Tuesday, June 29, 2010

Labour MP Calls For Germany To Quit The Euro

Gisela Stuart, Labur MP for Edgbaston wrote this -

For a generation of German politicians, "Europe" has been a way of slaying the ghosts of the past. This may be understandable, even honourable, but the results have not always been good for Germany or Europe. Chancellor Helmut Kohl overrode the Bundesbank (and the majority of Germans) in the name of "Europe" when the euro replaced the deutschmark. After barely a decade, Economic and Monetary Union (EMU) is facing its biggest crisis and Germany is again under pressure to come to the rescue, in the name of Europe.

In fact, in this instance, the interests of Germany and Europe are the same: Germany should leave the euro.

Her full article in Standpoint

Open Europe -

51 percent of Germans want the Deutschmark back

AFP reports that an IPSOS poll has found that 51 percent of German voters want to return to the Deutschmark, with only 30 percent wanting to keep the euro. 56 percent of those over 50 years old said they wanted the DM back and 42 percent of those between 16 and 29 shared this view.

Meanwhile, the WSJ notes that eurozone faces its next major test on Thursday when the European Central Bank's €442 billion of emergency loans expire. Some investors worry that vulnerable euro-area banks, unable to borrow in the interbank market, could have difficulties in replacing that funding, despite repeated assurances from the ECB that it will provide funds on similar terms, albeit for only three months, beginning Wednesday. The FT reports that Spanish banks have been lobbying the ECB to extend this three month programme, accusing the ECB of "absurd" behaviour in not renewing the existing scheme.

A Handelsblatt article, entitled "The ECB has to play fire brigade for Greece", suggests that the ECB will have to intervene in Greece's bond auction this week, with investors put off by Greek government bonds' junk status. In an interview with Le Monde Jacques Delpla - a former economic advisor to French President Nicolas Sarkozy - has said that debt repayments for struggling eurozone member states should be postponed by ten years in order to allow these countries to pursue necessary budgetary reforms: "The solution I suggest is therefore to encourage fragile countries to go on with their reforms without leaving the eurozone. In exchange, their debt payments could be postponed by ten years".

AFP WSJ FT Telegraph Handelsblatt Handelsblatt 2

10 years to save the Euro. It almost sounds like the 1000 year Reich. Better to face current reality, then dream that Germans will pay up for ten years on end. Ten weeks is proving a bit of stretch currently.

Labour MP Calls For Germany To Quit The Euro

Gisela Stuart, Labour MP for Edgbaston wrote this -

For a generation of German politicians, "Europe" has been a way of slaying the ghosts of the past. This may be understandable, even honourable, but the results have not always been good for Germany or Europe. Chancellor Helmut Kohl overrode the Bundesbank (and the majority of Germans) in the name of "Europe" when the euro replaced the deutschmark. After barely a decade, Economic and Monetary Union (EMU) is facing its biggest crisis and Germany is again under pressure to come to the rescue, in the name of Europe.

In fact, in this instance, the interests of Germany and Europe are the same: Germany should leave the euro.

Monday, June 28, 2010

Greek Government Debt Nears Pre-Crisis Rates

Greek government borrowing is getting progressively more expensive, despite the shock and awe bail-out and loans from the ECB. Another month, and the rates will be back where they were pre-the bail-out. The crisis can only get worse in the next few weeks, driving the political situation towards default, devaluation and relaunch of the drachma.

Coalition Should Put Visas Up For Auction - EU, Non-EU Alike

Damian Green, the Immigration Minsiter said on Channel 4 News tonight that the government is considering auctioning visas. What a good idea. Where and when does the bidding start? At least it's an honest approach, and clear cut.

If the government wants immigration numbers down, it's useless to put a cap on non-EU immigration alone, when 90% of the numbers arriving are from the EU.

The way to reduce immigration is either to withdraw from the EU, or make non-British EU Citizens pay to come here, unless they have a job skill vitally in need. Why have a different system for the two categories?

If companies want the workers in, or husbands want to live with their foreign wives or children, they can either get them here by them having the right qualifications, or they can pay for their visas with cash. Why should anyone have a right to walk into another country free?

With a price to be paid, the numbers coming in will be held in check, and the government will get plenty of receipts to help fill the coffers. It will help the economy twice over.

Maybe EU Citizens could be given a 25% discount or something, and if other EU countries want to replicate the system and charge Brits for visas, why not? There should be a price anyway. Go for it!!

I paid $20,000 for my Resident Retirement Visa in the Philippines (as a loan). Malaysia sells visas in a similar way. Why not sell working or fiancee visas to Britain from anywhere in the world? What price? $50,000? $100,000? That could raise $10 billion in a year per 100,000 incoming new residents. Our troubles would be over. It costs the country money to accommodate immigration. Why should we pay?

This solution would be better than making nasty political and racial decisions EU-style. Let the market decide. Presumably terrorists and serial killers would not be permitted to bid to live here, as they can now free of charge.

Open Europe - The Telegraph reports that Eurostat figures suggest fewer than 300,000 Britons are working in the EU compared with just over one million of their European counterparts working here, despite Gordon Brown's previous claims that migratory flows are equal in both directions.

There are six million Britons living abroad, most of them working. The figures given mean that maybe only 10% of them choose EU countries to go and work in. So much for the EU being being our key partners.

The EU is a sideshow. The best opportunities are elsewhere. If British workers know that, why doesn't its governmment?

If we had received $100,000 for each immigrant, the government would have had $100 billion from EU immigration alone. Gordon Brown must be kicking himself.

FACTCHECK on Immigration.

UPDATE - Asylum seekers not required to return home should be treated as having taken out a loan like a student loan, and have to repay it over their lifetime.

EU Deliberately Breaks Up Families

The hated Citizenship Test. £300 a time. 5% pass rate. It complies with EU immigration policy.
Keep the niggers out, is roughly speaking the policy of the European Union as regards immigration. Of course, it would never be spoken of in such terms, and there would be exceptions made for people from outside the EU to enter, who possessed skills needed for economic reasons, regardless of race. But broadly speaking, the policy is as I say. Keep what's left of Europe for Europeans - and asylum seekers, and make it impossible for anyone else to get in under any circumstances.

The 'niggers out' policy is enforced to the point that foreign wives and husbands who've lived in the UK for years with their families, can now be sent back to where they came from, if they don't pass the almost impossible Citizen Tests. Many families are being broken up, wives from husbands, children from parents. The shameful thing, to my mind, is that no one is saying a word about it.

In years to come, people might be able to take in what is happening.

I left the UK four years ago, and went to live in the Philippines, where my uncle lived when he was alive and where I have many friends from the 1980s and 1990s. I had fallen into bad health, and did not necessarily expect to live much longer, let alone recover. And yet, with treatment, recover I did, to the point where I can now lead a fairly normal life once more. I find that I can cope with the faster pace of life in the UK again, if I am careful not to overdo things, and stick to my medical regimes.

As I have a business over here employing 100 people, they are pleased to see me back in health, and back in their midst. I could not even take phone calls until a year ago, as my health was in such poor shape. You would think that I would now be able to focus on getting my business back to health as well.

The problem is that while I was away, two things happened. One, I became a parent, and now have a two year old son, who is currently here with me in Britain. I separated from his mother, and we (my son and I) were living with another woman who became in effect his mother, and my new partner.

I wanted to keep the 'family' together, but as I brought my son here to the UK, my partner's visa was refused as we had not lived together for two years. If we were married, it would have been easier, or if she had been the mother.

But should people, happy as they are, get married to be entitled to stay together to get around bureaucratic barriers?

Or have children for that reason? I don't think so.

The situation is that as I cannot bring my partner to Britain, she continues living in the Philippines, and I visit her there every three months or so. There is little prospect of this situation ever being possible to rectify under current EU regulations. At one time a British person could marry or partner whoever they chose and bring them home, but now they cannot.

Even if the partner arrives in Britain, their visa will always be dated, married or not, children or not, until the time that they pass a Citizenship Test, which is failed by 95% of people who attempt it. Visas are not automatically renewed so Citizenship becomes important.

Do people realise that, by bureaucratic means, denied of course by officialdom, that this important human freedom, to partner or marry whoever you wish, has been taken away, in favour of a European only policy? A European can come to Britain and live on social security in perpetuity, yet a non-EU nigger has to pass a test which very few British citizens would be able to pass, even if they studied for six months.

If I explain the situation to people, that non-EU families are being deliberately broken up in favour of an EU-only policy, some seem quite pleased at the thought. I guess human beings overall are pretty brutal in their prejudices and indifferent to the troubles of others.

As in my case the policy of never allowing families to settle and be stable will have consequences, whether they be economic, social or to health, none of them beneficial to the individuals affected, or the society to which they belong. The EU partners-only policy is as brutal as anything I've ever encountered in my life. Who would want to challenge it, or even admit such a policy existed? Goebbels would be proud.

David Cameron says he believes in the family. If he does, he would remove this EU-Only policy for who you can partner or marry. Until he does, I will be regularly leaving my 100 employees in the UK more often than I would wish, my ageing mother and my son for longer than I like to. There are many in the same situation as me, where their lives have fallen foul of the EU's border policy. How many more victims will there be before this bureaucratic injustice is ended?

There are five and a half Britons living abroad, many of whom would choose to return if they could bring their foreign partners. I doubt mine is an isolated case.

Would you pass the British test?.

The Policy is now to add a requirement to speak English at intermediate level. This will no longer be required by asylum seekers. But it is required by the spouses of British citizens, and the parents of British Citizens. Incredible.

Daily Mail - The Lib Dems are also reported to have forced the Government to water down a Tory pledge to bar immigrants unless they can speak English.

The promise was a central part of David Cameron's election campaign. But it has now emerged that families of asylum seekers allowed to settle here will be exempt from the ban.

The Government was warned that forcing refugees' dependants to learn English breaks Article 8 of the European Convention on Human Rights, which gives everyone 'the right to a family life'.

Lawyers say a refugee could argue that, as they cannot return home, they can gain their 'right to family life' only by having it in Britain - whether or not they speak English.

Former immigration minister Phil Woolas said: 'The Tories gave the impression that the English-speaking test would apply to all immigrants. It is now clear that is not the case.'

Sunday, June 27, 2010

After 'Cuts', Collapse

In Britain the government is cutting services by as much as a claimed 25%. The idea is to balance the budget over the planned term of five years. But what happens if tax revenues just keep falling and don't recover, as the plan assumes?

The future in those circumstances would not be too great for public servants, if events in California are anything to go by. There town halls and municipalities, hit by collapsing revenues, are actually closing down completely, no schools, no police, no nothing.

If services are needed, they call private service providers. This saves money, sure, but the communities that once had their own schools and police, now have mercenaries, who will only give service as they are paid, within strict budget limits. This could come to Britain, of course, if the '25%' cuts don't balance the budget, and if money cannot be borrowed at low interest rates.

FT Report.
EXTRACT - The small southern California city of Maywood has hit on a unique solution to its budget crisis. Crushed by the recession and falling tax revenues, the city is disbanding its police force and firing all public sector employees.

Maywood has opted for an extreme solution, by contracting out all public services, including the most basic, to save cash. But it is not alone.

Germany's Clever Goal

Uruguayan Referee with 'previous' - Jorge Larrionda
It was interesting that the first German goal-kick entered the British penalty area, with the German goal-keeper falling over as he took the kick, he was whacking it so hard. This was obviously an intended tactic - to land goal kicks deep into the opposing area.

So why when he took the next one were all England's defenders forward in position? I am no expert on football tactics, but surely the first one was warning enough, and a redesign of defence for deep goal kicks should have been implemented immediately to watch out for this tactic.


Ashley Cole is playing a blinder. Come on the reds.


What a farce. When 500 million people around the world know it's a goal without any doubt, surely the referee could be told as well. Had the score been 2-2 at half time, the second half could have been very different.


From 2-1 down, Capello decided to send his infantry over the top and his defenders forward, taking maximum risk to get a goal, only conceding two breakaways for his trouble.

Oh well. You cannot take this seriously, and I don't, but for all the emotion expended, you'd think that somehow a competent manager could be found who can speak English for a start, and read the tactics of the game better than Capello. I'm sure he's a very nice fellow, but I would imagine England would have half a dozen capable club managers who could do better.

My friends say they can relax now, and enjoy the World Cup now England is out.

Germany is dominating the continent now in the world's most important sporting arena, as well as Europe's politics and economy.

The sporting outcome of the world cup for Europe, matches well the situation of the economies - France, Italy, Greece out. Britain struggling to hang in there but falling early, and Germany in the ascendant, with the Netherlands and Slovakia still with hopes alive.

Two of the PIGS survive, however, Spain and Portugal, so currency issues cannot be said to be deciding football results entirely. So no need to make any outrageous political claims. Or is there?

Disallowed goal turned the game.

Uruguayan referee had previous for 'irregularities' (taking pay-offs?). It seems that the corruption at the heart of world government extends into world sport. Hardly surprising.

EXTRACT - In this year's tournament, where he has refereed three games, Larrionda has already attracted criticism for his failure to spot Tim Cahill's clear handball for Australia which ultimately cost Serbia a place in the last 16.

It seems like Britain and Serbia are equally the dogs of the world's political system and major sporting events.

How we won the rugby world cup, I'll never know. The refereeing in that was truly awful, but Johnny Wilkinson was simply too effective, despite it. It might help the psychology of players and supporters to realise, though, when they are playing against both opponents and referees combined. The disappointment would not be so bad, and the tactics used might be different.

FIFA still refuse to use technology to decide whether goals are scored or not, which enables a little bit more referee 'input'. It all fits.

The word 'stink' comes to mind. I don't get so emotional about football as many do, but I feel sorry for the game and a world that cannot organise itself, and is riven with corruption at seemingly every level. I am proud of the British football team's performance, and admire Germany's, but detest the governmental systems that enslave us all, damaging our sport, and wrecking our economies.

There is only one road back from this hellish corruption, and that is democracy. We still have to believe that somehow we will get back to something that makes sense, from the nonsense we are forced to live within right now.

Saturday, June 26, 2010

Coalition Might Have To Backtrack On VAT And CGT

Europe's leaders during happier economic times. Their faces look very different nowadays. Click to expand.
The recovery falters in the US with consumers saving hard to pay off their debts. The Fed is divided as to whether more QE can be afforded or not. QE probably won't happen until things look worse than they do right now. But with USA money supply tumbling by up to 10% a year, the squeeze will impact everyone around the world in the months ahead. Europeans whose governments are tightening their economies to get rid of borrowing will be hit very hard. Maybe the UK Coalition Government will be cutting CGT and VAT again within weeks, and paying off debt will get pushed down the loist of priorities, as the world hits the meat of the coming depression.

Ambrose Pritchard Evans is onto the story.


Gabriel Stein, from Lombard Street Research, said the US is still stuck in a quagmire because Mr Bernanke has mismanaged the quantitative easing policy, purchasing the bonds from banks rather than from the non-bank private sector.

"This does nothing to expand the broad money supply. The trouble is that the Fed does not understand broad money and ascribes no importance to it," he said. The result is a collapse of M3, which has contracted at an annual rate of 7.6pc over the last three months.

Mr Bernanke focuses instead on loan growth but this has failed to gain full traction in a cultural climate of debt repayment. The Fed is pushing on the proverbial string. The jury is out on whether or not his untested doctrine of "creditism" will work.
"We are now walking on deflationary quicksand," said Albert Edwards from Societe Generale.

Maybe the G20 this weekend will result in a new announcement of coordinated QE across many nations. That seems unlikely if Germany, Britain and the US have any say, where debt reduction is winning the balance of the political argument. The cold draft of a quickening downturn might force a reversal in policy, but maybe not this time, where the current fashion says that the credit reduction game will win.

Only Sarkozy is openly campaigning for the opposite as far as we know. This time the world will take the downturn on the chin. The result is unlikely to be pretty.

THE INDEPENDENT Bill Clinton's economic adviser -Stiglitz has one more practical solution to offer. Governments should set up their own banks to restart lending to businesses and save struggling homeowners from repossession. "If the banks aren't lending, let's create a new lending facility to do that job," he says. "In the US, we gave $700bn to the banks; if we had used a fraction of that to create a new bank, we could have financed all the lending that was needed."

It all sounds so easy. There are no top down solutions, other than holding the ship steady. The rough sea conditions are coming anyway.

If there is time to reduce government spending before the crash kicks in too hard, it makes sense to stop pouring resources down the state sector's unproductive throats, and redirect funding to the productive sectors. But the productive sector does not become entrepreneurial because of government subsidy. It fights out of self belief.

Banks will not lend to entrepreneurs out of fear of not being repaid. That is because prices need to fall to the point where the banks believe in the investments they are being asked to fund. Once property prices, shares and commodities have all halved in value, banks will lend to solvent businesses more readily. The trick is to survive the halving of asset prices. The next three years or so should put the floor in. From there the world can rebuild. Working off debt is not merely repaying the debts. It is coping with the fall in the elevated price levels which cannot possibly go on much longer.

BBC on G20 - A draft version of the summit's communique suggested the Group of 20 richest and emerging economies was nearing a compromise, Reuters news agency said.

This would see an agreement to halve budget deficits by three years and toughen banking regulations.

Brazil said the focus on cutting deficits could harm emerging economies.

"If the cuts take place in advanced countries it is worse," said Brazilian Finance Minister Guido Mantega.

"Because instead of stimulating growth they pay more attention to fiscal adjustments, and if they are exporters they will be reforming at our cost."

Friday, June 25, 2010

Cameron Should Not Have To Plead For BP's Survival

Today finds Cameron heading for Canada for the G20 with a private meeting booked with Obama in which he will plead for BP's survival. Obama is a shrewd politician, who knows that when there is a catastrophe you need a scapegoat, and he's decided to make BP the scapegoat of this one.

But if he doesn't realise the knock-on effects of destroying one of the biggest companies in the world, then he should. Investor confidence is fragile enough after many banks have had to be saved from oblivion with government cash in the last two years. It seems odd that the US government, which not long ago was raising trillions to save financially insolvent financial organisations, is now going crazy to destroy a company that is basically very successful.

Obama seems to lack basic wisdoms in many of his choices. He may be a great communicator, who, like our own Tony Blair, likes the cheque book, but as with Blair, the better the politician's 'elect-me' sales pitch, the worse the performance seems to be, once in power. Common sense is all we need in political leaders, not top PR professionals, who too readily allow others to swing in order to protect themselves.

Let's hope David Cameron can bring him around to adopting a position of common sense.


EXTRACT - Cameron - "I want to work with everyone concerned to try to make sure that out of all this there will still be a strong and stable BP, because it is an important company for all of us.

"That is about quiet diplomacy and making sure we deal with the issues, and I think that can be done."

Somehow I don't see Cameron rushing in to make concessions to all and sundry at international venues like Brown and Blair. He'll tread around Obama's ego, and political requirements, negotiate with Merkel's determination to make all Europeans into me-too Germans, and come home with Britain's interests protected. His face could not be more different from the grinning Brown and Blair 'you can tickle my tummy if you like' approach.

As for Cameron's body language, arms across front clasping large defensive file-holder, it says more than any words. 'On guard'!

John Redwood

Thursday, June 24, 2010

Break-Up Of Eurozone Being Taken Seriously

FT Video tells the story.

The PIGS are about to fly the Euro nest.

Barroso says they will fall to military takeovers.

But what of France? Will she fly the nest too? Why would Germany want to carry anyone who isn't solvent?

If you listen carefully to the above report, notice that only Germany and the Netherlands, from the 'Northern' countries, are spoken of as being likely to experience growth, and remain in the Euro. France is not mentioned in either list, the leavers of the stayers. That is the primary problem. Has this key member of the political alliance become one of the economic failures, spending too much, producing too little, unwilling and unable to change?

It looks like it.

If so, France will end up on the list of countries to leave the eurozone.

Unlike the FT, the EU is unable to even discuss the possibility of the Euro breaking up, which makes the event more likely to be cataclysmic than controlled.

One person is asking that alternatives to the Euro be discussed, and planned for in the EU Parliament. He says that the sceptics who want to think out an alternative future are the good Europeans. I wonder who he can be.

Wednesday, June 23, 2010

Barroso Predicts Collapse Of Democracy In Eurozone

Reported in Ireland two days ago but not in the UK, the President Of The EU Commission stated that he could see a coming collapse of democracy in Europe. Far from expressing any regret at the role played by the EU in first swamping the PIGS with excess lending, and then demanding politically polarising austerity measures, Barroso probably sees such a collapse as the best option. That way the EU can wash their hands of all the problems they have created without loss of face.

IF the EU were to be rejected by a democratically elected government within the eurozone,that would spell final humiliation. But a rejection by a hardline military regime would be presented as 'well, we did our best. but what can we do with these inferior peoples?'

The article from Ireland.

Extract -

In a recent meeting of trade union officials, the European Commission President, Jose Manuel Barroso, predicted that democracy could 'collapse' in Greece, Spain and Portugal, should the austerity measures being enacted in those respective countries lead to civil unrest or military coup.

It doesn't sound as if Barroso is all that bothered about the destruction of Europe's post war democracies. It's a case of sour grapes,of course. If we cannot make it work, no one can, is how he wants it to be.

Second extract -

At a time when so many people around Europe are feeling the pinch, Mr Barroso and his cohorts seem pleased to continue on the same track. It would seem that they, who are insulated by the money and perks which Brussels offers to its own, are not really so concerned with the real effects which the austerity measures will inflict on many Europeans, but rather on preserving their "empire" - seemingly at any cost. That is how Mr Barroso referred to the EU in the past…as an "empire", and it seems clear, especially in the light of the running of the second Lisbon Treaty here in Ireland, that "democracy" was never really that high on the list of priorities for the EU.
From The COIR Campaign.

Football's Like Public Sector And EU - Too Much Money, And Politicised To Death

England have just kicked off playing Slovenia. It looks a bit panicky and uncomfortable. Let's hope it settles down.

Whatever is about to happen on the pitch, nothing could equal the total disarray in the French camp, which has followed on from their loss to Mexico. The players are on strike. The team manager has lost his cool. The sponsors are withdrawing, and the French President is getting involved to try and get to the bottom as to why key players were kept off the pitch - such as Thierry Henri - and bring the national outcry to an end.

The FT writes Crédit Agricole pulls French World Cup ads

By Roger Blitz and Richard Lapper in Bloemfontein and Peggy Hollinger in Paris
Published: June 21 2010 15:23 | Last updated: June 21 2010 23:57

France’s World Cup campaign, crippled by dire performances on the pitch, internal strife and a players’ strike, went from bad to worse when Crédit Agricole pulled an advertising campaign and sponsors demanded action by the country’s football authorities.

The French bank said on Monday it had stopped early the advertising campaign, due to run until June 25, “in view of the current controversy surrounding the French national team”.

The team’s corporate sponsors have held conference calls to voice their anger at the players’ refusal to train.

One person who took part in the conference calls said that the sponsors believed the situation was “unacceptable”.

France is on the verge of elimination from the tournament, their 2-0 defeat to Mexico on Friday forcing tension between management and players into the open. The French team plays South Africa in its final group game tonight.

The crisis in French football – and the behaviour of the national team in South Africa – has triggered an avalanche of criticism from social commentators and politicians in France. Christine Lagarde, finance minister, said she was “appalled” by the players’ behaviour.

It has highlighted, too, the sometimes fragile relationship between teams, players and their sponsors.

It all seems like a load of prima donnas, all competing for attention, to the point that they can't work as a team, and do the basic job of playing a simple game of football.

It's too much money rotting the fabric of the game.

England's progress could turn the same way or surge from here. But already we can see the same signs of disconnection.

It's no different from most other aspects of life, including government. Too much money has been borrowed and spent, placing commercial interests way ahead of any other values. The pride in the game, in the nation, in the team have all been eliminated.

It's no different to the ludicrous sums which governments have squandered on the NHS, and other state services. The more money has been spent, the less the basic job gets done, and the more prima donnas compete to be the most self-important.

If there is a depression coming along, and all these fallings-out across European football are symptomatic of social structures in a state of collapse, no different from what's going on with the EU and the Euro, as more and more money is pumped into a growing black hole of hopelessness, then maybe one good outcome will be that life can get away from its total focus on money.

Maybe human beings can count for something once more, just as they are, with no need for any millions in their pockets, rotting their brains. Respect will be earned by behaviour, and attitude, not by the number of noughts a person can command. It's one aspect of Cameron's government which looks hopeful. He doesn't need any of the trappings. He's keeping it far.

PICTURE - Gary Lineker,former England Captain and football commentator kicks around in Number 10 with Cameron. Communication skill is the bottom line of success in most enterprises. Lineker has it. Fabio Capello seems a little light. Cameron's made a good start.

Redwood Corrects News Headlines. What Cuts?

He writes on his blog-

Public spending is to rise 10% in cash terms over 5 years:

2009-10 (Last Labour year) £669bn
2010-11 £697bn
2011-12 £700bn
2012-13 £711bn
2013-14 £722bn
2014-15 £737bn (£68bn or 10% above Labour level)

Who'd a thunk it? Conservatives. Cuts. Jam & Bread. Salt & Pepper. Laurel and Hardie.

Yet Thatcher increased spending continually throughout her Premiership. As will Cameron and Osborne. But myth rules the media.

Black Economy To Surge With 20% VAT

VAT at 20% will have one effect. It will make those who work in the Black Economy more competitive, and their market share will grow. In Britain the Black Economy is thought to be relatively small compared to the Club Med countries like Italy and Spain.

With many businesses fully aware that they have to cheat to survive, with many, for example, paying wages well below the minimum wage - I heard of a £3 an hour job last week being taken by a 24 year old graduate I know personally in London, 20% VAT will act as a trigger to prompt more people to offer or ask for a cash price.

The Black Economy could be approaching 10% of the economy, but no official figures have ever been produced in the UK. Spain's 2009 Report into the BE there suggested that there at least the BE is growing.

A report has just been leaked to the Cadena SER radio station that the black economy in Spain now makes up 23.3% of all transactions. This means that a quarter of the economy in Spain doesn’t show up on the official figures for the size of the GDP for example. The figure is 5% higher than a decade ago and it is getting higher due to the famous “Crisis”.

Up until now it has been normal for the plumber to say “Do you want a receipt?” the subtitle being, “do you want to pay 16% extra on top of your bill”. Apparently there has been a sea change in the way the situation is approached in the last year and it is now the buyer who asks whether it is possible to do the job without VAT rather than the vendor wanting to avoid a bit of tax and paperwork. Funnily enough Spain still only ranks second in the tax avoidance stakes as the figure in Greece is much higher.

Britain's BE is smaller than Spain's, but the problem is growing everywhere in the world, not shrinking. Running two sets of accounts is made easier by computers, and it becomes easier to cheat as the availability of computer power grows. See An estimate of the relative size of the Black Economy -

UK 7% of GDP
US 8% of GDP
Italy 30%
Russia 40-50%
Sub Saharan Africa 50-60%
China 20%
Japan, 6%

Full Report.

If the figure of 30% is achievable in Italy, wrecking government finances there, you can imagine that the Black Economy in Britain will be catching up as tax rates rise to European levels.

The article below explains the situation in Britain.

...Moonlighting, ghosting,working for cash in hand, undeclared business profits, fraudulently claiming welfare assistance, failing to register a business for VAT purposes and organised crime. All of these ‘economic axtivities’ are said to operate in the shadow or informal economy and no one including the authorities have much of a handle on just how large is the size of the black economy.

A new report from the National Audit Office has been looking at the attempts of HM Inland Revenue and Customs and Excise to recoup lost tax revenue from tax evaders across the country. Recent estimates from the European Union hint that one worker in twenty has undertaken undeclared paid work in the last twelve months although the range of results from the twenty seven member nations was from 1% to 18% with the UK below average.

That strikes me as likely to be an underestimate. There are in Britain over three million people counted as self employed, one and a half million unemployed and over ten million people listed as economcially inactive. I would venture to suggest that a sizeable proportion of this cohort of nearly 15 million people would have the opportunity for a spot of extra income each year which might go undeclared. Then add in those in full time and part time work employed by someone else who moonlight - teachers offering tuition, people paying their gardeners or cleaners in cash, the recently divorced looking for extra income to meet maintenance payments, graduates trying to repay their student loans and families on low wages desperate for some overtime and unsocial hours paid in cash to meet rising utility and food bills.

Most of us have done it at some point in our lives. Detection rates are low, we might find it fairly easy to rationalise it on the grounds that we are already heavily taxed and our extra income and spending helps to support local economies especially when times are tough and budgets are stretched.

Anyway the latest estimate is that there are upwards of 2 million moonlighters and ghost workers out there in the UK costing the Exchequer around £12 billion a year in lost tax take. But the extra spending and income generated in the black economy does create some additional tax revenues - it is not simply a deadweight loss which might have gone to fund more teachers and nurses.

VAT at 10% would give the legal economy a chance. 20% gives the crooks the edge they need.

UPDATE - On there was a discussion saying that in Scandinavian countries VAT is from 22-25%. Yet in Scandinavia people tend to comply with central authority, while in Britain people cheat.

A VAT rate of 20% can only work out in such countries where people don't evade tax as a general rule. Brits are not keen on complying with silly rules and are more individualistic, seeing their own interests as above those of central government. They don't feel shame at breaking petty rules and evading high taxes.

Tuesday, June 22, 2010

Investors To Become Cautious Faced With 28% CGT

The Capital Gains Tax increase from 18% to 28% will net less tax. Fewer people will cash in a gain to sacrifice 28% of their profit made on an investment to rebalance their portfolio than previously. They will prefer to sit on a lumpy capital profit and wait for a rising dividend, for example.

I bought a share in a coal mining exploration company at 0.8p in 2009, which today is trading at 12.5p after announcing the go-ahead in the development of a huge mine. It was a lucky strike. I cashed in half my holding pre-budget, but will now sit tight and wait five years for future lifts up to around 50p as the project comes on line, and await a dividend.

With CGT at 18% it might have been worth coming out on a rise and trading back in a fall in the price occasionally. But at 28% it will be a case of sit tight. A 28% tax bill makes any selling look mad. This will delay the moment that the government will receive any tax. I am sure my reaction to 28% will be typical.

The sad thing is that the tax increase will net no money from the government, but will make investors more cautious. What's the point?

The FT agrees -

The decision to raise capital gains tax to 28 per cent for higher earners will deter asset sales next year, reducing the tax take the government would have expected, according to official figures.

Forecasts show that investors will respond to the increase in CGT by putting off asset sales, reducing the capital gains they realise next year by more than a quarter.

As a result, tax revenues from the 10 percentage point increase in CGT for higher-rate taxpayers will be £800m lower in 2011-12 than they would otherwise have been, according to Treasury costings published for the first time to improve transparency. The overall increase in revenue from the CGT change will be £725m in 2011-12.

Drawing on evidence predominantly from the US, the Treasury’s analysis noted: “It is widely accepted that CGT has the effect of discouraging asset disposals or ‘locking-in’ gains.”

If you add in the multiplier effect, in that when investors sell an asset,they usually buy another, raising the rate of CGT is a highly deflationary act, and cuts the growth rate. Here is a tax that loses more than it gains. And it's all to please Vince Cable, who believes private wealth is a sin.

France Fears Being Dumped By Germany

Irish Pub Discovers Mediterranean Style. Would Ireland want a currency linked only to the Club Med Countries?

An interesting reminder of how the Euro came into being is provided by The Spectator today -

While the British have usually been regarded as the most eurosceptic of Europeans, it’s easy to forget that the Germans were never very enthusiastic either.

Helmut Kohl was desperate to secure French support for the reunification of Germany — over the stiff opposition of Margaret Thatcher and the British. So he agreed to French demands to support a currency union.

It was a quid pro quo. Just as a united Germany was the Chancellor’s political dream, so monetary union was the dream of François Mitterrand, the president of France.

The Spectator

And an interesting way that the Euro will go next is given by The Telegraph, similar to the ideas of the former CEO of Barclays Bank who thought the Euro should split into two - the northern Neuro and the southern Sudo -

Open Europe - Saturday's Telegraph reported that EU officials have revealed that Germany and France are examining ways of creating a "two-tier" euro system to separate stronger northern European countries from weaker southern states. The creation of a 'super-euro' zone would initially include France, Germany, Holland, Austria, Denmark and Finland. The likes of Greece, Spain, Italy, Portugal and even Ireland would be left in a larger mostly Mediterranean grouping.

"It's an act of desperation," the official is quoted saying. "They are not talking about ideal solutions but the lesser of evils. Helping Greece could be done relatively cheaply but Spain they can't afford to let fail or bail-out." The article noted that French President Nicolas Sarkozy is understood to have been initially cool on the idea but has grown so frustrated with Greece and now Spain that he has allowed officials to explore proposals.

So Ireland has found her way to the Mediterranean at last! It will be a long way to go to hold finance meetings. She might prefer a link to Sterling or even the Dollar. Somehow I cannot imagine Paddy being too happy linked up with Athens, Rome and Madrid!

The crux of these negotiations, however, is potentially far more serious. Germany won't pay up to carry Greek, Spanish and Italian debts. But that also logically means she won't pay those of France. That's the $60,000 question. Not where will Ireland go? But France.

But as that is the key question, it will not appear anywhere in public. The logical outcome would indeed be a split away of France from Germany, leaving a Euro rump of Finland, Denmark, Austria, Germany and possibly Slovakia and the smaller Eastern members. France would be dropped out to lead the Club Meds. That realisation is only just starting to dawn, and is no longer unthinkable, merely unspeakable.

For Sarkozy to be openly discussing a Euro carve-up, you can bet your life that he's beginning to realise that France's position is vulnerable, and he's trying to map out a future for the 'Northern' Euro which includes him. Anything else would be seen as total humiliation, and yet if Germany is trying to shed load, she would clearly prefer to dump France too.

MORE On The Euro Split HERE.

'The Place Is Dead'

I've been away from the UK a few years, and returned recently. I went back to some of the old watering holes I used to visit yesterday and met many old friends and acquaintances not seen for a while. I was shocked by the change.

The first bar/restaurant was closing at 8 pm and the cook had already gone home. I checked others and saw all were empty, except two which had only a few bums on seats. Places that were thronging four years ago were strangely quiet. One or two were completely closed with For Sale signs.

I met up with one group having a Salsa night, three women and two men. I remember these being twenty people minimum. 'Where is everyone?' I asked.

'The town's dead,' came the reply. 'It's been like this for weeks.'

'But it's midsummer,' I said.

'The town's dead,' I was told, 'but so is everywhere else. It's The Depression.' It was the first time I had heard the word given in general conversation in describing the current situation. 'My friend goes to Marbella every year, and she says the place is dead there too. If Marbella is dead, what chance is there for anywhere else?'

Four years ago, these same places were always busy, often with so much cigarette smoke your clothes stank and you needed a shower on getting home to be rid of it. It is far more pleasant to sit in pubs and bars than it was for that reason, but now they are empty.

The only places that were pumping were the two tennis clubs where all courts were busy for the evening. Annual memberships are cheap and drinks are sold at supermarket prices. No wonder the government's making cuts.

The Times -

George Osborne will claim today that the harshest Budget for 30 years will squeeze the rich more than it hits the poor. The Chancellor will seek to sell his package of record spending cuts and tax rises as being stamped by fairness as he tries to win public support for a four-year austerity drive.

Nick Clegg moved to pre-empt any revolt by Liberal Democrats last night by insisting that his party’s values were at the heart of Mr Osborne’s assault on the deficit. “This is one of the hardest things we will ever have to do,” he wrote in an e-mail to party members, an acknowledgement that the pain to come will put the coalition under immense strain.

Mr Osborne’s Budget statement is a watershed moment, when households learn how much they will have to suffer to help to pay off the country’s debts.

It looks like the town will be dead awhile. But at least Britain still has its own currency and its own economic government. I pity those countries that now depend on the floundering EU to make up its schizophrenic mind as to what will happen next.

Sunday, June 20, 2010

Would You Pass The 'British' Test?

So many things in Britain are wrong. The social rules are mad. No one wants to employ. Teachers want to retire. Nurses to quit. Carers to pack up. Being a human being and expressing opinions is not possible in most situations. Fear of speaking one's mind has become the norm.

For foreigners living in the UK it's worse. A friend of ours has a Filipina wife. She has lived in the UK with him for seven years. They are happily married. But until she becomes a UK citizen, she is not allowed to stay here, and could be made to leave the country when her visa date expires, married or not, children to abandon or not.

To become a Citizen she needs to pass a Citizen test, which is based on a book containing 1000 items of knowledge deemed necessary to become a citizen. The items are not simple and some quite obscure. No British person would pass this test without months of study. The pass rate required is 75%. Many foreign wives (and some husbands) have tried sitting this exam as many as ten times but keep failing. It costs £300 each time they try.

Every few months one third of the 1000 vital pieces of knowledge are changed to ensure the majority of Citizenship applicants keep failing the Test.

Next up, there is to be a language requirement, which is being set at intermediate level. Again many British citizens would fail this test. Few foreigners could expect to pass these tests unless they are Professors of British language & Culture.

EU Citizens, of course, don't have to do any of this. They can live in Britain all their lives without any conditions or limits being set.

I dread to think what is happening to the children of these mothers who are made to leave Britain after failing the Citizenship test. David Cameron says he believes in families. If he does, then why is the EU permitted to bar non-EU immigration to the point that British people are effectively unable to have families unless it be with EU citizens.

This is Nazism. Children being ripped away from the bosom of their parents, if they fail to measure up to bureaucratic standards of perfection. Cameron has to not only get us out of all EU economic control, but also all EU social and cultural control. The bureaucratic smashing of families should not be happening in a civilised country.

The EU wants to ban all trade with the outside world and all human association. It's not only the Euro which has no credibility. The whole EU concept of dehumanising us, and destroying families who don't fit the measure of Euro-perfection is downright evil. History tells us where visions of human perfection usually lead. The list of victims just keeps growing.

The British Test.

The British Test Blurb

- all written with pseudo-oh-so-helpful patronising bureaucratic arrogance

- Since November 2005, "Life in the UK Test" is a mandatory exam for all candidates for British citizenship. Since 2007, it is also required for those who wish to apply for an Indefinite Leave to Remain, or permanent residency in the United Kingdom.

The test is based on the manual called "Life in the United Kingdom: A Journey to Citizenship - 2nd Edition". The only testable chapters are 2, 3, 4, 5 and 6. The official questions are not published and their distribution is punishable by law.
You have 45 minutes to answer 24 questions and you are only allowed 6 mistakes.
Our Complete Training Kit contains 1000 practice questions that cover the entire testable material. We only offer questions that cover topics likely to appear on the exam.

Oh. Only 1000. That's nothing. It'll take ten minutes.

As for 'on the exam'? Allo Allo - was this whole thing written in Belgium?

One of the most popular features of our Complete Kit is Express Training: we selected only those questions that are extremely important and that are most likely to be asked. Express Training also allows you to quickly review the text book: every time you fail a question, we will show you the page of the official manual that you should review.

Popular? Popular? You think people actually want to be bothered with all this shit.

We recommend to start with a Simulated Test. Our Advanced Result Analysis will show your weaknesses right away; for example, if you see that most of your mistakes come from the questions about the Government, you may want to review that topic by taking a few tests based only on Chapter 4 (How the United Kingdom is Governed).

I think we know who's running the country, and it certainly isn't anyone British.

BritishTest offers a 100% money back guarantee in case of a failed test.

The course costs a mere £12, but the Test Fee - £300 - is not redeemable. Such generosity is astounding, indeed overwhelming.

Our training system is efficient and easy to use. You can start practicing immediately: your access key will be instanty delivered to your email or mobile phone.

Here is the clincher 'Arbeit Macht Frei' summary statement -

Our goal is to prepare you for the test quickly and easily. Hundreds of clients have used our training program and successfully passed their Life in the UK test.

Yes that's right. Auschwitz was all so easy and helpful for its inmates. Now fuck off and leave your kids, you ignorant niggers.

Maybe this way, some of our friendly paedophile networks can more easily get their hands on them.

Where's that David Cameron? Get rid of this total crap immediately.

There is nothing British about The British Test.

Friday, June 18, 2010

The EU's Last Days

The latest EU conference was timed well. The troubles in Greece are temporarily stifled. Those is Spain are being denied.

Stock markets are holding up. Government Bonds are selling sufficiently well. Even the Euro has taken a few tiny steps back up from its latest lows. In combination, it was all enough to give the EU's leaders just enough credibility to keep talking of expanding the EU's powers to include economic government.

Cameron held on to his refusal to get more involved with the EU's programme of economic governance, and after the conference, he stated that he had met his objectives. But one German diplomat countered this by saying that Cameron should not be so quick to claim victory and that he should wait until October, and see what the position is like then. The EU will be winding up a second leg to this negotiation, it seems.

That diplomat might also think, however.

What if the region's stock markets were in free fall, the Euro was hitting new lows, and one or two countries were on the point of default by October? Cameron would just walk away from the mess, and be vindicated in doing so. This conference was the moment to tie Cameron up, while the markets are somehow miraculously holding on. Once they crack, tying Cameron up in red tape will be impossible. The EU missed their best chance. From here their position can only weaken.

Charles Moore.

EXTRACT - At the European Council in Brussels this week, David Cameron was polite and charming, but his people insist that we shall never be part of the euro and we shan't pay for those who are. The first part feels secure – never has the Queen's head on our notes looked more comforting than it does today – but watch out over the second. Brussels wants to impose the equivalent of the Common Fisheries Policy on our financial industries, and to increase our European budget contribution to pay for its mistakes. In our terror of an old-fashioned Tory euro-row, I bet we give in on some of this.
Again and again in politics, great schemes don't work – Soviet Communism, for example, and now the euro. Rational people tend to conclude that, because a scheme doesn't work, it will quickly stop. Unfortunately, rational people are wrong. Bad political schemes are usually given up only when they have been tested literally to destruction. It would be much better for Europe if the euro had never happened, and I long for it somehow to fade away, but the process of destruction will be horrendous, and it is only just beginning.

I disagree, Charles. This time Cameron has to stand firm. This is no longer 1992. This is like keeping the Spitfires back from The Battle For France. We will need them for the Battle Of Britain. We need our money to save ourselves. The cheapest solution for the Euro is for Greece etc to withdraw and default. Every penny we lob in merely delays the inevitable.

The Euro will become the DM once more, and only solvent countries will remain members of the eurozone. Our message to the EU should be 'do it' i.e. get on with the break-up and the preservation of the core. We need stability in Europe, not the universal bankruptcy which will follow endless pointless bail-outs. We should not fear the collapse of the Euro, which is already inevitable. We should though greatly fear its pointless preservation.

Thursday, June 17, 2010

Washington Post Thinks Deflation Is A Silver Lining!

They write - A silver lining of the European debt crisis is starting to emerge: falling prices in the United States.

That must be one of the most naive sentences I've ever read.

Consumer prices fell 0.2 percent in May, the Labor Department said Thursday. The department said Wednesday that wholesale prices fell 0.3 percent. Both were driven by a dip in global prices for oil and other commodities caused by investor concern that, given the troubles in Greece and other European nations, the global recovery could slow.

Also Thursday, the Labor Department said that 472,000 people filed new claims for unemployment insurance benefits last week, up from 460,000 the previous week and adding to evidence that the job market is recovering very slowly.

Yes. This is some silver lining.

In the short run, the biggest impact of the European problems on U.S. inflation has been on commodity prices, and that impact was almost instantaneous; the price of oil, for example, fell from a recent high of $86.84 in early April to $77.67 Wednesday. But the slowdown overseas, combined with continued high unemployment and idle factories in the United States, is causing very low inflation even aside from the recent dip in energy prices.

The consumer price index rose 0.9 percent in May over a year earlier, when food and energy are excluded. The producer price index excluding food and energy rose 1.1 percent. Both of those figures are below the 2 percent or so annual inflation that Federal Reserve policymakers target.

Few analysts expect prices to start falling outright, a dangerous phenomenon known as deflation, though many would concede that the risk of deflation taking hold has edged up following the deepening of the European crisis.

Ananlysts never like to foretell doom and gloom. Their employers might stop their pay checks if they do.

That risk could become more severe if the economic recovery, which has been underway for about a year, was to weaken or cease. There was positive news on that front Wednesday, as the Fed announced that industrial production rose 1.2 percent in May, more than expected and the 10th rise in the past 11 months.

That helped bolster the case that the U.S. economy continues its steady expansion heading into summer, despite some recent disappointing data including a weak private-sector job growth figure for May and a steep drop in retail sales that month. The manufacturing sector has become a significant driver of growth.

"The breadth of the rebound is impressive and creates self-reinforcing demand for materials and equipment across the whole manufacturing sector," said Daniel J. Meckstroth, chief economist at the Manufacturers Alliance, a trade group.

The only silver lining is in fact the growth of US manufacturing as costs tumble. The rest is merely heightened risk of a depression. Can the UK manage a similar rebound in manufacturing after years of manufacturing falling? Why not, if we repatriate powers from the EU and get rid of the regulations which inhibit employment. It might be about all we have to fight with, so Cameron had better do some brisk trading with the EU, and liberate our industry so we can compete once more. This looks like the only road back to growth.

Is Government Thrift Now A Vice?

Professor Robert Skidelsky, Labour's favourite economist, based at St Andrews University
It is generally accepted throughout Europe that cutting government spending and reducing deficits is a necessity for preserving the confidence of markets. As John Redwood writes today, in 2005 the financial taps of high spending combined with low interest rates were kept open too long, causing inflation, only to be followed by too severe a raising of interest rates and now cuts in spending.

Is there really any choice? If we don't cut, 10 year interest rates could rise to Greek levels and milk government finances. If we do cut, it could help tip the economy into a deflationary spiral. Which is the worse?

Robert Skidelsky writing in the FT thinks that cutting right now will do great harm to the country's economy. He says -

These propositions are a re-run of the famous “Treasury view” of 1929. By contrast, Keynes argued that demand can fall short of supply, and that when this happened, government vice turned into virtue. In a slump, governments should increase, not reduce, their deficits to make up for the deficit in private spending. Any attempt by government to increase its saving (in other words, to balance its budget) would only worsen the slump. This was his “paradox of thrift”.

But unlike the situation in 1929, courtesy of Brown and Blair, we are entering a slump with excessive borrowing, which had been used to fuel the recent boom.

First we have to get government waste out of the picture, and then channel resources into the private sector, where growing businesses are being starved of funds. It's not just a case of spend or don't spend. As John Redwood says, it's a case of spend on what. The priority has to be to allocate resources to where they will pay off best, and that means into growing companies.

If Osborne cuts Corporation Tax, for example, and National Insurance, he's doing the right thing. But so too would eliminating the quangocracy be desirable. These are qualitative managerial choices, as well as macro-economic quantitative decisions.

Danny Alexander announces £11.5 billion of cancelled projects.

Full Skidelsky Article.

PMQs - Carswell Gets Referendum Assurance From Cameron

12.19pm: Douglas Carswell asks the second hostile question from the Tory backbenches. Why is there to be a referendum on AV - which wasn't part of all parties' manifestos - but no referendum on Britain's relationship with the EU - which had been? The Prime Minister responds by confirming the Coalition will introduce a referendum lock to stop any transfers of power to the EU without the consent of the British people.

Are you listening over there in Brussels? Thought not!

Report from Conservativehome.

Would You Like To Borrow £100,000 at 1% per annum?

Just as the EU starts a campaign of QE to attempt to bail out the Euro, the US Fed and the UK stop their QE programmes, at least for a while. The world's spare financial energy was being used to hold up optimism right up to the time of the British elections. Was that coincidence? If the QE was being used to try to keep europhile Labour in power, and Cameron out, as one of its objectives, it failed.

Now the world's financial 'energy' feed is being directed onto another target, bailing out the PIIGS and trying to save the Euro. While QE was effective in turning around stock markets for a year, sending them on the fastest one year rise in their history, the story so far with saving countries from default is that QE is proving less than effective.

As the chart of Spanish government debt shows, there is little change in the speed at which lenders are demanding higher returns, despite Shock & Awe.

Outside the control of those who hope to use QE to achieve political outcomes, there is the fact that parts of the world economy are beyond the reach of the western central banks. China's boom is slowing rapidly with the Shanghai, Hong Kong and Australian stock markets slowing noticeably.

The deflationary forces are simply too powerful. As people move away from debt, both offering it and taking it, cheap and plentiful money has less effect. Think of yourself. If someone had offered you an extra loan of £100,000 at %1 p.a. three years ago, you would have grabbed it with both hands. But today, you would pass it by, and wait and see. Am I right? Thought so!

I don't mean a replacement loan.


Governments depend on your behaviour to make their lending achieve their ends, and no amount of money can ultimately change what people's instincts tell them to do or not do. Deflation like inflation is in the collective mind. Gold is said to be the one thing that will keep rising forever, but the shortage is of cash, and gold needs cash to buy it. Banks who need cash keep bulling up gold, which they own. They would, wouldn't they. But it's cash they are all short of, and debt they are desperate to get rid of. The gold will end up getting sold soon enough.

Wednesday, June 16, 2010

EU Bail-out Of Spain Hasn't Worked

Never mind the acres of news print, the denials and the rhetoric. Look at the price of Spanish government debt. The Shock & Awe bail-out clipped back the rise in the cost of borrowing for the Spanish government, for a week or two. But the markets are now raising the cost once more. In fact it is surging out of control.

This is the only information you need to know the score. Look at the chart.

Spain is careering rapidly into a situation similar to that of Greece, where its huge debts are becoming unaffordable. Lenders fear default and are backing away. The EU pulled out all its stops to launch Shock & Awe to calm those fears, but it hardly touched the sides.

Bailing out the eurozone will need an endless feed of cash, but there is no one willing to fund it. The Germans are already sick of carrying the load. The French elite are still dreaming of an EU empire to be bought with a German cheque book. It ain't gonna happen. The price and the direction of the market tells you.

Like all the others, Spain will save more of her creditors' money if she negotiates a default now. The longer they leave it, the more the lenders will lose. Leaving the eurozone is the only way out.

In Greece 10 year money is back over 10%. How long can the charade of 'bailed-out=creditworthy' go on? See FT Bond Market Tables.

Financial Times. Cameron says that EU fiscal discipline and supervision must apply to eurozone members only. Horse the bolted stable after has door shutting.

Daily Telegraph. Cameron will resist any loss of sovereignty of controlling Britain's budget. Ok. But how hard will he fight? This is the moment of Euro truth for David Cameron.

The Independent explains -

The latest push for EU integration could become a major headache for Mr Cameron. The reforms could involve changing the EU's governing treaties, putting his Government under intense pressure to honour its promise to hold a referendum before any new powers are transferred to Brussels. Many Tory MPs are Eurosceptic and determined to press for a Europe referendum at any opportunity because Mr Cameron denied them one on the Treaty of Lisbon. This could cause tension between the Tories and their coalition partners, the pro-EU Liberal Democrats.

Look at the chart. If $1 trillion cannot change a thing as regards the creditworthiness of Spanish government debt, how much exactly will the eurozone require to hold it together? Britain cannot afford to get involved. Cameron has to hold the line.

People Need National Control Over Their Currencies And Their Economies

Introduced as 'Farridge' by the Chair, he's back in the EU Parliament, post-air crash, telling them straight what a cock-up they are all creating. How many Conservatives agree with every word that Nigel Fara(r)ge speaks? I'd say 85%.

The truth always does have a habit of being persuasive when you hear it pure and unadulerated. How long til we hear Farridge's message being spoken in the UK's Parliament?

As usual relax and enjoy what is without doubt the greatest political drama available, as Mr whatever you wanna call him, stands up in the EuroParliament and strips the flesh off the EU's central deceptions, slice by slice.

He tore Blair to shreds there pre-Lisbon Treaty. The footage was immediately suppressed, and cannot be found anywhere. That's the measure of how good he is.

Huhne The Loon

Roger Helmer writes about the Climate Change Orthodoxy in this week's newsletter as follows -

And yet we have our Climate Change Minister, Lib-Dem MP and former MEP Chris Huhne, not content with the EU’s current commitment to reduce CO2 emissions by 20% by 2020, but urging an even more aggressive target of 30%. This sets our new coalition government in conflict with our major EU partners, who have mostly reacted with horror at the idea of an even more fanciful and damaging target. Truly it was said, “Whom the gods wish to destroy, they first make mad”.

It's quite a point. Do we have total nutters at the heart of the Liberatory coalition? Clegg's wife has a well-paid job with a windmilling outfit hoping to make millions from covering the country with these useless items. Huhne's lost it completely, and Clegg alongside the two of them, spouting climate gobbledy-gook along with Cameron.

Ukippers will be furious of course. But the coalition this is what they deliberately voted for, they tell us. We have a mad government, elected by mad voters. Why do we expect anything sane?

Helmer's Piece -

Riddle: Why is the euro like climate change?

Roger Bootle, a Telegraph columnist and Managing Director of Capital Economics, is one of the UK’s most respected economists. He was also, as it happens, one of the key speakers at my first Climate Conference in Brussels in April 2007.

In a Telegraph article on June 7th, he talked at length about Gordon Brown’s vital decision to keep Britain out of the euro – one of the very few good decisions that Gordon made ( ). And he asks whether there is an issue of similar consequence facing our new government. Let me quote:

“There doesn't have to be a parallel to the euro issue for the current government, but I think that there is – climate change. Again this has a European and a quasi-religious aspect to it. There are both fervent adherents and sceptics within the Cabinet.

The UK is committed to incurring enormous costs to meet ambitious targets for reducing CO2 emissions at a time of economic stringency at home, and when large parts of the world are hell-bent on emission-creating economic growth. Scepticism about man-made climate change is growing and, despite the position of the Prime Minister, the orthodoxy may well be overturned at some point”.

Let's hope.

Huhne The Loon leaves his wife for his PR assistant. The Liberal Democrats do it again....display instability of one kind or another...
Daily Mirror.

Deflation Arrives In America

The headlines are clear enough. You read in all media commenting on the world economy things like,'Inflation Not Rising Yet', implying that it will be rising soon enough. The thought that inflation might not be returning at all, but its opposite number deflation , has clearly not yet occurred to people.

And yet in the last months in the US, prices are now actually falling. It was tabled that inflation was at 0.9%, the lowest level since 1966 last month. But as the trend to lower prices continues, the next stop is for prices to fall, and that moment is upon us.

In the UK, the trend is not yet deflationary, but the trend is for inflation to be falling. This goes against many forecasters who are convinced that the falling Pound will cause higher inflation. But however fast the Pound falls, commodities are falling faster. Wages are being squeezed with unemployed people, when they are eventually rehired, finding their pay down by 15%.

The world is readying itself for inflation. When will people realise that the new enemy is in fact deflation? Prices will be falling for a period of maybe years, until people decide that they are buyers once more. Government spending will need to fall 50% not 25% to keep pace with the falling revenues. Capital Gains Tax will have a higher rate soon, but will there be any gains to tax? That is the bigger question.

I spotted this report on a gold website which shows how surprised people in the US at being faced with falling prices.

The key U.S. inflation reports – the producer price index and the consumer price index -are slated for release Wednesday and Thursday and are without a doubt a big focus for gold and other traders this week. Both reports are expected to be tame.

May’s producer price index, which measures wholesale inflation, is expected to show a drop in prices. Marketwatch says the consensus is for a 0.6% decline, after April’s 0.1% drop. The core is expected at 0.1%, versus 0.2% in April.

The consumer price index for May is expected to fall 0.2%, Marketwatch says. It fell 0.1% in April. The core, which excludes the volatile food and energy components, is forecast at 0.1% and was flat in April.

Market analysts said the headline figures for PPI and CPI should be down because of the steep drop in oil prices in May and that lowered gasoline and heating oil prices. Further, food prices have fallen a bit, also tempering the main figure. Yet because of this, the core figures might be slightly higher.

Standard Chartered said in a research note that there is little sign that inflation should change. “Industrial production and capacity utilization should show continued improvement but have a long way to go before inflationary pressures become a consideration,” the bank said.

The bank added that not only is inflation in the U.S. and western economies not an issue, so far it is remaining tame in Asia, where economic growth is picking up, although momentum is building. Still, they said, the turmoil in Europe may push back any central bank rate tightening until the end of 2010.

Jim Smitherman, a commodities broker at Coquest Inc., said the attitude in the markets concerning inflation is "steady as she goes."

He said inflation data is tame and should remain so for the remainder of the year. "I think the Fed will maintain its current policy for the foreseeable future. Commodity prices in general are lower over the last six months and barring a collapse in the dollar I would expect them to remain that way,"Smitherman said. "Those calling for inflation right around the corner have been doing so for 2 years now. How far away is this corner? I think it is a long ways away."

A year from now Britain could be saying very similar things. Talk of inflation could soon become a distant memory, as debt-deflation takes hold.

Oi! Theresa. What About My Brother?

I was pleased to see that Theresa May has pulled the Vetting And Barring Database. Making all nine million professionals working with children register with a central database or they were to face a £5000 fine, was daft in every way. It was typical of Labour's incompetence at handling social issues. They always managed to create vast and expensive non-solutions.

They had no idea how to work with people, so they always reached for blunt instruments such as money and machinery, especially computers. There is never any substitute for understanding. Maybe the Liberatories will do better.

My brother works or rather used to work in a caring profession. He had four autistic adult 'boys' in his care and worked long hours in small team running a home. He used to describe how each of the boys had a different problem. One would try to eat everything, even stones on the ground. Another would just run off and keep running, so my brother used to run with him sometimes five miles until the boy finally stopped and he managed to coax him to come home. Another would just set off across the road if he saw something that interested him, oblivious to the dangers of traffic.

This boy's father would simply grab hold of him, and then carry him back to safety. My brother found that holding the boy in a bear hug while he tried to distract him away from danger was the only reliable way to help him.

And yet for this breach of the rules, he was severely reprimanded and warned that he would lose his job if he kept on using this method. 'You are not allowed to touch the students.' he was told. My brother asked what method they suggested he should use when the student was on the road, and was in danger for his life with traffic. He was told that he could do anything else, but was not allowed to touch the students.

He walked out. There are no other ways to save this boy from danger. Needless to say he feels distressed.

When he heard that I was going to London this week, and would be meeting one or two political types, imagining me to be more connected than perhaps I am, he asked me to speak to Theresa May about this. He still cares about the boy and is worried what will happen.

Although I have met Theresa May, it was in 2003 at the Party conference, when IDS was clinging on to the leadership, I don't have the open line to the top, as my brother imagines. But what the hell. Let's blog it.

So Theresa, what will happen to the boy?

Will he be allowed to run to his death under a car?

Will good hard-working and caring professionals like my brother be driven to resignation by crazy, petty, downright stupid blanket rules to be enforced in all circumstances regardless of the consequences, by the little Hitlers that populate government after years of Labour putting them into powerful and well-paid positions? The carers receive low pay, of course, while the 'management' have all the trappings.

Will this new spring of common sense being applied to the Vetting Database, also apply to cases like my brother's in future?

In short, can we be allowed to care for each other again please? We would like to be so able if you would permit. But first you will have get the Hitlers off our backs. Theresa? Are you listening?

Telegraph Article on Theresa May's suspension of the Vetting Database.

She (theresa may) will add: “The safety of children and vulnerable adults is of paramount importance to the new Government.
“However, it is also vital that we take a measured approach in these matters. We’ve listened to the criticisms and will respond with a scheme that has been fundamentally remodelled.
“Vulnerable groups must be properly protected in a way that is proportionate and sensible.’’
Tim Loughton, the children’s minister, will say he was worried that the scheme would have driven a “wedge between children and well-meaning adults, including people coming forward to volunteer with young people”.
“Such individuals should be welcomed, encouraged, and helped as much as possible, unless it can be shown that children would not be safe in their care.”
Any vetting system “should not be a substitute for proper vigilance by individuals and society,” Mr Loughton will add.
“At the moment we think the pendulum has swung too far”

You bet it has.

Daily Telegraph.

Daily Mail. Lib Dem Featherstone undermines Conservative May over the Vetting Database.

Monday, June 14, 2010

The Office of Budget What?

The Office for Budget Responsibility is starting to make a few announcements, and its role is becoming clearer. The question is not so much whether the Conservatives are going to tell endless lies about the economic situation. There may be the occasional white lie, I suppose. The question, to my mind, is whether Brown and Darling were lying.

There were some very odd things going on. Darling is said to have hidden money from Brown, for example. The Treasuries Spending Outturn Report in December 2009 contains no less than £180 billion worth of unexplained 'Accounting Adjustments' which somehow reduced government spending from £800 billion to £620 billion, in the process bringing the Chancellor back within his borrowing requirement projection, despite revenues falling by a substantial figure throughout the year, as reported month on month in the media. His original spending projection had been £670 billion. Is it likely that his spending came in so much lower in reality?

But the OBR is not going to delve into such sensitive matters. The OBR is only going to be talking about the future.

From the FT -

Remind me, what is the role of the OBR?
Once it is on a proper statutory basis, the OBR will take the final decisions on the government’s economic forecasts and draw up estimates of the effects of tax and spending changes, so the chancellor will no longer have the ultimate say.

Twice a year, it will also report on whether the government has a 50:50 chance of meeting its medium-term ambitions for the public finances or whether tax rises or spending cuts are prudent.

But will Monday’s announcement be different?
Yes. It is merely a presentation of the latest official economic forecasts for the economy and the public finances.

So we will get forecasts only, it appears. No look will be taken at what has gone on previously.

Of course if spending was in fact much higher than Brown admitted to, soaring to unimaginable levels this would scare markets, and it would be well to keep it under wraps. Osborne can cut the spend down to the admitted level without having to admit to cutting a penny.

Brown imagined that it would be his entitlement to be claiming there were in fact no cuts taking place, while he was slashing and burning after the election. Osborne might as well take the free political ride, and carry on the scheme designed and planned by Brown.

That is no doubt why the OBR is taking no responsibility for what has gone on before. It's what politicians do when they are planning to cover up information. They create a separate office to make all the announcements, so they are one stage removed from all the shenanigans. It's one way of taking Responsibility, I suppose. Look ahead only. Why look back to the Brownian nightmare? It is finally over, after all.