereotypes are there for a reason, and our bankers & investors should have listened more to their gut instincts than the “everyone deserves a fair chance” mantra that the world is pushing these days.
    Remember, they were poor in the first place for a reason!!

  • Comment number 18.

    14. At 11:24am on 26 May 2010, you wrote:
    His view that this was evil and promoted greed should perhaps have been headed by a wider audience than his family that day.
    That should read heeded not headed, honestly he wasn't a nutter.

  • Comment number 19.

    ...and we should never forget Geithner's hand in the root causes of the financial melt-down...

    Geithner's 'Dirty Little Secret'
    http://www.atimes.com/atimes/Global_Economy/KD03Dj02.html



  • Comment number 20.

    17. At 11:31am on 26 May 2010, LostAtSea wrote:
    Remember, they were poor in the first place for a reason!!

    That's probably the most ridiculous comment I've ever seen on this blog.

  • Comment number 21.

    Globalisation - Don't you just love it! One goes we all go. Wonderful. In the deep recesses of my mind I seem to recall that there was always a desire for unrestricted global trade. I also recollect that it was understood that this could NOT be achieved until intenational currencies had levelled out. It was recognised that until this happened competition could not be fair or balanced.

    The lifting of the restrictions on China's export levels prior to parity of currencies being achieved changed everything. Anybody else remember ship loads of bras sitting at Southhampton? :) The Chinese economy is growing at a phenomenal rate but at a human and social opportunity cost. Waged slaves, living on the factory grounds, returning to see their families (possibly thousands of miles away) once a year. The Chinese workers save every possible penny in case of ill health and for old age, while the Chinese government deliberately keep their currency's value extremely low. Without the same employment rights, which in Europe and the States add substantial operating costs to the employer, the chances of us competing on price are zilch.

    Now to the next factor of this boom bang a bust equation. Without solid exports the wise guys in their wisdom determined to make too cheap credit readily available to almost anyone - no job, no savings, no probelem - while determining that the ghost economy would balance our books with accounting wiz-kiddery. The over-priced housing only ever benefited banks with people taking out huge loans for basic accomodation that would have been cheaper to build buying a brick at a time from B&Q. But hey...all that equity gave us plenty of cash to buy all those lovely new product from China. Everyone was happy but a child could see it could never last. Just like any other junkie chasing the dragon - the dragon will eventually turn round and chase us back.

    Which brings me to another factor in this rotten equation. The deliberate expansion of an addicted underclass. Without worthwhile employement and without the ability to plan ahead that partners poverty, any readily available means of escape, even if it is only psychological, becomes attractive. Cheap alcohol and a massive black market in street drugs fills that void and brings with it the petty and violent criminal behavious we have all grown so used to.

    It's not all black in the black market though. It serves the useful function of keeping hard cash flowing round the economy (dealers don't do debit cards) while providing employment oppoertunities for a growing army of social workers, probation officers, outreach workers, project workers, key workers and on and on it goes.

    We need an entire rethink of our way of life. We DO NOT require a bankers tax to prevent future catastrophe. Stables, horses and bolting. We require proper procedures and sensible investment which is not purely financial. We need to alter our view of achieving wealth for wealth's sake - it is just so 20th century.

  • Comment number 22.

    I should also add that the audit and regulatory visits for any financial services company seem always to be spearheaded by the grunts, the grads or in my eyes, the children.... aaah, bless. Not only a depressing reminder that middle age is fast becoming reality but also that some issues and problems will never be identified due to the inexperience of the examiners.

  • Comment number 23.

    #18

    Just sprayed coffee all over my laptop as I pictured a family queueing outside barclays waiting to headbutt the staff inside!

  • Comment number 24.

    8. At 10:56am on 26 May 2010, bill

    ..and this graph perfectly illustrates your point...

    http://www.businessinsider.com/spanish-debt-contagion-2010-5#spains-debt-is-out-of-control-considering-its-place-in-the-global-growth-rankings-1

    All in debt, all sinking in debt, all going to default eventually.

    When the world is broke, your only hope of paying your bills is selling to you broke neighbours - then I say you're all broke.

    The fantasy that China will somehow become a 'giant consumer' which pulls the world out of recession (and lets not consider what that consumption would do to the environment) - is a solution clearly lacking in the understanding of how the Chinese culture works and how their people think.

    They are savers, they are high production low consumption, they value education more than money - they won't be chasing the plastic dreams of the people of this nation - but dreams which have a tangible value at the end of it - i.e. something socially rewarding, something which gives you acknowledgement from your people - not a worthless piece of paper with "I promise to pay the bearer on demand..."

    That is why the west cannot see it's own downfall - no western analyst can imagine such people - surely everyone is motivated by money / profit / capital ?

    The whole thing is a bad joke - the media have the mouthpiece but they don't have the insight or intelligence to use it properly. This is why when the 'promises fail' the people will be angry - and will probably want to smash a lot of state and corporation property up (it's what they do when they feel let down and mis-led)

  • Comment number 25.

    There must be a tiny amount of suppressed mirth in US financial circles. Having been through the best part of two years being vilified as the mainstay of the "perfidious Anglo-Saxon model" it looks as if they weren't the only ones engaged in reckless activities. Schadenfruede is, appropriately, a German word (taking secret pleasure in the misfortune of others) but it must be hard work keeping it secret just now.

    Now this is serious and is no joking matter but it is nonetheless time to remind ourselves of the preaching that used to go on about the inevitable triumph of the Euro and of the "European Model" following the meltdown of "zee crazy Anglosaxons!". Nicolas Sarkosy, a man whose "vertical challenge" would tend to lead him to boasting, made little secret of his joy when the US and UK banks were in trouble last year. The fact that European Governments have been just as daft as the banks they derided must come as a bit of nasty surprise and a force-fed meal of humble-pie to those trumpeting their pleasure just a few months ago. In that respect it is a bit of a hoot...though not in the sense of wishing misfortune on others...just in seeing people who make daft boasts bought down to size.

    That aside however, disturbances in the Eurozone economy will inevitable bring problems for the UK and will probably dampen our export potential just when we were hoping that exports might be a way out for this economy that has been tilted utterly in favour of finance. At a time when the public sector will be receiving a very necessary pruning, there might not be enough private sector growth to take up the idle capacity in the economy.

    Another difficulty for the UK will be that, having believed that the Euro-Federalist Project was past its high-water mark, the present crisis may embolden the "unifiers". The response in the EU to most problems is to grant more power to Brussels and it seems highly likely that this crisis will see the centralised economic supervision of the member states increase. Fear alone will suppress protest and we will see the renewed push for full fiscal integration and, inevitably, political integration!

  • Comment number 26.

    Sorry QE fans - looks like the parties over and the hangover arrives soon....

    http://business.timesonline.co.uk/tol/business/economics/article7136901.ece

  • Comment number 27.

    With this in mind where does that leave the UK - possibly not in the firing line right now.

    Time for the BoE to slowly start to raise rates in a pre-emptive way to protect the £, keep a lid on inflation, reward savers and take the steam out of any house price growth.

    June increase to 0.75%
    Sept incresae to 1.00%
    Dec increase to 1.25%


  • Comment number 28.

    20 Devilsinthedetail

    "17. At 11:31am on 26 May 2010, LostAtSea wrote:
    Remember, they were poor in the first place for a reason!!

    That's probably the most ridiculous comment I've ever seen on this blog."

    Hmmm...having worked for a number of years in Italy I would say that far from being ridiculous, the comment is bang on the money...if you'll pardon the pun?

    Maintaining polite fictions is all very well but I suspect that while it may make you feel morally superior, it will do nothing to get us through these ongoing crises. Surely there has never been a better time for everyone to be honest about themselves and others? Including ourselves!

  • Comment number 29.

    20. At 11:57am on 26 May 2010, DevilsintheDetail wrote:

    17. At 11:31am on 26 May 2010, LostAtSea wrote:
    Remember, they were poor in the first place for a reason!!

    That's probably the most ridiculous comment I've ever seen on this blog.

    -------------------------------------------------------------------------

    DevilsintheDetail - it may be the most ridiculous comment YOUVE ever seen on this blog but the fact is LostAtSea is right. The work/business ethic that we know and understand in the UK simply doesnt exist in many parts of Southern Europe.

  • Comment number 30.

    23 Newsblogger

    Plymouth Brethren are not the headbutting types! They do however do a very good line in calling down hellfire and damnation...something that I learned myself years ago in a remote part of Scotland when changing on the beach to go diving...on the Sabbath!!!!!

    Joking aside, the original poster is absolutely right to point out the extent to which we have embraced instant gratification and rejected hard work and saving. It's easy to blame the banks for pushing cheap money and unsecured debt at people, but they were pushing at an open door. There is nobody to blame for this mess but ourselves!

  • Comment number 31.

    ...so yesterday there were 'serious concerns' about the sovereign debt situation.....and today there are 'no concerns' about the soveriegn debt situation causing a bounce.

    mmmmmmm - sounds like a set up to me - someone it about to get totally fleeced - my number 1 bet is it's the taxpayer.

    http://news.bbc.co.uk/1/hi/business/10161911.stm

  • Comment number 32.

    28. At 12:24pm on 26 May 2010, Anglophone wrote

    It's not polite fiction Anglophone (Anglophone ?) and I have no interest in moral superiority. I just smell xenophbia and I don't like it.
    In fact the implication is that the British are somehow superior in both lifestyle and, if you like, morals and that is plainly, as I said, ridiculous.

  • Comment number 33.

    26 WOTW

    Interesting article - my #27 was posted before I read your link. Any comment on the big rebound in bank shares? Just you were all doom and gloom on them yesterday. Not that I think all is rosy far from it, someone is making a killing from all this volatility though.

    Interesting times.....

  • Comment number 34.

    20. At 11:57am on 26 May 2010, DevilsintheDetail wrote:
    17. At 11:31am on 26 May 2010, LostAtSea wrote:
    Remember, they were poor in the first place for a reason!!

    That's probably the most ridiculous comment I've ever seen on this blog.

    ---------------------

    Yes, quite.

    However there is a reason that they are poor - although probably not the one that LostAtSea means.

    Spain, Protugal and Greece all had fascist governments until the 70s, In Northern Europe we think of facism as being defeated in 1945. But people in their 40s in Southern Europe grew up with it.

    My personal observation is that this has left them with a descructive mixture of entitlement, and refusal to co-operate with authority. I.e. they expect the government to do everthing for them (as it always has) - but on many fronts they absolutely refuse to co-operate with it to help it to do so.

    So they expect generous unemployment and pensions - but refuse to pay the tax due on property or income.

    This kind of thing takes generations to unwind - expecting democracy and European integration to ride in and sort everything is hopelessly niaive.

  • Comment number 35.

    Re >21 from misalot

    thank you for your post, we can't change everything writing here, but we all know this coming century, is not going to be 'business as usual' as if we are still in the 1900's - just how that is going to turn up - personally I think we are a long way from knowing, we need to deepen a whole lot more first... However the last line of >21 has such a great resilient attitude in it, 'greed is so last century'...

  • Comment number 36.

    " 6. At 10:31am on 26 May 2010, Dempster wrote:
    Can you give a reasoned explanation as to why the regulation of the financial industry doesn’t work?"
    Because pursuit of profit it the name of the game (accumulating capital), and you would need regulation that prevented this. And then capitalism would no longer exist.

  • Comment number 37.

    Well the stock markets may have bounced today, but it wont last. The fact that gold has risen to above $1200 an oz, is the important point. Heading towards a new record once again. The rats are still leaving the sinking ship.

  • Comment number 38.

    I'm wondering how deliberate this EU crisis was.

    The scenario: central bankers, power brokers and industrial capitalists hold the real power in Brussels, and want to exert ever greater control over their "subjects".
    Under the pretence of "Ending the prospect of war for ever" the EU is founded, and slowly grows. But to take control of the extremities, the simplest solution is to bring them into the EU with some clear guidelines on how to behave (convergence criteria), secure in the knowledge that they won't. Then, as they spend, spend, spend all this financial largesse on offer, the banks offer indiscriminate amounts of credit to individuals, corporations and even governments that clearly do not warrant it.
    The end result is that when the easy credit is withdrawn and they default, they will either fall into bankruptcy or, to avoid this, they will be "super nationalised" as the Brussels machine takes ever more central control.
    I see only two solutions to the Euro crisis - either the defaulting nations are expelled and regain their own currencies leaving a smaller but stronger Euro zone, or they become a subservient subject of a unified Europe, with financial policy and control direct from Brussels.
    I guess the third way is the collapse of the Euro....

  • Comment number 39.

    When are we going to stop basing our policies on the actions of fast-buck merchants ? Caledonian Comment

  • Comment number 40.

    9. At 11:01am on 26 May 2010, traducer

    I have been warning about the instability of Spanish banks for months now. The media are doing a great job of sweeping it under the carpet.

    I suspect this is so everyone can 'act surprised' when the inevitable happens and we can blame fate, luck or god or something else we have no control over.

    The truth is if we had admitted and addressed the problems when they arose we wouldn't be in such a mess (we'd be in a mess, but tempered by everyone knowing in advance)

    Sadly the Governments and media of this world don't think we can handle the truth and therefore we're treated like mushrooms.

    This will merely increase the anger when the truth is found out.

  • Comment number 41.

    24 Writingsonthewall

    Ahh..we're all going to die. I absolutely agree with you, having been present for the humiliating process of Western companies trying to swing big deals in China, that dreams of China as a big export market are foolish. Even if they do become rich enough for bulk luxury exports it is highly unlikely that the Chinese Government will allow a big import market to develop. Similarly, Chinese people would regard it as their patriotic duty to buy home-grown goods in much the same way as is seen in other big Far Eastern export nations.

    Spare me all the sub-Kung Fu stuff about them being on a higher moral and intellectual plane though. That's for the self-loathers Grasshopper! They all want consumer goods the same as everyone else!

    The collapse of Western capitalism has been predicted for ages and therefore must surely come about soon. Even in my lifetime I think that we're onto the 3rd of 4th "irresitable force" that will sweep us all away. Don't forget that even in 1973 eminent economists were confidently predicting the triumph of the Soviet economic model over the West, which at that time was wearing flared jeans. Then we were going to be eaten alive by the Japanese...until the banking collapse. Then by the Asian Tigers until the 1998 crisis. Now by China and I imagine that as has happened to everyone in history before, China's rise will be trimmed off sooner or later by their own particular structural weaknesses. That could be the middle class demanding more power, the chronic demographic imbalance caused by the one-child policy, the growing and tragic gender imbalance, environmental degradation or a whole host of other factors. Like everyone else the Chinese are attached to elastic and what goes up inevitably comes down again. Let's just hope that they can mange it peacefully!

  • Comment number 42.

    12. At 11:16am on 26 May 2010, Oblivion wrote:

    "It's an economic war. US based speculators attacked Greece. The EU responded in such a way to devalue the Euro. The US will be enormously worried by this because the US is faced with a dillema: devalue the USD or face increasing unemployment. Either way is bad."

    This is exactly what is happening - the fall of the Euro is of no concern to the US except it prevents their recovery through exports.

    It's a race to the bottom, where the winners are the greatest losers and all the rest get wiped out.

  • Comment number 43.

    15. At 11:25am on 26 May 2010, Just_the_Fax

    Just one question...

    Who pays for the regulator to regulate the industry which has failed in it's self-regulation?

    The result is what is happening now - taxpayer funded ombudsmen who become the 'custromer complaints division' of the sector making the whole process of 'justice' elongated and bloated and often with poor results for the consumer.

    Take a look at the ombudsmen in our 'ex-national' industries - and see how they are fighting a losing battle which we are paying for. I know of a specific case where the obudsman / regulator has stated to the industry that "this practice must stop" - and the industry has ignored this and continued with the practice.

    I supplied them with this information 4 months ago and nothing has happened yet and all the regulator sends out are messages of 'we are dealing with it but we're very busy'.

    Regulation doesn't work - we need to question the worth of the industry we're proposing to regulate before we throw any more effort into controlling it.

  • Comment number 44.

    14. At 11:24am on 26 May 2010, Dillers wrote:
    My brother in-laws father (God rest his sole) was a Plymouth Brethren.

    ---------------------------

    Where did he rest his sole....Dover???

  • Comment number 45.

    17. At 11:31am on 26 May 2010, LostAtSea wrote:

    "Sometimes stereotypes are there for a reason, and our bankers & investors should have listened more to their gut instincts than the “everyone deserves a fair chance” mantra that the world is pushing these days.
    Remember, they were poor in the first place for a reason!!"

    What a load of tosh - the old 'europeans are lazy and deserve it argument'.

    Well they seem to be replacing you in your job - and English is their second language - so that demonstrates they are harder working and better at communication than you! If they're lazy - what are the numerous unemployed Britains???

    Bigot street is three streets along and on the left.

  • Comment number 46.

    32 Devilinthedetail

    Ahhhhhgod how predictable. I do not believe in "British Superiority", but having travelled and worked around the world a great deal I don't buy into this self-loathing cringefest beloved on the centre-left that we are, by contrast an incompetent, intolerant hellhole of a land. There is good and bad everywhere...you just need the eyes to see it.

    The original poster made a comment about business culture and practices in Southern European countries. Having lived there I reckon he was not far wrong. That's not for a second that I would suggest that all things British are manifestly superior. You fancy swapping Italian food for British cuisine...or clothes...or weather?

    Get off your liberal-left high horse and learn to see things for what they are...not what you think that they ought to be!

  • Comment number 47.

    19. At 11:55am on 26 May 2010, DebtJuggler wrote:

    "...and we should never forget Geithner's hand in the root causes of the financial melt-down...

    Geithner's 'Dirty Little Secret'
    http://www.atimes.com/atimes/Global_Economy/KD03Dj02.html"

    Ah yes, we never talk about the past - this is why most people in political circles are always 'looking forward' - simply because their historical records are paved with idiocy.

  • Comment number 48.

    Any currency not backed up by significant political integration and backed by centrally controlled fiscal and monetary systems was always doomed to failure. They've been talking about a single currency across some of the Gulf states for several years now, but the plans have been put on hold "for at least five years" and you can't help but think that the leaders in the Middle East are thinking along the lines of 'there but for the grace of God....'

  • Comment number 49.

    @ number 4,
    Germany and its national debt brought the world into the banking closures and the deep depression. The crash of '29 was not particularly troublesome until it combined with a banking crisis. Opps,nevermind -- my bad -- seems to be occuring again.

  • Comment number 50.

    28. At 12:24pm on 26 May 2010, Anglophone wrote:

    "Hmmm...having worked for a number of years in Italy I would say that far from being ridiculous, the comment is bang on the money...if you'll pardon the pun?

    Maintaining polite fictions is all very well but I suspect that while it may make you feel morally superior, it will do nothing to get us through these ongoing crises. Surely there has never been a better time for everyone to be honest about themselves and others? Including ourselves!"

    Hey Anglophobe - it seems these 'lazy europeans' seem to be taking our jobs quite easily - how do you explain that?

    Maybe there is a slightly different attitude to work in warmer climates (for obvious reasons) - which is why they all have nice skin and look younger etc. Meanwhile the slaves of Britain run themselves into an early grave for scant reward picking up cancers and stress related diseases on their way.

    Do people really think like Anglophobe in this century - or is there a moderating delay of epic proportions??

  • Comment number 51.

    15. At 11:25am on 26 May 2010, Just_the_Fax wrote:
    'I have an answer for Dempster...'

    Thank you JTF, it was a good answer to.


  • Comment number 52.

    29. At 12:26pm on 26 May 2010, Catpain_Slackbladder wrote:

    "DevilsintheDetail - it may be the most ridiculous comment YOUVE ever seen on this blog but the fact is LostAtSea is right. The work/business ethic that we know and understand in the UK simply doesnt exist in many parts of Southern Europe."

    What tripe - have you ever tried working flat out in the mid-day medditerainian sun? Maybe you think a Siesta is merely a reflection of southern Europe laziness.

    I never grow tired of wingeing Brits who think they have a superiority over other nations merely by birthright. I bet not one of you has actually done a hard days work in your life (and no i don't mean turning up to your desk job early and leaving late and describing it as a 'hard day')

    However, we are the definitely stupidest country in existence (apart from the US) - because we're the only idiots who actually believe what our lying politicans tell us every single time - what a bunch of suckers.

  • Comment number 53.

    46. At 1:06pm on 26 May 2010, Anglophone wrote:

    "I don't buy into this self-loathing cringefest beloved on the centre-left
    Get off your liberal-left high horse and learn to see things for what they are...not what you think that they ought to be!"

    Well said - unfortunately it goes with the territory on here, almost like a badge of honour or right of passage - to do down from where you came or what you are. Often the sign of an uptight middle class upbringing, a rebellion against mummy and daddy and their values/beliefs.

  • Comment number 54.

    46. At 1:06pm on 26 May 2010, Anglophone

    I dont go in for self-loathing or for trying to bracket people into meaningless categories.
    If you can't imagine the effect that these kinds of comments have on our image abroad then you haven't travelled enough.
    Banging on about Johnny Foreigner is just embarrassing the rest of us who are trying to get on with and do business with these people.

  • Comment number 55.

    The biggest problen with bank lending is the shortage of property whether commercial or domestic.
    For years the banks lent money on multiples of income and that was that.
    Deregulation caused the banks that were awash with money to ignore these guidelines and increase the multiples available to the desparate customers.
    This in turn caused the prices of said properties to rise in line with the increased loan sizes that were available.
    Prices then spiral with banks lending more and more money to people eager to get on the ladder.
    The profits of this then feed back into the economy giving all parties including the government more money to spend.
    Governments lap up this temporary increased revenue for better services etc !!
    The inevitable then happens when the bubble bursts and governments are left high and dry with tax revenues that are no longer there and an electorate that has got used to a way of life funded by loans that were unsustainable.

  • Comment number 56.

    "I should point out here that data on bank exposures to the overstretched borrowers I've mentioned is neither detailed or comprehensive"

    Robert, take a look at the OECD Economic Outlook May 2010 Macroeconomic summary published. Box 1.1 contains a summary of French,German and US banks' holdings of Greek and Southern European assets, not just government bonds. If I am reading it correctly it details France's banking sector capital and reserves at $354b and Germany's at $413bn. Holdings of Greek,Portugese and Spanish assets by French and German banks stand at ( they say) $334.9bn and $330.4bn respectively. Those figures indicate how challenged the French and German banks could be with stresses on those assets hitting their capital. No detail given on impairments. No wonder the ECB are having to step in on bond markets.

    France and Germany need to openly publish results of their stress-testing to clear the air.

  • Comment number 57.

    Q: Is Europe paying for its over-confidence?
    A: No, Europe is paying for its over-spending.

  • Comment number 58.

    In what way is it paying? Not one person here has pointed out how a somewhat devaluing Euro is in any way bad for the Eurozone.

  • Comment number 59.

    Like the buy-to let landlord interviewed today.

    Twenty properties bought rolling over gearing of equity from one house to another. If that is the right term.

    I remember them a few years ago rushing to buy affordable homes and pushing prices up and up and using the fictitious equity to use as a deposit on yet further affordable now unaffordable homes.

    Leaving the majority of first time buyers either unable to afford to buy or stretching them far beyond a reasonable limit in trying to maintain a mortgage.

    Now they are crying about maybe having to pay proper taxes on their gains. How sad.

    It is people like these that have contributed to the great banking mess we are in. They couldn't borrow enough. Just pure greed.

    Well the bubble hasn't burst here yet so if they don't pay the taxes they may well find that assets can depreciate very quickly. If it doesn't get you in one way it certainly will in another or perhaps it could be a double whammy.

  • Comment number 60.

    33. At 12:43pm on 26 May 2010, StartAgain wrote:

    "26 WOTW

    Interesting article - my #27 was posted before I read your link. Any comment on the big rebound in bank shares? Just you were all doom and gloom on them yesterday. Not that I think all is rosy far from it, someone is making a killing from all this volatility though."

    Volatilty is merely a sign of an impending crash, you may be interested to note that the second largest daily points swing in the DOW was the recent (and unexplained) 'flash crash' on May 5th.

    ...guess when the biggest swing was?

    You guessed it - 10th October 2008 - 5 days before the second largest 'point loss' in history.

    How does it go? The market can stay irrational longer than we can stay solvent.

    It's like the twitching of a cow's carcass at the abbatoir - we all know it's dead, but it looks like it's still going..

  • Comment number 61.

    I think your analysis of the forthcoming meetings was rather coy and gentle.

    Personally I wouldn't like to have been in any of those meetings.

    Rather than 'tee-hee' it is more likely to be 'What the [american expletives] do you think you are [more american expletives] are playing at with the [even more american expletives] Euro?'

  • Comment number 62.

    41. At 12:56pm on 26 May 2010, Anglophone wrote:

    "Spare me all the sub-Kung Fu stuff about them being on a higher moral and intellectual plane though. That's for the self-loathers Grasshopper! They all want consumer goods the same as everyone else!"

    That's not what confucious says.

    "The collapse of Western capitalism has been predicted for ages and therefore must surely come about soon. Even in my lifetime I think that we're onto the 3rd of 4th "irresitable force" that will sweep us all away."

    It's true, - it does seem like an endless stream of disaster - but then this is testament to the amount of effort and resources our Governments are prepared to throw at a broken system in order to 'fix it'.

    "Don't forget that even in 1973 eminent economists were confidently predicting the triumph of the Soviet economic model over the West, which at that time was wearing flared jeans."

    True, mainly because Soviet 'dictatorial' production was as effective as the Chinese's is today. Collectivism in the most powerful and progressive way of development - it's just a question of how you achieve it.
    So far all attempts have been 'by force' - i.e. dictatorships.

    "Then we were going to be eaten alive by the Japanese...until the banking collapse. Then by the Asian Tigers until the 1998 crisis. Now by China and I imagine that as has happened to everyone in history before, China's rise will be trimmed off sooner or later by their own particular structural weaknesses. That could be the middle class demanding more power, the chronic demographic imbalance caused by the one-child policy, the growing and tragic gender imbalance, environmental degradation or a whole host of other factors."

    I agree - Capitalism is unstable in all parts of the world - not just ours.

    "Like everyone else the Chinese are attached to elastic and what goes up inevitably comes down again. Let's just hope that they can mange it peacefully!"

    This is the biggest concern - as the people become impatient for growth the solution prepared by politicians will be a massive capital destruction - i.e. a war.

  • Comment number 63.

    Raise Stamp Duty on all Share and Bond transactions. Say 5% - 10 %

    Place a transaction or Betting Tax on the Spreadbetting stockmarket transactions.

    In fact why not class any spreadbetting profits as Income for Tax purposes ?

  • Comment number 64.

    Certain people seem obssessed with keeping Inflation low.

    Well the Inflation I have seen in the last three years is anything but low, and does not correlate to the Official statistics.

    Petrol prices for one.

    However, a certain amount of Inflation say 30 to 50 percent over five years would be beneficial to the Economy, rebalancing debt versus turnover.

    However, this only works if the workforce also receives a 30 to 50 percent rise in pay over the same period, otherwise Taxes stay flat or in fact diminish.

    Whilst the ordinary people suffer wage freezes or even cuts, the Tax take will fall, company profits will continue to erode.

  • Comment number 65.

    Ah well, the Fear of Inflation may prove to be the root of all stagnation !

  • Comment number 66.

    Stereotyping isn't accurate and it isn't nice. Beware the prejudices that come from package holidays, business trips and expat communities. That has been my experience.

  • Comment number 67.

    A good time to move all cash to a Building Society or Co Operative Bank.

  • Comment number 68.

    WOTW - Are you by any chance a Grecian? That would explain a few things!

  • Comment number 69.

    Surely all that will happen will be a sudden change in the euro rules to 'create' the required money a la QE and pay for it with higher inflation?

    Everybody will be poorer as a result (except for the 'important' bankers who are unlikely to be on the breadline)

    Lovely.

  • Comment number 70.

    63. At 2:29pm on 26 May 2010, supercalmdown wrote:

    Place a transaction or Betting Tax on the Spreadbetting stockmarket transactions.

    In fact why not class any spreadbetting profits as Income for Tax purposes ?
    ...................................

    Easy answer to that one. A friend who spent a lot of time spread betting recieved a demand from the IRS (as it then was) for tax on his profits as he was deemed to be doing it for a living and was therefor income. However, a letter from his accountant pointing out previous years losses that he had failed to declare as negative balances against his income and therefor demanded a rebate on these previous taxes soon resulted in the IRS dropping the demand.

    In short, the tax office has concluded that more money is lost than won and do not wish to open the door on a pile of rebate claims against tax paid against ordinary earnings.

  • Comment number 71.

    Yes, inside himself, Timothy Geithner is probably smirking.
    Why?
    Because American derivatives, credit default swaps and CDOs have brought European countries to their knees. The United states has made European banks look like amateurs, especially when the Wall-Street boys came up witho sovereign default swaps, which enabled them to bet against the STUPID PIIGS.
    Congress is well on its way to passing financial reform that will do nothing - ABSOLUTELY NOTHING - about regulation. If regulation was intended, financial reform would look something like the Glass-Staegall Act, seperating regular banks from investment banks and thereby stopping this financial, incestuous relationship.
    Big European banks hold less capital relative to their loans and investments than their big US counterparts? Did you get this backwards? Lending is frozen tight in the United States because banks are not sure of what they are holding, not sure of their level of capitalizaton.
    Why?
    Bcause they too have been exposed to fancy financial instruments, like derivative bundles that contain bad-debt sub-prime mortgages. Look at their books. Look at their profit & loss statements. See if you can find the hidden debt, the toxic debt, the scary unseen debt that keeps these banks frozen.
    If the European banks look significantly weaker and more vulnerable, it’s because the United States of American – the likes of Goldman-Sachs – took the STUPID PIIGS to market and sold them for slaughter.
    If Britain has remedied herself, why is she still as far in debt as her mentor, the United States of America?
    Does this not make you question the so-called remedy i.e. bail-outs?
    American and British banks, European institutions went on a borrowing and lending spree, but the United States’ Wall-Street boys were betting, fandangling, churning out complex derivative bundles - betting, betting, betting AGAINST European sovereign debt, leaving the STUPID PIIGS to the slaughter house.
    The American Wall-Street boys don't make mistakes; they know exactly what they're doing. They hide debt; they encourage European spending (because the real debt is hidden), and ultimately, having sucked the STUPID PIIG dry, it tosses the Portugals, the Spains, the Irelands, etc. into the piggy tray.
    If you think Europe has property bubbles, just wait for the second round of property bubbles from the United States; it’s already started. Check the real estate vacancy rates, especially in office buildings.
    If tens of billions of euros in government & property loans will have to be written off, look westward to the United States, and you will feel much better, quickly.
    So, when there occurs the second banking crisis, with its epicentre in the United States of Amnerica, there's no question that the likes of Timothy Geithner willl stop smirking. He will likely blame the EU and/or the Euro. He won't fess up to bundled derivatives and those catastrophic CDOs.
    Europe is now under financial wizards out of Brussels; the EU is fairly united. The EU and its EURO will survive. I trust the overall wisdom of politicians like Angela Merkel. She's nobody's fool!
    The United States on the other hand is being financially run (into the ground) by the likes of Volcker, Geithner, Summers…when its economy catches the SWINE FLU OF all FINANCIAL SWINE FLUs, it will not lead to more bail-outs. In fact, it will plunge this previous super-power into bankruptcy because its 12-trillion dollar debt is not sustainable, especially because it now exceeds GDP.

  • Comment number 72.

    50. At 1:13pm on 26 May 2010, writingsonthewall

    It's the fear and all those dreams that now look like they will never come true, all looking for someone to blame, and shows

    It doesn't bode well.

  • Comment number 73.

    52. At 1:24pm on 26 May 2010, writingsonthewall wrote:

    29. At 12:26pm on 26 May 2010, Catpain_Slackbladder wrote:

    "DevilsintheDetail - it may be the most ridiculous comment YOUVE ever seen on this blog but the fact is LostAtSea is right. The work/business ethic that we know and understand in the UK simply doesnt exist in many parts of Southern Europe."

    What tripe - have you ever tried working flat out in the mid-day medditerainian sun? Maybe you think a Siesta is merely a reflection of southern Europe laziness.

    I never grow tired of wingeing Brits who think they have a superiority over other nations merely by birthright. I bet not one of you has actually done a hard days work in your life (and no i don't mean turning up to your desk job early and leaving late and describing it as a 'hard day')

    So WOTW...your response to a persons comment you feel is derogatarily stereotypical....is to trump them with stereotyping to an even greater degree...Absolutely ingenious..!

  • Comment number 74.

    50 Writngsonthewall

    "Hey Anglophobe - it seems these 'lazy europeans' seem to be taking our jobs quite easily - how do you explain that?"

    Oh God...well how about this as an explanation. Firstly...the type of people who have the initiative and energy to get off their backsides and travel hundreds of miles to a different country are cream of the crop...the brightest and most motivated in their homeland. They come to the UK where they compete for jobs in areas of the economy with what is frankly the bottom-end of our own society. The poorly educated, the poorly motivated and the underskilled. It's hardly surprising that they beat the errr...British workers.

    This of course represents one of the conundrums of the age. If you accept the terribly politically incorrect idea that we do in fact have differing levels of ability, importing better educated, more able and motivated people from less expensive locations to do work that lower skilled, less able British workers would normally do is breaking any concept of a social compact. It's very NuLabour in fact. It's easier to burnish one's impeccably liberal, free-thinking credentials by praising this rather unequal struggle than it is to wonder what becomes of our own people at the bottom end of the scale. It's easy to laugh at the feckless Brits being out-competed but it sounds like an updated version of moralising Victorians pouring scorn on the "undeserving poor" and "letting them rot!"

    Actually, you seem to be celebrating a piece of real free-market social Darwinism in action. Something that doesn't square with your usual pronouncements...you're not as far away from those evil money men as you like to think.

    Secondly, the majority of recent EU migrants to this country have come from Eastern Europe. True there is a significant Portuguese community in East Anglia but otherwise Southern Europeans have not made up the bulk of recent migrants. The original post was concerned with Southern Europeans who are leading the charge in the Euro crisis...not about immigrants in general.

    As I'm sure you were told at school...always remember to read the question twice before launching into an answer;-)

  • Comment number 75.

    WOTW: I served 18 years in HM forces from 1986 to 2004...many of those years in Northern Europe and enough in Spain, Greece, Italy and Portugal etc to formulate a good impression of working attitudes. Just after my only war posting (Gulf 1991) we actually had to pause a joint military exercise because our NATO allies were too insistent on taking a 2-3 hour break to avoid the heat! The Dutch and Germans and the few UK troops involved carried on regardless. If there is another serious war and Europe is involved, lets hope it doesnt start on a hot day!

  • Comment number 76.

    56. At 1:52pm on 26 May 2010, shireblogger wrote:
    "I should point out here that data on bank exposures to the overstretched borrowers I've mentioned is neither detailed or comprehensive"

    Robert, take a look at the OECD Economic Outlook May 2010 Macroeconomic summary published. Box 1.1 contains a summary of French,German and US banks' holdings of Greek and Southern European assets, not just government bonds. If I am reading it correctly it details France's banking sector capital and reserves at $354b and Germany's at $413bn. Holdings of Greek,Portugese and Spanish assets by French and German banks stand at ( they say) $334.9bn and $330.4bn respectively. Those figures indicate how challenged the French and German banks could be with stresses on those assets hitting their capital. No detail given on impairments. No wonder the ECB are having to step in on bond markets.

    France and Germany need to openly publish results of their stress-testing to clear the air.

    Why do you think Germany is trying to protect naked short selling on it's banks....

  • Comment number 77.

    WOTW you really hate yourself dont you? I pity you. Now, before you return to bleating on about British superiority you need to establish the nationalities of those that must endure said bleating - for I am Irish. A proud and patriotic Dubliner living in the UK for 35 years. Your country has been good to me and im honoured to live and work here. Maybe you should be too? Either that or go somewhere (anywhere) else that can cope with such a whinger.

  • Comment number 78.

    The banks made bad loans based on false assessments that they and their subsidiaries colluded to provide. The governments were realizing greater tax revenue based on the false values of the investments and the Rating Houses were also in collusion with the bankers to provide governments with higher rating based on the fake assessments and loans that were not backed by any real monies. In any other industry than financial services there would be a long line at the courts for those facing crinimal charges, but since the governments were facilitating all of this with their failure to regulate only the depositors and taxpayers will be punished.
    It is difficult to legislate honesty and ethics without stern punishment. If the governments can agree to curb banking gambling and separate the assessment harm from the loan arm and the rating agencies not have a financial interest in the loan values they attest, maybe some protections might be developed. Now, the bankers can extort whatever they want from the governments as the governments have weak leadership because of their ties to the bankers. The banks need to be divided. Gambling high risk banks, investment banks and depositor banks. Each provides various levels of return and security. If bank paid salaries and not bonuses there would be less incentive to create these scams with front loaded payments. Jesus turned over their tables in the temple for a reason, a lesson that has been forgotten since they have re-establed their tables in government.

  • Comment number 79.

    WOTW, did you read this article? - http://www.rexresearch.com/articles/ocultech.htm

  • Comment number 80.

    54 Devilinthedetail

    Sorry to puncture your comforting image of me as some sort of Disgusted of Tonbridge Wells fulminating about Johnny Foreigner from behind the Daily Mail. Unfortunately I am willing to bet that I have travelled the world much more than you, been to all but one continent, seen rich, seen poor, lived high, lived rough and so on and so on.

    That is why I never buy into this self-loathing stuff about what a hateful incompetent bunch we are. All countries and peoples have positives and negatives and you have to recognise them and take them at face value. We have many vices but we also have virtues and, funnily enough in my experience we are reasonably well liked around the world...though of course not universally. To believe otherwise is probably just projecting your own angst and insecurity onto others!

  • Comment number 81.

    Robert
    Europe: Paying for its over-confidence?
    You forgot to mention that US based and registered banks have their finger prints on all kinds of trades and scandals all over Europe .. and the worst of the negative trading hasn't even started yet

    Europe is paying for or isabout to pay for its inadeqaute regulation of all banks including the American ones?

  • Comment number 82.

    Hmmm, just stumbled across a couple of interesting articles.

    Seems like the Rothschild bank wants the UK to sell off our motorway network to private companies. You know, the one that was built from taxpayer funding. Great! We can all look forward to paying road tax and some new form of toll to a private company for using the infrastructure we've already paid for and pay every year to maintain. God bless capitalism!

    Also, it appears that a bank has been blown up in Germany, allegedly as a result of a botched robbery, although it might have just been vindictive. Who knows!

  • Comment number 83.

    Catpain.....

    The toughest Burmese bandit can never understand it.
    In Rangoon, the heat of noon is just what the natives shun.
    They put their Scotch or Rye down and lie down.
    In a jungle town, where the sun beats down to the rage of man and beast,
    The English garb of the English sahib merely gets a bit more creased.
    In Bangkok at twleve'o'clock, they foam at the mouth and run,

    [together now]


    But mad dogs and Englishmen go out in the midday sun.

  • Comment number 84.

    WOTW: Collectivism in the most powerful and progressive way of development - it's just a question of how you achieve it.
    -----------------

    Only one problem, at any level larger than a small hamlet collectivism does not work and can be proved not to work. The point is very simple. Collectivism by definition involving central decision making about the allocation of resources, be it labour, money, raw materials. For collectivisation to work the central decision maker has to consistently avoid making bad decisions because a bad decision impacts on everyone in the collective. (in capitalism everyone makes their own decision, some of which will be wrong but as long as the majority get it right the society continues forward). The problem is that this requires the central decision making to be (a) amoral - because morals affect decisions in ways that have nothing to do with economics and (b) not totally detached from influence by lobbyists. Most human beings cannot satisfy those criteria at least not without turning into serial murderers. The second problem is that for the central decision maker to make correct decisions all the time the information that the central decision maker has must be both complete and up to date - as we all known garbage in garbage out rules applies to much more than computers. In any complex economic system we do not have the ability to generate all the real time data that a central decision maker would need and even if we did by the time the central decision maker had processed that information and made a decision based on it, the information would already been badly out of date.

    Putting it more simply collectivisation is nothing more than a permanent bubble economy. Whereas capitalism has suffered 2 global threatening bubbles in 80 years a collectivisation approach would result in bubbles (and therefore busts) for all of the last 80 years.

    --------------------------

    #71 wrote "American derivatives, credit default swaps and CDOs have brought European countries to their knees"

    Derivates are not American. They were first used for certain in Roman times and possibly even in Eygptian times.

    So the fact that a number of European countries (UK included) have spent most of the last 10-30 years consistently spending far more than they earned is the Americans fault? Not sure I can follow the logic, but why let little details like facts get in the way.

    ----------------------------------

    As for the comment "The work/business ethic that we know and understand in the UK simply doesnt exist in many parts of Southern Europe"

    What a load of tripe. I have dealt with a lot of businesses in Italy and Spain (cannot comment on Portugal or Greece because I have not dealt with them) and they work very hard, certainly just as hard as people in the UK. Of course they have slackers and benefit scroungers but so do we. The problem is not the work ethic but the politicians and their love of more and more public spending

  • Comment number 85.

    73 wrote

    So WOTW...your response to a persons comment you feel is derogatarily stereotypical....is to trump them with stereotyping to an even greater degree...Absolutely ingenious..!

    I am afraid this is perfectly normal for the poster in question

  • Comment number 86.

    76. At 3:17pm on 26 May 2010, Kevinb

    Oh - do you mean the web of debt

    http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html?ref=global

    If you spent less time telling me how much rubbish I write and actually read some of it you could save a lot of time!

  • Comment number 87.

    79. At 3:24pm on 26 May 2010, plamski wrote:

    "WOTW, did you read this article? - http://www.rexresearch.com/articles/ocultech.htm"


    not yet - but a nice bank holiday weekend coming up...

  • Comment number 88.

    Peston: That said, good regulatory policy is to hope for the best but prepare for the worst.

    The EU did have good regulatory policy. The problem was that only Belgium and Finland took any notice of it. Regulations can be imposed AND ENFORCED on banks but it is not so easy to do the same with member states who are their own police force and judges. Not one member state who broke the regulations on debt was fined and the EU has no opposition to hold it to account. So is it really any wonder that all this has happened? Creating more regulations for incompetent, greedy national governments to ignore will make no difference whatsoever. When is this lesson going to sink in.

  • Comment number 89.

    I hope Geithner does not have the gall to offer advice to the European finance ministers and bankers! He has presided over an economic meltdown, and an Obama yes man who hopefully will no longer have a job for which he is completely unqualified come November.

  • Comment number 90.

    Just_the_Fax:

    Very good - although in my case I think it needs to be amended to "Mad dogs and Irishman"...! ;-)

  • Comment number 91.

    75. At 3:07pm on 26 May 2010, Catpain_Slackbladder wrote:

    "WOTW: I served 18 years in HM forces from 1986 to 2004...many of those years in Northern Europe and enough in Spain, Greece, Italy and Portugal etc to formulate a good impression of working attitudes."

    ...but you were in the HM forces - not in an Italian car factory, or a Spanish tomato picking field, or a Greek Olive grove picking olives - how does your experience give you authority to talk about the working practices of over 130 million people.

    "Just after my only war posting (Gulf 1991) we actually had to pause a joint military exercise because our NATO allies were too insistent on taking a 2-3 hour break to avoid the heat! The Dutch and Germans and the few UK troops involved carried on regardless. If there is another serious war and Europe is involved, lets hope it doesnt start on a hot day!"

    Gosh this is real "Dad's Army" stuff isn't it - those lazy Italians always changing sides, and as for those cheese eating surrender monkeys...well...

    Maybe if you were in these countries for anything other than oppressing the indegenous people then you might have been able to communicate with them to find out why they weren't marching. Still your experience only reflects the attitude of some soldiers from those countries - it's not a reflection on their population.

    Maybe the southern Europeans have a lower threshold for entry into the army than we do in order to boost recruitment.....not so keen to fight modern colonial wars for their Capitalist masters perhaps.

  • Comment number 92.

    82. At 3:41pm on 26 May 2010, SimplySimon wrote:

    "Seems like the Rothschild bank wants the UK to sell off our motorway network to private companies. You know, the one that was built from taxpayer funding. Great! We can all look forward to paying road tax and some new form of toll to a private company for using the infrastructure we've already paid for and pay every year to maintain. God bless capitalism!"

    Not to worry - our new 'free and fair' coallition is preparing to sell all our schools to the private sector - and re-label them 'Acadamies'.

    Now we know what we know about private sector management - Banks, PFI, Car Industry, Airline industry.....

    ....does anyone apart from the Cabinet think this is a good idea?

    Sure it's sold to us as 'free choice' - but how much free choice will there be when your son can't go to school next week because the hedge fund that runs it has imploded and he has to change schools mid-term?

  • Comment number 93.

    #41 Anglophone. You are behind the curve. Try looking at reality instead of predictions. Western capitalism is dead.

    You can read no capitalist treatise that envisions the collpase of entire nations because the governments of those nations have a "capitalist duty" to destroy themselves by transfering all actual and projected future wealth to a clique of oligarchs who have captured control of the global financial system. (and don´t waste time looking for "feckless borrowers" - If you lend someone money then you have a duty to ensure that they are likely to pay you back, and if they don´t pay you back then that is your problem)

    Your delve through history is somewhat selective. At each of the junctures that you identify substantial parts of the UK economy were destroyed. Take a look at shipbuilding, motor bike manufacture, coal mining, steel production etc etc - all substantively destroyed at various points of economic crises. Destroyed, and never to return.

    All replaced by garbage - selling each other burgers, insurance and general garbage that people neither want nor need. All covered over by natures gift of North Sea oil and and a long running ponzi scheme that masqueraded as high finance.

    Capitalism died, and you didn´t notice - You will do soon though, for this time there are no magic tricks left in the box.

  • Comment number 94.

    #82. At 3:41pm SimplySimon wrote:

    "Hmmm, just stumbled across a couple of interesting articles.

    Seems like the Rothschild bank wants the UK to sell off our motorway network to private companies. You know, the one that was built from taxpayer funding. Great! We can all look forward to paying road tax and some new form of toll to a private company for using the infrastructure we've already paid for and pay every year to maintain. God bless capitalism!"

    You have completely misrepresented this story. In particular, the government has categorically ruled out the charging of tolls.

    "Also, it appears that a bank has been blown up in Germany, allegedly as a result of a botched robbery, although it might have just been vindictive. Who knows!"

    Again, you're trying to make something out of nothing. It was a botched robbery. Nothing more.

    But you made a jolly good attemt at stirring up outrage.

  • Comment number 95.

    #94 rbs_temp

    How you interpret what I write is completely up to you.

    Living in Southampton I have a blatant example of how these projects work. Perhaps you could research The Itchen Bridge, which was built from taxpayer funds and has now been spun off to "The Southampton Corporation".

    Despite promises that tolls would not be charged after the costs were recouped, it's now a major source of revenue for a private company.

    As for the German bank that was blown up, how do you know it was a robbery? Don't you find it an unusual way to rob a bank?

    Or do you really believe that someone with the motivation to blow up a bank, and the resourcefulness to put that thought in to action, is stupid enough to blow up the complete building?

  • Comment number 96.

    29. At 12:26pm on 26 May 2010, Catpain_Slackbladder wrote:
    "DevilsintheDetail - it may be the most ridiculous comment YOUVE ever seen on this blog but the fact is LostAtSea is right. The work/business ethic that we know and understand in the UK simply doesnt exist in many parts of Southern Europe."
    ___________________________________________________________

    Look Capn, I dont want to carry on with this too much as its off topic but the reason I reacted was that the expression "Remember they are poor for a reason" is absurd.

    In what way are they poor? Lifestyle, diet, attitude to serfdom, too much debt, too few techie gadgets ?. The statement is a sweeping genralisation that offends.

    Can we agree to disagree?

  • Comment number 97.

    Was the Emperor confidence about his new clothes?

    Who are the real world weaver swindlers knowingly making false promises and gold fortunes for themselves?

  • Comment number 98.

    I'm sorry but the "poor for a reason" comment is indeed a load of rubbish.

    #74 "Secondly, the majority of recent EU migrants to this country have come from Eastern Europe ... The original post was concerned with Southern Europeans who are leading the charge in the Euro crisis..."

    But what about the Eastern Europeans, surely they also were poor for a reason? Ah but I guess it's not laziness, perhaps it was some other reason. And I seem to recall that Germany was very poor once. It's all very confusing.

    In fact since you have all these nationalities in your neat little boxes, we should take any country that is or recently was poor, and you could help us figure out which the lazy and imprudent ones are, and which ones have more complicated valid historical explanations?

    And what about the Brits? I seem to remember not very long ago that most of British industry was anything but competitive.. I guess they failed to succeed *despite* their fantastic work ethic and prudence, perhaps it was the unions what done it?

    Let's not forget that Britain is in Greek territory as far as overspending and borrowing is concerned. Northern Europe it might be, but that's pretty much the only thing it has in common with Germany in this context.

  • Comment number 99.

    Robert ("I've never met Tim Geithner..."), you've got to get over there and interview this guy. How else is the world going to know what is really going on? We're relying on you.

  • Comment number 100.

    @ 6. At 10:31am on 26 May 2010, Dempster wrote:

    > Can you give a reasoned explanation as to why the regulation
    > of the financial industry doesn’t work?

    Sure thing, boss. Regulators use imperative rules - a set of allowed or proscribed activities, related by logical expressions.

    What's the problem with this? They are not predictive - they do not lay out the goal, but the "supposed" means to achieve it. Of course, the first thing people do is find ways round it. Regulation works nowhere, without a moral hazard attached. That's the way of the world.

    To fix regulation, we make declarative rules: if condition; then consequence. An examples might help here: if a bank goes broke, the managers go to jail for a long time and are stripped of all their assets which are distributed to the people.

    That way, we don't have to wonder if they broke rules, or whether they are good or bad people. We leave that for God to figure out. All we care about is that our banks don't go broke. So we make declarative rules,and make sure bankers know that they are in line for a jail cell if there is any monkey business at all.

    I can guarantee that bankers will ensure they have sufficient capital reserves if we make use of very simple declarative rules.

 

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