Liborgate

Liborgate, despite the brief interlude provided by the chaff from the DFS over Standard Chartered, rumbles on.

The BBC reports that seven banks (HSBC, Royal Bank of Scotland Barclays, Citigroup, Deutsche Bank, JPMorgan and UBS), are to be questioned in the US for alleged Libor manipulation.

The US authorities will look to see if there is sufficient evidence to support a criminal prosecution.

The coming weeks will see much behind the scenes haggling between the banks, the regulatory authorities and governments, in order to avoid this going to court.

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Mervyn King Chides US Authorities

Mervyn King is less than impressed with the US over its "shoot first, ask questions later" approach to financial regulation, wrt dragging Standard Chartered through the mire of public opinion before even completing its investigation.

King is quoted in Boston.com:

"I think all that the U.K. authorities would ask is that various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed."

King is too polite to say that this is in fact a trade war between the US and UK.

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The USA's Little List

Standard Chartered (a British bank) finds itself on an ever growing American list of British banks that have been accused of all manner of "dastardly" deeds of alleged money laundering etc, that "in theory" threaten the safety of the USA.

Unsurprisingly, as a result of the public witch hunt and accusations, shares in Standard Chartered have fallen by 24%; as the USA lets loose in the media in a concerted attempt to bring the bank to heal before any evidence has actually been presented in court.

Standard Chartered deny the accusations.

Does anyone else not find it a tad "odd" that the US authorities are not pursuing US banks with such vigour through the courts and the media?

As one unnamed London based director allegedly emailed in 2006:

"You f****** Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

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It's The Debt Stupid!

In August 2011 I wrote the following about the shenanigans over the US debt ceiling:

"The bill allowing the President to raise the US debt ceiling has finally been passed by both houses.

Crisis over?

No, the markets have reacted badly to the fall in US manufacturing and have been less than impressed with the political antics on Capitol Hill.

Whilst the politicians who brought about this crisis may feel smug and self satisfied, they should bear in mind that US creditor nations such as Russia and China will never trust them again to deal with economic issues such as this in a sensible and rational manner.

As such the long term prospects for the US economy, and Dollar as a reserve currency, are bleak; thanks to the selfish indulgences of the politicians on Capitol Hill.

Breaking News

China rating agency Dagong downgrades U.S. to A+ from A

And so it begins!

The politicians were warned!"

Well here we are in 2012 and the whole sorry business is about to rear its ugly head once more, as President Obama is seeking to raise the debt ceiling by a further $1.2 trillion to $16.394 trillion.

For why?

"To meet existing commitments."

Congress has 15 days to vote on a resolution of disapproval under terms of budget control legislation passed last year.

"Experts" predict that the shenanigans of last summer won't be repeated, because Congress won't be able to muster enough votes to block it.

We shall see.

Politicians are, after all, entirely self serving selfish individuals; they would never let an opportunity for political grandstanding and political brinkmanship be blocked by economic considerations or the financial welfare of their electorate.

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A Continent of SPIVs - Kicking The Can Down The Road

Sir Mervyn King, governor of the Bank of England, is appearing before the Treasury Select Committee (TSC) today.

He has told them that he has little faith in whatever "plan" is agreed by the Eurozone "leaders" (aka "Clown College"). In his view, whatever is decided at tomorrow's EU summit will not solve the region's underlying problems; it will only buy one or two years of breathing space.

Quite!

In the unlikely event that Clown College can come up with a plan to "kick the can down the road" for a year or so, how will this be financed?

It seems that, as Europe is skint, they will be tapping the IMF (funded by the USA) for the money which will be provided via a Special Purpose Investment Vehicle - aka SPIV.

How very appropriate!

Now repeat after me, and learn this for prep:

- There is no plan
- There was no plan
- There will never be a plan

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Germany and USA Go To War, France Panics

It seems that the relationship between Germany and the USA has taken a nosedive.

The Telegraph reports that German finance minister, Wolfgang Schauble, has said that it would be a folly to boost the EU's bail-out machinery (EFSF) beyond its €440BN.

"I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense."

He then told Washington to mind its own business, after President Barack Obama rebuked EU leaders for failing to recapitalise banks and allowing the debt crisis to escalate to the point where it is "scaring the world".

Quote:

"It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government."

Well then!

In other news, the FT reports the following:

"A split has opened in the eurozone over the terms of Greece’s second €109bn bail-out with as many as seven of the bloc’s 17 members arguing for private creditors to swallow a bigger write down on their Greek bond holdings, according to senior European officials.

The divisions have emerged amid mounting concerns that Athens’ funding needs are much bigger than estimated just two months ago. They threaten to unpick a painfully negotiated deal reached with private sector bond holders in July."

The French are really panicking about the deal unravelling because, were it to do so, it would expose how under capitalised French banks really are as the banks would be forced to take a greater hit (one that they cannot afford).

The recent market rallies have been based on leaks spread by those with an interest in seeing a rally at month end, and by the gullible media.

Don't fall for the hype, there is no bailout plan!

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Double Dip Recession Looms

The Telegraph reports that the West is facing the threat of a double-dip recession; after key measures of confidence collapsed in both the United States and Europe, with Germany suffering the steepest one-month fall since records began in the 1970s.



Whilst the USA is mulling a further round of QE, Europe is frozen like a rabbit in the headlights. Member states are bickering as to what should be done, the ECB has blundered by increasing rates this year and Germany is a house divided as the true costs of the Euro expiration are becoming apparent.



Unlesds both the USA and Europe act in unison the double dip is a certainty.

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The End of The Dollar?

The UN Conference on Trade and Development (UNCTAD) has quite correctly said that the system of currencies and capital rules, which binds the world economy, is not working properly.



UNCTAD blame this systemic failure for the financial and economic crises.



Additionally, UNCTAD have called for a new global currency that replaces the Dollar as a reserve currency.



Given the recent shenanigans in Washington, where the politicians played chicken with the Dollar and the world financial system, it is hardly surprising that the calls for abandoning the Dollar as the global reserve currency are becoming louder. Countries do not want to be held hostage again by the antics of those on Capitol Hill.

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US Rates Frozen Until 2013

US interest rates will be kept at record low levels for at least another two years, the Federal Reserve said yesterday.



Now if only the ECB could make the same sort of announcement, then we might see a bottoming out of the falling global markets.



Sadly the ECB is completely disconnected from the real world.

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A Walk Down Memory Lane

1980: Ronald Reagan runs for president, promising a balanced budget

1981 - 1989: With support from congressional Republicans, Reagan runs enormous deficits, adds $2 trillion to the debt.

1993: Bill Clinton passes economic plan that lowers deficit, gets zero votes from congressional Republicans.

1998: U.S. deficit disappears for the first time in three decades. Debt clock is unplugged.

2000: George W. Bush runs for president, promising to maintain a balanced budget.

2001: CBO shows the United States is on track to pay off the entirety of its national debt within a decade.

2001 - 2009: With support from congressional Republicans, Bush runs enormous deficits, adds nearly $5 trillion to the debt.

2002: Dick Cheney declares, “Deficits don’t matter.” Congressional Republicans agree, approving tax cuts, two wars, and Medicare expansion without even trying to pay for them.

2009: Barack Obama inherits $1.3 trillion deficit from Bush; Republicans immediately condemn Obama’s fiscal irresponsibility.

2009: Congressional Democrats unveil several domestic policy initiatives — including health care reform, cap and trade, DREAM Act — which would lower the deficit. GOP opposes all of them, while continuing to push for deficit reduction.

September 2010: In Obama’s first fiscal year, the deficit shrinks by $122 billion. Republicans again condemn Obama’s fiscal irresponsibility.

October 2010: S&P endorses the nation’s AAA rating with a stable outlook, saying the United States looks to be in solid fiscal shape for the foreseeable future.

November 2010: Republicans win a U.S. House majority, citing the need for fiscal responsibility.

December 2010: Congressional Republicans demand extension of Bush tax cuts, relying entirely on deficit financing. GOP continues to accuse Obama of fiscal irresponsibility.

March 2011: Congressional Republicans declare intention to hold full faith and credit of the United States hostage — a move without precedent in American history — until massive debt-reduction plan is approved.

July 2011: Obama offers Republicans a $4 trillion debt-reduction deal. GOP refuses, pushes debt-ceiling standoff until the last possible day, rattling international markets.

August 2011: S&P downgrades U.S. debt, citing GOP refusal to consider new revenues. Republicans rejoice and blame Obama for fiscal irresponsibility.

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It's The Politicians Stupid!

As markets throughout the world plunge, on fears of another financial crisis, the blame for this can be laid full square at the feet of the politicians.

Those in the US who used the stage of Capitol Hill for their self serving antics over the debt ceiling and the "leaders" of Europe, who have behaved and bickered with crass stupidity, are equally to blame.

José Manuel Barroso, the inept President of the European Commission, publicly warned that Eurozone countries are failing to stop the “contagion” of the debt crisis. All very well, maybe. However, by publicly stating that, he needless to say spooked the markets.

To add to the feeling of panic, Italy publicly stated that China has told it that if the European Central Bank will not buy Italian debt, why should China?

I have to ask, by making this public, what exactly were the Italians thinking?

1 It spooks the market even more

2 It shows that they themselves are desperate, as clearly they are trying to offload their debt to all and sundry.

Add into the melting pot the fact the the "leaders" of Europe recently claimed, with self inflated pride, that they had "solved" the Eurozone crisis and that they had earned their holidays and you have a recipe for disaster.

Take all of the above together, and it is self evident that the blame for the current crisis can be attributed to the politicians. Politicians who clearly do not understand that markets are driven by primal instincts (fear, greed, euphoria and a pack mentality).

Until the politicians actually "get it", the crisis will continue and worsen.

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Playing Politics With People's Lives - Epilogue

The bill allowing the President to raise the US debt ceiling has finally been passed by both houses.

Crisis over?

No, the markets have reacted badly to the fall in US manufacturing and have been less than impressed with the political antics on Capitol Hill.

Whilst the politicians who brought about this crisis may feel smug and self satisfied, they should bear in mind that US creditor nations such as Russia and China will never trust them again to deal with economic issues such as this in a sensible and rational manner.

As such the long term prospects for the US economy, and Dollar as a reserve currency, are bleak; thanks to the selfish indulgences of the politicians on Capitol Hill.

Breaking News

China rating agency Dagong downgrades U.S. to A+ from A

And so it begins!

The politicians were warned!

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Playing Politics With People's Lives - Satan's Sandwich

I see that the politicians on Capitol Hill have just about managed to act with some commonsense at the eleventh hour, and have passed a bill in Congress that allows the debt ceiling to be raised. The Senate is due to vote today.

Neither "left wing" democrats, nor the swivel eyed of the Tea Party are happy with the compromise.

Representative Emanuel Cleaver (Democrat), said:

"This deal is a sugar-coated Satan sandwich. If you lift the bun, you will not like what you see."

The bill raises the debt ceiling by $2.4 trillion, which theoretically will allow the government to meet its debt obligations until 2013.

However, $1 trillion will be cut immediately from government spending, with a further $1.4 trillion to be agreed by the end of the year.

The markets, having briefly rallied, fell as they digested the news that US manufacturing has grown at its slowest pace in two years.

Whilst all this self indulgent nonsense has been going on, those with an eye for playing the markets will have done very well out of the rise in value of gold then, if they anticipated the vote in favour of a deal, the fall back in value of gold.

Let us trust that those politicians who played games over this issue were not some of those who played the gold markets!

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Playing Politics With People's Lives - Deadlock Resolved?

President Barack Obama claims that he has reached an agreement with Republican and Democratic congressional leaders, aimed at ending the US debt deadlock.

He has been on television and claimed victory.

However, there is an enormous caveat.

Reaching agreement with the leaders of both the Democrat and Republican parties does not in itself mean that the "swivel eyed" right or "loony" left factions within Congress will follow their leaders blindly down the path of compromise.

Given that the factions have taken the US, and the world, to the edge of financial chaos it is too early to claim victory for commonsense and compromise.

Ideologues do not give one jot for commonsense, or the needs of those whose who live in the real world.

As Obama warned:

"We are not done yet."

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Playing Politics With People's Lives - Republicans Fail

With 96 hours left to raise the debt ceiling, and in a sense save the world economy, the Republican Party has failed to gain sufficient internal consensus to support its plan that was scheduled to be put before Congress yesterday.

The leader of the Republicans in the House of Representatives, John Boehner, has lost his political credibility as he failed to persuade the Tea Party faction to support him.

As such, the vote and plan have been abandoned and the markets have continued to fall.

Proof, if ever it were needed, that the politicians care more about partisan politics than people's lives.

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Playing Poltics With People's Lives

US politicians on Capitol Hill continue to play politics with people's lives, and as yet refuse to agree to raise the debt ceiling.

Ideology may give comfort to those who live and breath politics. However, the rest of the world needs a real job in order to feed and cloth itself. The damage being done to the world economy by the intransigence of the Prima Donna's on Capitol Hill is putting the livelihoods of millions at risk.

Irrespective of whether or not the debt ceiling is raised in time to avoid default, none of those involved in this disgrace deserve to be re-elected.

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Playing Politics With People's Lives - The People Fight Back

I am pleased to see that the American people have woken up to the fact that the politicians on Capitol Hill have let them down.

The switchboard at Congress almost crashed as Americans voiced their anger at the stalemate in Washington over raising the country's $14.3 trillion debt ceiling.

The vote on raising the debt ceiling has been postponed until Thursday.

The message to the politicians is simple, don't play politics with people's lives!

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Playing Politics With People's Lives -The Columbian Stand-off

Sadly, for those of us who live in the real world, the politicians in the US have so far failed to reach any form of agreement wrt raising the debt ceiling.

Partisan hatreds and ideology are driving this protracted Columbian stand-off, whilst the economic well being of real people who have to earn a living in the real world is being held hostage by the antics of those on Capitol Hill.

he risk of a US default is increasing, as talks between President Obama and Boehner (the leading Republican in Congress) collapsed acrimoniously.

Needless to say, the politicians are blaming each other for this mess.

President Obama made a television address in which he stated:

"We risk a deep economic crisis - this one almost entirely caused by Washington."

Boehner claims that he "had made a sincere effort to work" with the White House but that divisions could not be narrowed.

Playing politics with people's lives will lead to economic disaster, and will cost both the Democrats and Republicans dear in the next elections.

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Playing Politics With People's Lives

The markets are beginning to realise that, thanks to the intransigence of the politicians, the US may well default on its debts. The opening sessions in all major countries this week saw falls in their key indexes.

Sadly, the politicians are more concerned with playing politics with people's lives rather than raising the country's $14.3 trillion debt ceiling.

Some cynics are of the view that the chaos caused (and flight to gold - today it touched an all time high of $1,622.49 per ounce) by the ongoing impasse in raising the debt ceiling is benefiting those with an interest in gold.

Let us trust that those politicians who are blocking a deal are not found to have significant holdings of gold.

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The Last Chance Saloon

The European experiment and the US economy both face zero hour.

This morning Germany and France claim to have reached a common position on a second bailout of Greece. However, unsurprisingly, no details have been released.

Notwithstanding the economic viability/credibility of this "accord", European leaders are holding a crisis summit today in Brussels in the vain hope that a solution that will save the Euro experiment will be found.

Meanwhile, across the Atlantic, as the politicians on Capitol Hill hold the US and world economy to ransom whilst they continue to bicker; the Federal Reserve is pro-actively preparing for the US to default on its debt.

Politicians on both sides of the Atlantic have failed the people that they claim to represent. As and when the Euro collapses and (quite probably) when the US defaults, the politicians will then engage in an exercise of passing the plate of blame whilst the people of the world suffer from the economic effects of their failure to show leadership.

This is the last chance saloon for the world economy, sadly the fate of the world economy is in the hands of politicians.

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