Two blogs .. and a few links

The chap whose comments at Harry's I so admired (his follow-up was excellent too), William Gazy, has a blog.

I don't know why, but the title of A Progressive Viewpoint always made me cringe. Which is a pity, because it's really a rather good read.




The chap who set fire to himself in Westminster last week was apparently not a distressed pensioner, but a Sri Lankan.

It is believed he was attempting a self-immolation as a protest against the Sri Lankan security forces who are on the verge of defeating the (LTTE) terrorists.

Labour's racist education policies. Don't know why that's a surprise. Sion Simon said in Parliament only yesterday of the great curry chef shortage (no, I didn't know, either) "we'll help employers by funding the development and training of members of the ethnic communities to get to Level 3 - the equivalent of A-level standard - on courses run through a virtual strand of the new National Skills Academy for Hospitality". You can't get much more institutionally racist than that. I guess you actually have to be from Bangladesh or Mirpur to cook a decent balti.




Here's a real economic gloomer-and-doomer - Absolute Return Partners’ Niels Jensen, quoted at Credit Writedowns.

Mr Jensen is obviously a chap with the root of the matter in him :

It is pathetic to watch our prime minister attacking the bonus arrangements of our banks when the UK Treasury, on his watch, spent £27 million pounds on bonuses last year as reward for delivering a public spending deficit of 4.5% of GDP at the peak of the economic cycle. Even my old mother understands that governments must deliver budget surpluses in good times, allowing them more flexibility to stimulate when the economy hits the wall. What Gordon Brown has done to UK public finances in recent years is nothing short of criminal.

He points out that in many ways, European banks are deeper in the doo-doo than the Septics :

For the true horror to emerge, we need to turn to Eastern Europe for a minute or two. Nowhere has the credit boom been more pronounced than in Eastern Europe. And nowhere is the pain felt more now that credit has all but dried up. One measure of the credit fuelled bonanza is the deterioration of the current account across the region. Credit Suisse has calculated that in four short years, from 2004 to 2008, Eastern Europe’s current account went from +6% to -6% of GDP². That is a frightening development and is likely to cause all sorts of problems over the next few years.

Meanwhile Western European banks, eager to milk the opportunities in the East after the iron curtain came down, have acquired many of the region’s banks. Now, with many Eastern European countries in free fall, ownership could prove disastrous for an already weakened banking industry in the West.

Do go on ...

On the 11th February the Daily Telegraph’s Brussels correspondent Bruno Waterfield wrote an article under the header: “European banks may need £16.3 trillion bail out, EC document warns.” In the article, the reporter revealed that he has seen a secret document produced by the EU Commission which briefed the union’s finance ministers on the true extent of the banking crisis. Less than 24 hours later, the article’s header was changed to “European bank bail-out could push EU into crisis” and two paragraphs had mysteriously disappeared. Here they are:

“European Commission officials have estimated that “impaired assets” may amount to 44pc of EU bank balance sheets. The Commission estimates that so-called financial instruments in the ‘trading book’ total £12.3 trillion (13.7 trillion euros), equivalent to about 33pc of EU bank balance sheets.

In addition, so-called ‘available for sale instruments’ worth £4trillion (4.5 trillion euros), or 11pc of balance sheets, are also added by the Commission to arrive at the headline figure of £16.3 trillion.”

Do yourself a favour - read those two paragraphs again. Newspaper editors do not change content light-heartedly. Did the Telegraph editor receive a call from Downing Street? Or Brussels? Did he have second thoughts about the avalanche that he could possibly instigate? I don’t know and I probably never will. But one thing is certain. If the EU Commission’s estimate of £16.3 trillion of impaired assets is correct, then the crisis is far worse than any of us could ever imagine. Not only would we have to get used to the prospects of a systemic meltdown of our banking system, but entire nations may go down as well.

Don't hold back - tell us the worst ...

Public debt will rise and rise. The official estimate for the UK for next year is already approaching 10% of GDP, an estimate which will almost certainly rise further. We probably have to get used to running 10-15% deficits for a few years, a fact which seriously undermines the notion of government bonds being next to risk-free.

He finishes on a really depressing note and one which reinforces all my fears. This stuff about deflation is just so much nagombi. As City Unslicker points out, food inflation is running at 9%.

The most obvious trick left in the book, therefore, is to inflate us out of this mess. With the enormous amounts of public debt being created at the moment, years of deflation a la Japan would be catastrophic. You will never get a central banker to admit to it, but a healthy dose of inflation is probably our best prospect of surviving this crisis.

Neils' idea of "healthy" might be different to mine. Even Ambrose Evans-Pritchard is calling for the presses to roll.

The Fed should swoop in to the market – armed with Ben Bernanke's "printing press" – and mop up enough Treasuries to force 10-year yields down to 1pc and mortgage rates to 2.5pc. Monetary shock and awe.

This remedy is fraught with risk, but all options are ghastly at this point. That is the legacy we have been left by the Greenspan doctrine. We are at the moment of extreme danger in Irving Fisher's "Debt Deflation Theory" (1933) where the ship fails to right itself by natural buoyancy, and capsizes instead.

From all accounts, the Fed was ready to launch its bond blitz in January. Something happened. Perhaps the hawks awoke in cold sweats at night, fretting about Weimar.

It looks as if buying shares in these guys might be a sound move. How much more money are we going to throw at the banks ?

Ben Bernanke said the White House would have to consider increasing the scope of its $750bn banking rescue package, as well as readying further aggressive measures to shore up the world's biggest economy. His warning to Congress came as shares in London slid to a new six-year low amid disquiet about the stability of Britain's banks following Monday's cash calls from HSBC and AIG.

So my fantasy of October last year is coming true. Apart from the VAT reduction (I forecast an increase) it's all pretty much in line. The Dow hit 6,666 today. Doomed !

Dear Taxpayer,


The $800 billion US and $450 billion British bailouts have proved highly effective pilot projects, and in some cases have seen share prices fall less quickly or even on occasions rise.


However, as was always made plain, these were only trials of the technique. Following today's largest one-day Dow fall since 1987, and continuing weakness in London, it has been decided that the pilot phase is over, and that some real money is necessary.

A task force consisting of the most highly regarded tax lawyers have for several days examined the options for moving us forward, and there are three :



a) a massive reduction in government spending. Ridiculous. Only a strong state can protect the vulnerable at this critical time. And don't you feel just a little bit vulnerable ? Of course you do. You need to be protected, don't you ? And told what to do. Spending cuts would plunge the world into depression and a new Dark Age.



b) a massive increase in taxes. Not so ridiculous, but may impact upon the wealth creators who more than ever are vital to the economy. Could plunge the world into depression and a new Dark Age. Nonetheless, some taxes will rise. Value Added Tax will rise on November 1st by the value of the rate of inflation (measured by the new Energy Price Index - currently at 24%).



c) a further substantial increase in liquidity - the so-called "Mugabe Miracle" option in its Weimar variant. Would wipe out all debts in very short time and massively enrich "us"* all. While this option successfully restarted the German economy in the late 1920s, some worry that it led to the persecution of minorities. We have examined the British and American situations and are firmly convinced that persecution, if anything is likely this time to be the other way round. The only serious risk is of a shortage of wheelbarrows. It is this third option that has been decided upon as our - as your - best way forward in the continuing financial uncertainty.



You need do nothing at this moment. Stay indoors and listen to the radio. We thank you for your patience. Your vote is important to us. You are being held in a queue. Your call may be recorded - as may your email, browsing habits and text messages.




Best Regards



G.W. Bush

G. Brown



pp Ug, the Giant Lizard, Secret Ruler of the World

* ("us" i.e. not you)