Gordon's Successful Gilts Auction

Yesterday the DMO sold:

BY AUCTION OF £1,100 MILLION OF 1 7/8% INDEX-LINKED TREASURY GILT 2022

The auction was covered 2.72 times and the results were:

Real Clean Price £106.21 Inflation-adjusted Clean Price* £108.736736

Real Yield 1.375%

So why were investors to pay over par for this gilt? Well it is an RPI index linked bond so its coupon will be 1.875% + RPI. Only the government and a very few utility type companies with RPI indexed revenue streams can risk issuing this type of bond but it is the only type of bond that can be used by private pension schemes to guarantee index linked pensions. Hence these so called linkers are in great demand, sell at a high price and at the price bid pay a real yield of 1.375%. Not many schemes can afford these bonds but when inflation takes off after QE then they will prove to be a good safe investment. You have to pay for quality!

These bonds were introduced when double digit inflation was common and we may well see double digit inflation again when the sterling fall kicks in.

Gordon however should have remembered how dangerous it is to go away on foreign jaunts leaving enemies at home a free hand. Mervyn King and Gordon dislike each other but does anyone now like Gordon? Merv is not exactly lovable either. Come back Tony you were lovable. It will be a long time before we see another Scottish PM.

Daniel Hannan's superb performance continues to shake the political world whilst our MPs and MEPs continue to milk the system. Radical action is needed. Cut the number of MPs to 400 and don't send UK MEPs to Brussels.

Hannan, Farage & Gordons Gilts

I wrote yesterday comparing Hannan & Farage's anti Brown speeches at the EU Assembly and how I found Hannan's a much more impressive performance. The market agrees with me. As I write on YouTube Hannan's clip showed 650000 hits to Farage's 12000 ie fifty times more people watched Hannan than Farage on the same topic. Even Jill Cockburn on the Daily Politics showed a bit of Hannan. (When Guido Fawkes pointed out to La Cockburn the BBC had not featured Hannan at all on its main News her pathetic reply was none of the other channels had either!) It is thus much likely people will choose to vote for Hannan's party in preference to Farage's party. Its as simple as that as Nigel likes to say.

I have always thought the claims that Farage is a great media performer have never been subjected to any real scrutiny. Other UKIP spokesmen like Del Young were never given an opportunity on Question Time etc. It not just about being glib in a barrow boy way but about the content you choose, the tone you adopt and the approach you take. On these Hannan won hands down. UKIP simply has to give others a chance in the media spotlight before it is too late.

There was a distinct lack of demand for 40 year gilts in yesterday's DMO auction. I have been forecasting this would happen. Its nice to get something right! The reasons for the relative failure of yesterday's auction are Mervyn King's comments to the TSC on reducing the amount of Gilts the BoE may buy under its QE programme plus the pick up in CPI inflation. The fall in RPI is a transient effect caused by the rapid reduction in the BoE Repo rate to almost zero. This obviously cannot go any further and will most likely have to be rapidly reversed to protect Sterling.

There are really on two concepts to grasp in economics, supply and demand. The market knows there is a huge supply of Gilts in the pipeline so prices will fall and yields and other interest rates rise. At the same time the demand for gilts will fall because financial companies are short of cash and also because of the fall in Sterling and the related rise in inflation. Long dated gilts, and 40 years is a very long dated gilt, are most sensitive to inflation problems as even at 3% inflation the redemption value of a £100 gilt will drop to £31 in 2009 prices over 40 years.

Hannan was correct. You cannot borrow your way out of this mess. Public expenditure, ie Gordon Brown's client state, has to be cut. This means tough decisions a phrase devalued by Labour politicians in a devalued government.

Farage & Hannan's Attacks on Brown in EU Assembly

I am grateful to those on the forum who posted the links to these two speeches. It is not easy to fit such speeches into the 3 minutes allowed as there is so much one could say about Brown's incompetence and manipulation. There were clear differences in tone and substance between the two speeches.

Farage's speech was a grandstanding rant that concentrated on Brown's past errors, selling the gold, removing tax benefits to private pension schemes and ratifying the EU constitutional treaty without the referendum promised in the 2005 Labour manifesto. The later was an own goal by Farage as he and his fellow MEPs failed to mount any sort of opposition in the UK to the passage of the Lisbon Treaty bill. Instead it was left to the Tories to oppose it in the UK and they gleefully grabbed our issue and ran away with it. Farage jumped onto the Ganley Irish campaign after Ganley had done the hard work setting it up and funding it but what good was that to the UK. Farage's speech was a case of shutting the stable door after the horse had gone. A week is a long time in politics and Nigel Farage has to realise issues have to be addressed when they are current and dominating the media if one is to have any effect on the outcome or benefit in the ballot box.

Hannnan on the other hand concentrated on what Brown was doing now and the current mess we are in. It was a much more measured, witty, thoughtful speech with a good joke thrown in about Brown being pathologically unable to apologise for anything. Hannan started by pointing out how Brown was saying as, all politicians in the EU do, one thing in Brussels and a different thing domestically with no mention of British jobs for British workers to the EU! He spoke on the current dire British fiscal position and pointed out how much debt, £20000, that Brown had saddled every British child with. He pointed out relative to GDP we were more in debt than Hungary and Pakistan, countries the IMF had already been called into to sort out. He spoke on the loss of private sector productive jobs compare to the growth of public sector jobs. He linked Brown to the catastrophic fall in sterling and finished with the telling phrase about Brown, "you are the devalued Prime Monister of a devalued Government.

In short Hannan spoke on current issues and linked them to the things that matter for ordinary people, jobs and their children's future. Farage delivered a historical rant. He does rant very well but it was Hannan's speech that will resonate with the voters and win votes.

UKIP leadership should not use pub language

I was appalled yesterday to hear Mr Farage on his radio interview say of party members who made criminal accusations, 'that in any other political party they would be chopped off at the legs before breakfast'. This is the language of gangster films not political debate and as Junius points out this was allowed to pass without question by a pretty hopeless BBC interviewer.

Mr Farage went on to talk off people in UKIP with different political agendas. This came up at an NEC I attended where Ms Duffy alleged I had a some hidden agenda. Mr Farage was there listening when I replied to Ms Duffy that I had only one agenda and that was to get the UK out of the EU in my lifetime. I presume and hope this is also Mr Farage's agenda.

Mr Farage however only hears what he wants to hear and sees what he wants to see. His completely unsubstantiated allegations that UKIP candidates on their blogs had been advising voting for other parties has to be seen in the light of his allowing his own press officer setting up a political party, Libertas UK. Now what is that all about I wonder?

As I noted in one of my first blog postings I fell out with Mr Farage at the first NEC meeting I attended when I ask to see the evidence to support a wild allegation Mr Farage made about a UKIP branch. I have to this day never seen this evidence. Double standards and hypocrisy are evident when you compare Mr Farage's statements one with another, and with his actions. Put this with discriminatory application or non-application of party MEP selection rules by NEC member Mr Gill and you have a recipe for chaos.


This use of gangster film language by Mr Farage comes on top of Mr Denny & Mr Zuckerman using mental illness descriptions as terms of abuse. UKIP leaders must use moderate and temperate language and ensure their statements and actions do not contradict if they wish the electorate to take them seriously.

Farage being economical with the truth on BBC radio

I worked on forecasting techniques and forecasts for many years. One of the things I learned was that the average forecast ex-ante invariably out performs the previously single best forecast measured ex-post and that the reason for this was that even the worst individual forecast contains nuggets of information that can add something to the overall picture. BobFM writes worse than anyone else on the British Democracy Forum and he always parrots the Farage line. This morning he did include the link to Mr Farage's latest interview on the BBC programme Westminster hour . I was not aware of this interview. I am grateful to BobFM for posting it. I give the URL below. Click on it if you wish to listen to it.

http://news.bbc.co.uk/1/hi/programmes/the_westminster_hour/7958329.stm


Mr Farage was bleating on about party discipline, a favourite theme of his. After all, why use valuable radio time to put forward UKIP policies when you can indulge in some internal navel gazing? He claimed that UKIP candidates on their blogs had been decrying the party and advising voting for other parties. As far as I know I am the only UKIP MEP candidate writing a blog so I presume Mr Farage's comments refer to me. I know Mr Farage claims he has de-selected me but as due process has not been followed I reject Mr Farage's actions as illegitimate and clearly unconstitutional. Mr Towler did write a blog for a while but stopped when his paymasters in the EU asked him to. I believe Mrs Towler also had a blog but only for a very short time.

I would be grateful if anyone can point out to me where on my blog I advised voting for another party. My views on voting UKIP are available for all to see and here on YouTube and I give the click through link below. I hope Mr Farage will watch it. He might learn something useful from it.

http://www.youtube.com/watch?v=S-PdSiooRss&feature=channel_page

The charge of decrying the party is also bogus. As I made plain yesterday there is a higher loyalty than blind obedience to, and support for, the UKIP's hierarchy actions. Where these actions conflict with long established British principles of justice, fairplay and decent civilized debate we all have a civic duty to speak out against them otherwise we lose what we are fighting for and what generations of our ancestors fought and died for.

Mr Farage made reference to some members of UKIP making criminal accusations against other party members. The process of reporting suspected criminal behaviour to the police is not a criminal act. It is a civic duty! The police will investigate and act accordingly. Whistleblowers are always decried using the specious and self serving arguments of loyalty deployed by Mr Farage. If honest decent people turn a blind eye to what they know is wrong then eventually the bullies will come for them as the Germans found out in the 30s.

I have not had a chance to put my case, cross examine the evidence against me or appeal against this arbitrary decision to de-select me. I have been tried in absentia by a prejudiced court just as happens in the EU. If UKIP behaves like the EU then what are we fighting for? That was my branch's view and it is my view.

What are Denny & Zuckerman's Medical Qualifications?

My attention was drawn to an email from Denny to Geoffrey Collier quoted on the Caterpillar blog this morning. I quote below an excerpt,

"I do not know your background sufficiently well to know whether you are merely a willing dupe in this process, as a small bit-part acolyte of another outside conspiracy/agency involved; or whether you are just suffering from OCD with an obsessive fixation with UKIP and Farage/Ashford in particular; either way you display an overly obsessive disposition to what is only a small political party hammering its way into the British political scene with minor difficulties which by comparison with the major parties are piffling.
This obsessive condition seems to be a common disorder too with some in (and out of) UKIP, in that John West displays the same kind of disposition; and GLW too; and Edmond ....in fact all the "malcontents" ... could it be that the commonality is an anti-UKIP network? or are you all mad?"

Obsessive Compulsive Disorder (OCD) is a recognised psychiatric condition which I do not suffer from and nor in my opinion do John West or Geoffrey Collier. Perhaps Denny could post details of his medical psychiatric qualifications which enables him to make such diagnoses.

Denny is the second member of UKIP's NEC who seems to think it is acceptable to use mental illness diagnoses as terms of abuse. John West and I were accused by Zuckerman, UKIP's lawyer and party secretary, of suffering from Tourette's syndrome. In all my life I have never met people other than Denny and Zuckerman who descend to using mental illness diagnoses as terms of abuse. It is profoundly insulting to those genuine suffers of these two diseases. I also ask Zuckerman to post his medical qualifications.

Denny finally winds up by calling Geoffrey, John and I 'mad'. Reasoned rational argument with supporting facts is the real currency of political debate not wild abuse and labeling any who disagree with you as 'malcontents' . It would help UKIP's cause if NEC members remembered this. It is not disloyal to UKIP to disown and criticise unacceptable language by members of the NEC and I will continue to do so. We all have a greater loyalty to uphold British standards of civilised debate and respect for those who through no fault of their own suffer mental illness.

Let them go bust!

I watched my favourite political programme last night, this week with Diane Abbott, Miguel Portaloo and Andrew Neil. Ms Abbott cut through all the waffle and pointed out the banking system can be cured using simple principles. First as we did in under Eddie George if a bank gets into trouble let it go bust like Barings and BCCI. (The latter tried to sue the BoE for lack of regulation and lost. The former's debt, three name paper, was honoured by the London money market.) When Northern Rock went tits up Willem Buiter, one of the original MPC was the only one to public state the correct solution was to let it go bust.

Second for the US to reintroduce the Glass-Steagal act and for us to impose a similar clear divide between investment banks, the spivs, and retail banks like the old building societies and Lloyds TSB pre Gordon Brown. Glass Steagal was repealed in the US as a result of pressure by an ambititious CEO, Sandy Weill of Citibank on the Clinton administration. Citibank became the biggest bank in the world but is now bust and propped up by the taxpayer. Strike an RBS chord?

Third make sure the banks have adequate capital. This is not difficult. It was specified under the Basle rules but our FSA did not police it adequately. The Spanish did. They put had 15 of ttheir regulatory staff in each Spanish bank at any time to police the capital rules. Result no Spanish bank got into trouble.

The FSA should focus on the protection of retail depositors and keeping the crooks out. We need to increase personal responsibility for investment decisions not reduce it. Equity shareholders have been punished severely but bond holders have been bailed out. The old deposit protection scheme was quite sensible and could easily have been tweaked to perform better. But we should not protect those with million pound deposits chasing above average returns.

More Economic & Euro Woes for Gordon

Crises have a way of sharpening differences an concentrating the mind. The much reported split at the G20 finance ministers summit, chairman A Darling is a clash between the Anglo Saxon and the European economic political philosophy. The US want action and the EU, leader Frau Merkel, want more regulation. It is a clash between free markets and the real liberty these ensure and political centrist control and the enslavement of the people this entails. A UKIPer wrote to the DT today saying the EU desire to de-sex titles could be accomplished by calling everyone comrade. A bit to close to the bone for the EU Soviet's liking!

Be prepared for an endless torrent of Eurospeak from Brussels as things go from bad to worse. Don't believe the BBC's news reports. They are committed Europhiles to the last comrade supported by an inquitous licence fee that penalises the poorest in our community! They remind me of the pre-revolutionary French church in the mid 18th century, wallowing in exemptions, perks and privelege paid for by the sans culottes.

As Simon Johnson, formerly chief economist at the IMF wrote on Sunday, "anything that sounds meaningless is meaningless" and there will be lots of it to be had from the EU, the BBC and Gordon.

Johnson nails the real culprit for the cuurent econonic problems, the EU and its high risk debt fuelled expansion/accession since the late 90s. The US sub prime was just the detonator. The real explosive lies in the crash in Eastern Europe and the PIGS. They are trapped in the Euro so they can't devalue their currency. Their only choice is to cut wages and prices by 20 to 30 percent with the surefire civil unrest that will be unleashed. Politicians do not like this prospect one iota as it puts the blame squarely where it belongs on them, the politicians who go them into the Euro and the EU.

The banking sector in Europe must shrink and the two hardest hit will be the UK, particularly the South Eas,t and Switzerland. The UK will be able to avoid civil unrest on the wages front by devaluing the currency, indeed they have already done so. The real threat of civil unrest in the UK will come on the jobs and immigration front particularly in the big cities of the Midlands and the North. So problems for Gordon all over his land and even in the kingdom of Fife the Scot Nats are snapping at his heels. Time for prayer.

Party Lists

There was an interesting letter to the Sunday Telegraph citing Gisella Stuart complaining that, " in the June MEP elections voters will have a ballot paper which does not allow them to choose any candidate but instead presents them with a list bearing the labels of national political parties"

The writer goes on to say "this is because the Labour Government (unlike most of its continental counterparts) insisted on 1999 on such a closed list system so that it could effectively control which Labour politicians could be elected to the European Assembly". This system of course gives total control to the party machine and is profoundly undemocratic as Ms Stuart pointed out. It is a system open to manipulation and abuse and as we have seen in other areas if a system can be mis-used then there are those who will not hesitate do so without qualm or conscience.

I did not know that in some other countries electors vote for individual candidates as I believe we did in the 94 in a first past the post European election. UKIP presumably got no MEPs in 94 but the results would transfer more directly to UK Parliamentary elections where we have to win to get out of the EU. I would be grateful for any further information on these points. Please put comments on this blog.

Gisella Stuart is of course a Labour MP but she did vote and speak for a referendum on the Lisbon Treaty against her party whips. We in UKIP do not have that freedom as my experience shows. Speaking and writing to newspapers in support of all core UKIP policies and posting clips on YouTube emphasising this support is insufficient. Disagreement with the leadership style is verboten and leads to deselection, expulsion and character assasination.

I watched Alec Salmond, the Scottish Nationalist leader, on the Andrew Marr show. It was a masterclass on how to handle a potentially difficult interview, bad opinion polls etc. Alec answered every question properly unlike the juvenile Cabinet Minister Douglas Alexander who was also on. Douglas Alexander is in charge of Labour's Westminster election campaign so no problem there then for Alec S.

Why Rules Matter

The politico's parrot-cry that irritates me most is, we will learn lessons from this, our latest screw up. Lessons from the past are embodied in the rules of organisations covering their corporate governance e.g. how to convene a meeting and take minutes. The major failing of bank regulation was not that regulations were not in the rules book but that they were laxly applied or waived altogether under political pressure.

Consider the Lloyds takeover of HBOS last autumn. G Brown did not want major redundancies in Scotland during the Glenrothes by-election. A loss there and Gordon was toast. Only two UK banks were in good enough shape to takeover HBOS, an entirely domestic operation, Lloyds and HSBC. HSBC were bigger but had significant shareholders from China and already had sub-prime problems in the US. Lloyds had lost its international claims about 30 years ago in a previous bank disaster. Lloyds was thus a domestic bank that could easily only expand in the UK with a chairman who was ambitious to be the biggest bank on the High Street. Politicians recognise this in less than 5 seconds. The problem for a Lloyds takeover was it would be rejected on competition grounds by the OFT but Gordon could over rule the OFT! So you have an ambitious man and what he wants is in the gift of GB who wants what the ambitious man has to offer. Deal done! Stuff the Lloyds shareholders who ended up £50bn worse off, forget about due diligence rules, hubris wins again but nemesis quickly followed as surely as it did in Ancient Greece and Rome.

Coming now to UKIP they had lots of rules governing MEP candidate selection for the members to vote on viz:

All candidates must have a UK electoral roll number.

All candidates must have a CRB check.

Candidates standing in more than one region must make this clear at the hustings.

Proposers can only propose one candidate.

Candidates must be a British citizen.... or a citizen of another member state who is resident in the UK or Gibraltar during the nomination period.

Candidates must be a member of UKIP

and of course candidates must support UKIP's core policy of withdrawal from the EU

One candidate, Marta Andreasen failed all these criteria yet was put on the London list and the South East list! Another, Tim Worstall, failed the residency and proposer criteria. Both are close associates of Mr Farage.

As Lynda Robson put it,

'Why are some candidates more equal than others?' I am absolutely sure that if when I had applied I had said:

I'm not a UK resident;

I'm not a fully paid-up member of UKIP;

I can't get a CRB check;

My proposer has also proposed someone else;

I'm not on the UK electoral Register; and

I have no intention of mentioning I will be standing in two Regions

I believe I would have been very firmly rejected - and rightly so.

Such chicanery will not play well with Elcom or our other enemies in the media and the community at large.'

UKIP's election rules regulator was Mr Gill. With Farage's approval he waived the rules for Marta Andreasen. This created huge bad feeling and upset a large number of our activists in London and the South East. Hubris from Farage and nemesis will follow as it has for Lloyd’s Victor Blank

The great strength of this country has been the fair and impartial application of rules of procedure. David Abbott expressed this superbly in the email below which was used to kick him off the UKIP NEC!

Sent: Wednesday, September 24, 2008 4:42 PM
Subject: Football, cricket and UKIP


Dear NEC members and other friends,


Several times my website has pointed out that most of the world's popular
games and sports began in Britain because we Brits understood the importance
of rules. You can't have a game without them.

Rules have to be fair, agreed and understood ahead of time, and obeyed. If
the rules are broken, there are penalties. The rules are not to be ignored
or changed in the middle of the game. The umpire or referee has to be
unbiased.

This is the British way, and it has worked for centuries. Without rules that
are understood and willingly obeyed, nobody wins and nobody has a good time.

Lack of success and a distinct lack of a good time now distinguish UKIP.

Where UKIP has rules, they are ignored if it suits the leadership. Often
there are no rules and no rulebook. Minutes are not always kept. Rules are
selectively applied to favour the few and to afflict others. Lack of fair
play is sapping the life of our party.

A recent manifestation was the selection process for the MEP lists. A man
who had once been my hero was going to be the trusted umpire who would
ensure that the rules for the selection process were fairly applied. Instead
there were significant breaches of those rules. Lynnda Robson described
breaches that affected her in some detail, and we have all had
communications about rule-breaking from many other complainants.

This uneven application of the rules is a disgrace. It seems to have been
directed by the leadership.

Until our party leadership adopts again the ethics of its members, which is
to say British habits of keeping to the rules, fair play and honesty, it is
hard to envision any future success for the party.

This situation is tragic because we were looking to the party to lead us out
of the morass of the EU. Instead the leadership seems to have adopted the
EU's reckless attitude toward rules and indifference to ethics, particularly
Judaeo-Christian ethics.

I am sending this to several interested party members. If you are an NEC
member, please vote with your conscience at NEC meetings, and do not succumb
to the continuing pressure that legitimises rule bending. If you are not a
member of the NEC, but have friends who are, please encourage them to do the
right thing.

Yours sincerely,


David

David F Abbott MRCP

And now we have procedural rules being ignored on the SWCC by the RO Mr Wood and the Chairman Mr Mager not giving sufficient notice of a meeting, more than 21 days and not sending out the agenda more than 7 days before the meeting. I have written to both pointing out that as these last two meetings on 14th Feb and 14th March were improperly convened they cannot transact any SWCC business. I gather Mr Farage was not pleased with these rules as he attended the first illegal meeting. He was even less pleased when someone pointed out they were his rules approved by his NEC! The reason such rules exist is to stop cliques manipulating committee meetings.

Rules, regulations and procedures protect us from those who wish to thwart the democratic process. Those who waive them generally come a cropper

Sterling starts to wilt

Yesterday Sterling fell by 3% against the Euro and 4% against the Dollar. These are huge moves in a market where a 0.3% move would normally be regarded as big. Most investors expected this fall at the end of last week but yesterday Sterling capitulated in a delayed reaction to the BoE's QE announcement. Some dealers attached some weight to the government increasing its stake in Lloyds to 70% or so. Sterling clearly has further to fall as the BoE increases the money supply over the next months.

Gilt yields have also fell below 3% at one time, the lowest since 1989. This reflects it is the safest haven to park Sterling in over the next few months and stuff lending to risky businesses. Gilt yields have risen from this low to 3.1% today. Unlike the BoE, I expect inflation to pick up as the fall in Sterling feeds into higher oil prices and import prices generally. When this is recognised Gilt yields will rise rapidly.

The coming G20 meeting this weekend will see a clash between the Franco-Prusian rulers of the EU who want more regulation and a big crackdown on tax havens and the Anglo Saxons who want to concentrate on a new international accord on bailing out the financial system. I would not like to have to write the press statement, traditionally written before the meeting so the politicos can have lots of photo ops. The Anglo Saxons want to reflate but want to see some reciprocity from the Fourth Reich.

Markets are like Justice, Impartial

Two headlines struck me in today's DT business. "Overvalued Euro set to plunge 'within months'" by Garry White and AEP's piece headlined "Thanks to the Bank (of England) its only a crisis; in the eurozone it's a catastrophe"

AEP writes on how the ECB is behind the curve and how the PIGS's economies are suffering because of ECB's interest rate and hence forex policy and also the ECB insisting there is no danger of deflation in Europe. White's piece tells how the spread betting companies are reporting huge wave of trades shorting the Euro. The CFTC figures show in the last net short positions against the Euro by speculators and hedge funds doubled from 10,081 to 19431 contracts. This will get hedged into the futures market bringing down the Euro futures rate and gradually impacting the spot rate. The markets are doing the ECB's work for them and the markets will save the PIGS if the EU bureacrats allow them to function. The same applies in the UK but King is not as savvy as Trichet.

It all reminds me of the figure of justice on the top of the Old Bailey in London, blindfolded with the scales of the market, sorry justice, in her hand. The markets are blind to whom they help or hinder by their judgements. Written round the bottom of the cupola are the words, "Punish the wrongdoer and defend the children of the poor". Pure humbug but clearly the wrongdoer is Fred the Shred and the defender of the poor Gordon Brown or so the spinmeisters want us to believe.

No Nigel on Sky TV

I was looking forward to NF's advertised appearance on Sky TV this Sunday morning so I could watch him debate with Robin Page. It was disappointing that it seemed to have been pulled. I cannot believe the claims on the democracy forum that this happened at Nigel's behest e.g. from a PeterC , "I have spoken with Robin Page both yesterday before Farage pulled and again this morning after Farage pulled, Sky were going to have a van for a live link up with Robin, Farage pulled out because Robin had been asked to be interviewed,". I trust UKIP press office will issue a statement rebutting this and setting the record straight. UKIP needs as much TV exposure for Nigel as possible. It is one of Nigel's strong points that he is always available for TV appearances.

Liam Halligan in today's Sunday Telegraph is a refreshing voice against the overwhelming concensus views on global warming and Quantitative Easing. If you oppose the former you are 'a denier' and should be treated like a holocaust denier and if you argue against the latter you are against trying to save jobs. The idea is to undermine an argument not by fact or reason but insinuating it is immoral to even hold such an opinion. In football parlance it is called playing the man not the ball and it is what us Eurorealists have had to put up with from the media and the British political establishment since 1972. It is the 'reason' or should I say excuse why the UK government has never had a cost benefit study of UK membership of the EU.

Halligan notes as I did yesterday how hopeless the Tories are and how we with QE we are now behaving like a banana republic that can inflate away its debts to zero. The markets are not going to let that happen. Governments spending will have to be cut, taxes raised and the government deficit reduced. The economy will have to be re-balanced. More proper private sector jobs created and non-productive public sector pen pushing jobs reduced. As Mandy says more engineering less financial engineering.

Government takes over LLyods

HMG now controls 77% of Lloyds voting equity. CEO Eric Daniels & his chairman Sir Victor Blank have turned Lloyds from a well funded solvent bank into a basket case in 6 months. Give Sir Fred and Sir Tom McKillop their due it took them over two years to achieve this with RBS. However, if anyone thinks bankers are bad at running banks for a real mess you have to have HMT on board! You ain't seen nothing yet!

The thought of government directed lending at RBS, Llyods and NRock makes my blood run cold. Bad debts will rocket. Foreclosures will be banned. Top up loans and bail outs will be the order of the day. It will be throwing good money after bad on a grand scale. The real losers in this fiasco so far have been the bank shareholders. They have lost virtually all their money. That includes many ordinary people through their pension funds and ISAs. Now it will be everyone in the UK that takes the equity losses and these losses will be huge. Sterling will be trashed on the Forex market, unemployment will rocket and the populace will turn to extremes either the far left or the far right. Cameron, Boy George and the Mekon will sit there like the three wise monkeys waiting for power to fall into their equally grubby and incompetent hands. They also are completely clueless as to how to sort out this mess.

The only good thing I could see possibly coming out of this will be a complete reform of our Parliamentary democracy which under the control of party spin doctors is no longer fit for purpose, neither the Commons or the Lords. We have not had a military government in this country since 1660. I would not bet against another one occuring in my lifetime.

Quatitative Easing today Robert Mugabe tomorrow

Well its official. We are going to print money to solve our problems just like the worst third world dictators do to hang on to power. How can it be right that we try to get out of a mess caused by too much borrowing and cheap money by making money even cheaper in greater quantities. How can it be right to brutally penalise savers and reward the profligates who got us into this mess. It is insane. The emperor has no clothes!

I predict Q. E. is one thing the ECB will never do. The Germans will simply never agree and they will be right. It would amount to an EU debt union.

Under QE Sterling will weaken, the Euro will strengthen, UK inflation will rocket, labour unrest will follow and we will be back to the last days of the Callaghan government in 1978/79. It took the bravest political decision of my lifetime by Mrs Thatcher in the 81 budget to raise taxes in a recession to cut the government fiscal deficit. Remember 364 academic economists, the great and the good of the economic world signed a letter to the Times saying this was completely the wrong action to take. Time proved it was the basis for the UK economic recovery but even 20 years later many of these economists cannot accept they were wrong and Mrs Thatcher was right. They behaved like 364 Ted Heaths. Cameron will have neither the courage or the will to take similar unpopular action when he comes to power.

Barclays Capital witter on about the Taylor rule indicating rates should be "minus 1%". This is a classic case of extrapolating into the unknown a rule whose veracity has only ever been tested over a small range of much replicated circumstances.

UKIP should oppose this QE tooth and nail as when it fails, as it will, the clamour to join the Euro run properly by the Germans will be irrestible. We are now in the end game for Sterling.

Gordon's Gilts & Indigestion

It is reported that quantitative easing, printing money in plain English, will be signed off today by an exchange of letters between the BoE and HMT. It will work as I described previously, HMG issues gilts, BoE prints money, BoE uses this newly printed money to buy the gilts, Gordon gets the the money, Gordon spends the money and by so doing Gordon saves the world. Ho-Hum!

Yesterday the DMO, Gordon's Gilt issuing department, offered the market £2.25 bn of 30 year maturity gilts by a tender auction. The lowest accepted price was £95.08, a yield of 4.55% was £1 cheaper than the average price of £96.12, a yield of 4.485%, a yield tail of 6.5 basis points the widest for a conventional gilt auction since 1995. This indicates a weak demand for Gordons gilts, The auction was 1.48 times covered so roughly one third of the bids were at a lower price than £95.08 and correspondingly higher yield than 4.485%.

Investors did not rush to buy these bonds firstly because they are worried by the huge supply of gilts coming down the track. Gilt issuance is set to rise to a record £146 bn this year, three times last years figure! Increased supply means reduced prices means higher yields. Secondly, printing money causes inflation, ask Robert Mugabe, so by the end of 30 years your £100 gilt might only be worth £1 in 2009 money, not a great investment. Hence the comment from UBS that "the auction was massively dire" and one of the worst auctions in 10 years for poor demand. Investors are getting gilt indigestion.

The end result is that 30 year gilt yields rose 20 basis points. Gordon will have to issue shorter and shorter gilts which have to be rolled over more frequently. We are rapidly turning into a third world country a la Greece!

The BoE's quantitative easing is reported to involve buying a further £150bn of Gilts. These will be short dates in of 2 to 5 year tenor.

In total Gordon will be spending £300bn of borrowed money this coming year. How will this ever be repaid?

That's the way the money goes, pop goes the weasel!

Europhiles versus Reality

This is the brilliant title for Simon Heffer's piece in today's DT. He articulates a number of the issues I have raised on this blog in recent days. Its nice to be ahead of the curve as we used to say in the BoE.

Heffer quotes Milton Friedman, the man who converted Mrs Thatcher to monetarism, and hence seeded Mrs T's much needed supply side reforms in the UK now sadly pissed away by 11 years of NuLabour and the preceding 6 years of John Major.

Friedaman said: "The Euro is going to be a big source of problems, not a source of help. The Euro has no precedent. To the best of my knowledge there has never been a monetary union putting out a fiat currency composed of independent states. Ther have been unions based on gold or silver but not on fiat money-money tempted to inflate-put out by politically independent entities." (A fiat currency is a paper currency whose notes act as 'money' only because a government says they are 'money'. It has no intrinsic value unlike gold or silver coinage.)

The EU political class is in total denial and squabbling amongst themselves with naked national interest the dominant factor. The three ways out of the Euro mess are:

Cut public spending and/or raise taxation. Electoral suicide for any government plus guaranteed riots across the EU.

Print money by the back door and hope the markets wont notice - unlikely but Almunia's so called 'solution' - see today's DT business section. This will go down like a lead balloon in Germany, shades of the end of the Weimar republic.

Get the German's to act as lender of last resort ie borrow huge amounts in the market on their name and credit rating and give the money to the less well off in the EU. The market would demand a huge premium for these Bunds and it would be electoral disaster for Frau Merkel. The Germans don't see why they should pay for corrupt inefficient European countries.

Managing an overall Euro FX devaluation is a difficult trick to pull off and would certainly attract retaliation from the US.

Add in the clear East West divide and you have a recipe for EU break up just as happened 1700 years ago to the Romans. As it says in the Bible, "The sun rises and the sun sets and there is nothing new under the sun"

Trouble Rising in the East for the EU

My theme of yesterday is today's banner headline in the DT. The French & Germans are claiming credit for calling Sunday's emergency summit. Sarkozy is carrying on as if he is still EU president and implying the Czechs are not up to running the EU. Its back to the Holy Roman empire as far as Merkel and Sarkozy are concerned and the Eastern Empire better learn this quick.

Maybe they should remember the original Roman Empire split into the empire of the East and the empire of the West circa 300 AD and the split came right down the same fault line between Croatia and Serbia.

The Euro is the driving force behind the coming social unrest and split. Almunia, the EU commissioner in charge of monetary affairs yesterday stated he had a cunning plan to avoid this split but it was so secret he could not tell anyone, a bit like Baldrick in Blackadder! I doubt the plan will be up to Baldrick standards!

Italian BTP - Bund spread at 1.5% and Greek-Bund spread at 2.5% says it all. Nothing can withstand the bond market!

Setback on the Eastern Front for the Fourth Reich

Ferenc Gyurscany, the Hungarian Foreign Minister has sent a six page letter to the EU making dire predictions of what could happen in Eastern EU Empire ie Poland, Hungary, Czech Republic,Slovakia,Latvia, Lithuania, Estonia, Rumania and Bulgaria. The Czech PM and current EU president weighed in with dire warning against France & Germany taking protectionist measures against the Eastern Empire. Sarkozy of course denied this and as always blamed the US. Qui s'excuse s'accuse as the French say.

The bottom line is that the Eastern Empire wants a 200bn Euro bail-out to prevent a major crisis including possible civil unrest. The Frau Fuehrer dismissed this call. Put this together with the PIGS demand for a similar bail out and one does wonder where the money will come from.

There is now 100 million plus citizens from the Eastern Empire in the EU but as we know many are resident in the Western Empire where their presence is already causing resentment amongst the native populations. As I noted some months ago there will be civil unrest throughout the EU this summer. They will soon need their EU army and gendarmerie.

I read Robin Page's centre page piece in the DT today on why he has left UKIP. Click on the link below to read what he said.

http://www.telegraph.co.uk/comment/4903755/Why-Ukip-has-just-lost-another-member.html

Who will buy Gordons Gilts or BO's Treasuries?

Economic reality will out. Its not over till the fat lady sings but when you tighten her corsets in one area she just pops out somewhere else!

In today's Sunday DT Business Liam Halligan points out the risk of a 'buyers strike' when Darling Brown tries to sell £50bn, £100bn, who knows how much gilts to the bond market. Johnny Foreigner wont want them given the precipitate decline in Sterling. Pension funds and insurance companies are not exactly flush with cash so who will buy these gilts? Why the Bank of England of course! How will it get the money? Why it will print it at of course so lots of overtime coming up for Essex man and woman at Debden the Bank's printing works! And where will the fat lady pop out? Well Sterling will sink more, inflation will rise and Robert Mugabe will become HMT's latest economic guru replacing the disgraced Myners.

The UK already has a third world health service, a third world education system so why not a third world Zimbabwe type economy! The Tony & Gordon Cappuccino years are now exposed for what they always were, not economic growth but economic disaster. The tide has gone out and the nude swimmers are exposed for all the world to see.

BO across the pond also has a similar problem in persuading the Chinese to buy Treasuries to keep the BO show on the road. Notice how Chinese human rights are no longer of any importance to Mrs Clinton. I guess in her word she mis-spoke when she used to bang on about Chinese human rights abuse. My view is the Chinese will buy up natural resource companies, miners like RTZ and oil companies not worthless US paper. This will be backed up by a Chinese diplomatic strategy to turn some of the countries with this natural wealth into Chines client states e.g. Sudan. The Chinese are long term thinkers. Their time horizon is over a hundred or more years. Our quick fix politicians cannot understand this just as they cannot understand how radical Muslim preachers can turn decent civilised people into religious zealots in a very short time.

Saturday's DT ran a full page spread entitled "Breaking point for the eurozone". This dealt mainly with how the Irish economic miracle rapidly became the Irish economic disaster as the other side of Euro membership bites. A 'celebrated' Irish economist, David McWilliams is quoted as saying, "The entire Irish episode will be studied for years to come as an example of how not to do things". Irish unemployment is heading for 10% and Irish workers are pouring into, Yes you have guessed it, the UK seeking work. Well at least they cannot blame the Brits for their troubles this time, all home made in Ireland.