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Portuguese 10-Year Bond Yield Reaches Record 10.70%

13 Jun


Greek default options

12 Jun

Via The Economist:

Ex Irish Finance minister Lenihan dies aged 52

11 Jun

Our thoughts are with Brian Lenihan and his family.

I commented about Brian Lenihan and Ireland’s solvency problems below:

A trip to the UK and ‘austerity’


Irish 10-Year Yield Rises to Record 11.24%

11 Jun

NIALL FERGUSON: The iPIGS, don’t forget Italy!

29 May
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UBS’ DONOVAN – Expect more mediocre growth and the G8 will accomplish nothing

29 May

Donovan sees the G8 meetings as being essentially irrelevant and useless. He believes as usual the meetings will achieve nothing. Donovan expects Euro growth to remain tepid and even mediocre. He calls for a rational approach to appointing the next IMF Head based on their candidacy rather than their nationality. However, he does not believe Greece can withdraw from the Euro and does not see emerging markets having a real impact, but will become relevant in 15 years. These last two points regarding Greece and emerging markets I disagree with but the rest of the video summarises the current European market dynamics quite well. Again I cannot subscribe to the institutional groupthink around the non-viability of a Greek Euro exit and the non-relevance of emerging markets.

Vodpod videos no longer available.

PIGS are borrowing at mafia loan shark rates!

27 May

   Source: BBC

A trip to the UK and ‘austerity’

5 Apr

The word ‘austerity’ has it’s origin dating back to 1300–50 and has Anglo-French roots. Sternness, harshness are typically qualities of being austere and one dictionary suggests that austerity was applied during WWII to national policies limiting non essentials as a wartime economy.  Rationing for example is a form of austerity.

Currently David Cameron’s Conservative government are attempting to persuade the populous that the UK needs to cut the fiscal and structural deficit. My concern here is that opposing parties and the public don’t understand economics and basic financial fundamentals; one should not spend more than they can afford. Like our friends in Ireland, the former PM’s one statement summed it all up. Brian Cowen tried to calm the media and the public by saying that Ireland is well funded until mid-2011 so the country faces no liquidity problems.

Clearly this showed that he did not have a clue and that the market were not concerned so much about Ireland’s liquidity (since borrowing would be available but just at higher interest rates), but its solvency.  And to say Ireland was well funded until 2011 showed how recklessly their finances were managed that they would allow an entire nation’s people to be reliant solely on the spirit and sentiment of the market.

In the UK I don’t believe the deficits are been cut enough. In the US currently Congress are locked in debate as to whether fiscal deficit year-end 2011 should be $1.6 trillion or $1.54 trillion. Rep. Frank believes large banks are currently well capitalised. I would prefer to take the opposite side. It seems that the only argument against deficit cutting is that we need to grow the economy by spending borrowed money which will create a multiplier effect throughout the economy. I question that premise of growth. Growth is through investing capital that has been saved and invested, that has been generated via an opportunity cost like forgoing current consumption.

Growth is achieved by investing in capital infrastructure, our export markets and developing our knowledge base. Like in the UK, across Europe and in the US the blame culture rampant among politicians, citizens and business leaders continues indefinitely while the Chinese, Indians, Russians and Brazilians are not only eating our lunch, but our breakfast, tea and dinner.

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