End game for the Eurozone

As I have pointed out before putting together two separate pieces from even the same newspaper can yield some interesting results. 

Euro bail-out in doubt as hysteria sweeps Germany was the page 1 headline on today's business DT. The article catalogues the likely disintegration of Dr Frau Merkel's coalition government with smaller parties and even members of Merkel's own CDU party very unhappy with Germany having to pay such huge sums to bail out the PIGS. They are even more unhappy with their complete lack of democratic control over the EU and ECB.

The article ends, 'The next month will decide her (Merkel's) future, Germany's destiny and the fate of monetary union.' That really says it all!

The real seriousness of the situation emerges on reading Tim Congdon's  piece also in the today's business DT entitled, "Britain can easily weather a eurozone break-up if it lays off its lenders". As always Tim is concerned with the strength of bank's balance sheets in current circumstances, the break up of the Eurozone and the resulting sovereign debt defaults which could leave many banks in the EU bust.

Sovereign debt is the ultimate asset underpinning our banking system. A sovereign default is very serious but it can be managed as happened with the huge Russian debt default of 1998 involving 168$bn of debt. It never made the headlines which was probably a good thing but was potentially very serious for the UK through the activities of the LTCM hedge fund. You probably never heard of it because the major investment banks got together and 'fixed' it but boy it could have been catastrophic.

In fact between 1998 and 2005: Russia, Ukraine, Pakistan, Ecuador, Argentina, Moldova, and Uruguay. all defaulted and the world continued to function. These countries devalued, cut public spending had their debt restructured and followed the IMF prescription which works.



So what is different today? Well the banks are not what they were and politicians desperately seeking re-election are involved and have taken things out of the bank's hands. Now I am no fan of rapacious bankers but they are generally talented people who do understand banking. Politicians on the other hand as Napoleon observed are generally of low intellect and understand very little about anything except their own self interest. This is what is behind Tim's plea to lay off the banks. Be assured our politicians and EU crats won't! They cannot resist meddling. There will be endless conferences, announced plans media appearances and sound bites. Just what politicians love.

This is what makes the current Eurozone situation really dangerous. We have a bunch of unreconstructed Soviet style apparatchiks like Barroso in charge of a capitalist system in deep trouble. I expect a full blown financial crisis by mid September with a huge amount of hot air from Brussels.

Derek Hunnikin's UKIP papers

Derek Hunnikin joined UKIP in 1995 twelve years before I did. He sent me a series of documents detailing the unsavoury history of UKIP's hierarchy from 1995 to date. His email address is

derekhunnikin@btinternet.com

I urge all interested in UKIP's fate to email Derek requesting a copy of his dossier.


I have never met Mike Nattrass and I know nothing of his views. I think UKIP's best hope lies with Nikki Sinclaire, whom I have met, and  who has been very active with her referendum campaign. I know  some of her other political views do not play well with some of UKIP's core support but I urge them to concentrate on the big issue of leaving the EU and not be beguiled by a sterile left wing right wing argument. One of the most effective and articulate opponents of the EU in the UK is Bob Crow, the far left, rail worker's leader!

One of the most telling comments in the dossier came from Robin Page who makes the point he was voted onto the governing body of the National Trust against the wishes of the NT establishment only after the NT started using the Electoral Reform Society to conduct is ballots. On the NEC I fought for UKIP to use the ERS for all UKIP elections.I  was bad mouthed by Farage, Whittaker, Derek Clarke, Denny etc  who clearly had their own agenda in these matters and deliberately mis-represented the service the ERS offered at a very competitive price..

I publish below the reply I have sent to Derek based on my own experience.

Dear Derek,

Thank you very much for sending me copies of the above. It must have taken a great deal of time and effort on your part to do this and I wholeheartedly thank you for this. I read all your documents and learned a great deal from them as I only joined UKIP in 2007!

I had worked for the UK government in the period 71/73 when Heath pushed through the Common Market Accession Act with a succession of dirty tricks. I thought then when I resigned from the Civil Service I had seen it all, that was until I met Nigel Farage!

Looking at the latest list of those standing for the NEC my heart sinks. Farage supporters and wannabe MEPs predominate.

Tim Congdon is a good man and excellent academic economist but lacks the ability to talk to ordinary people. Gerard Batten turns to jelly when opposed by Farage. John Bufton is ill and I doubt Trevor Colman wants to stand again given the villification he has had from SW committee members. William Legge, the belted Earl, is another Bannerman. He simply wants a political career after the Tories had multiply rejected him. Worse, his paid 'minder' is Malcolm Wood  a long term associate of Farage who shares many of Farage's characteristics.

I am sorry I have not been more help to you but my energies have been diverted to helping my wife and her French property these last six months. I agree with most of your sentiments and views on UKIP.

UKIP is the only political party I have ever been a member of and through it I met many fine people whom I still count as my friends. It is sad, but not surprising, to realise from your dossier that my UKIP experience merely repeated the experiences of those who had gone before and that if by chance in future any non - Farage supporter is elected onto the NEC list or MEP list I fear they will suffer the same fate!

I was elected both to the NEC and MEP SW slate on the democratic vote of UKIP members. UKIP is not a democratic party but a Farage cult and hence can never have any impact on UK politics

Regards

Eric Edmond

Farage's chosen  prosecutor for my fictitious damaging  of UKIP was Bannerman. I am still a paid up member and supporter of UKIP. We all know where Bannerman now sits in adoration of his new found political hero and hoped for political patron David Cameron.  So tell me Mr  Farage who was the traitor in UKIP and who the unjustly prosecuted honest supporter wrongly removed from the NEC and MEP slate at your instigation? .

DT Business pick up my point on who pays Sarky's Tobin tax

That's right, its you! Just watch Dave and George roll over like typical Tories.

I will be incommunicado for a while but rest assured I will return God willing.

Sarkozy & Merkel want your cash and your job to pay the PIGS

The only concrete proposal to emerge from the latest Sarky Merkel meeting was for an EU wide Tobin tax on all financial transactions. Where do most big financial transactions take place in the EU? The City of London which is not even in  the Eurozone!

Its a wonderful bit of political chicanery.  Tax those who cannot vote you out of power! A Tobin tax is an old favourite of the French as it reduces the City of London's competitive advantage and thus enhances the business prospects of Paris and Frankfurt as financial centres. What will Dave and boy George do to resist this latest attack on the City by the EU? They could veto it but I doubt they have the guts so I guess as usual they will do nowt and just pay up inn Euros and jobs.

Sarkozy pulled a similar trick 3 months ago by putting an additional tax on holiday homes just after my wife bought herself a house in Brittany. Now the vast majority, 80% plus of holiday homes in France are owned by the French who vote in French elections.. Sarky has therefore decreed they will not be liable for this tax which will only apply to non-French owned holiday homes. All of course against the EU rules but what are they there for but for the French, Italians, Spanish etc to ignore when it suits them. Only the Brits obey the rules proving they are really stupid.

Mean while the ECB continues to buy PIGS paper with newly minted money so now Italian and Spanish 10 year bond rates are 4.99%. But as the actress said to the bishop things have to pop out somewhere in this case the Euro money supply and resultant inflation something not lost on Merkel's German coalition partners.

I congratulate all UKIP members who vote against Farage's pan European party proposal but do not think you have won this war. Farage will be back with honeyed words about allowing UKIP MEPs to join with mid European racists and fascists into a pan European party is necessary for Nigel to speak with a strong voice in Brussels as the Foreign Office like to say. I also say F. O. to these Farage's tales.

This will be accompanied by threats of resignation at the party conference and to the 100% Farage controlled NEC and of course tales of party bankruptcy. Now who banrkupted UKIP? Answers on the comments section of my blog please.

Another week, another Sarky Merkel eurozone crisis meeting

It must have dawned by now  on the Eurocrats that the markets are not buying any stop gap sticking plaster solutions. The only organisation buying right now is the ECB, that supposedly independent central bank, acting on the orders of its political masters bought €22 bn. of PIGS bonds last week to add to the previous weeks purchase of €16.5 bn. As Dubya used to say a billion here a billion there and soon you are talking real money.

Has this reduced PIGS bond yields? Yes it has. I update my little table below with today's yields.

              8th July                11th July             15th July             18th July               16th August

Greece  17.04% (14.20) 17.19% (14.52)  17.71% (15.02) 18.23% (15.57)   15.51 (13.18)

Ireland   13.13% (10.29) 13.62% (10.96)  14.27% (11.58) 14.45% (11.79)   10.18 (7.85)

Portugal 13.05% (10.21) 13.28% (10.61)  12.93% (10.24) 12.84% (10.18)  10.90 (8.57) 

Spain         5.69% (2.85)      6.08% (3.41)     6.07% (3.38)      6.32% (3.67)      5.02 (2.69)     

Italy           5.28% (2.45)      5.72% (3.05)      5.77% (3.09)    5.99% (3.34)       5.04 (2.70)

So PIGS 10 year bond yield have dropped by 1% for Italy to 4.5% for Ireland. This of course means the price of these bonds have all risen and the ECB has been paying this increased price. Very nice for banks with large holdings of PIGS paper like say French banks. A nominal 100€ bond that would have been marked to market on their books at say 90€ they can now sell to the ECB for say 93€  a huge change for long dated bonds held on carry trades. The banks are shot of these dodgy  mainly long dated bonds and have lots more Euros to waste on their next whizzo investment idea. The banks will have shortened the maturity of their Euro sovereign portfolio and will I bet be reducing maturities over two years to as close to zero as they can manage.

Now if you listen to the BBC economists this has reduced the financing cost to the PIGS. This is not true. The financing cost to the PIGS was set when the bond was issued so the real test will be when the PIGS go back to the market to refinance their maturing paper. Now if the ECB then still is happily buying PIG bonds at the rate of €20 bn a week, no problemo as Barroso says. The snag is the ECB will have to stop sometime if only when inflation rockets and then I opine the PIGS bond yields will also rocket once more. Still the French banks will have their money and the risk and losses will have been transferred to those who finance the ECB, that's right the Germans! Its the old privatise profits and nationalise losses political trick which only a return to the gold standard will ever stop. Thanks Gordon for selling our gold at $275 per ounce, current price circa $1800 per ounce. Pure genius as the Guiness advert says.


Many good pieces have been written this last week about how the world ended up in this mess Bretton Woods and all. The French of course sabotaged this during the sixties by de Gaulle presenting every French dollar to the US Treasury for one ounce of gold at $35 per ounce. This forced Nixon off the dollar gold standard in 1971. A great triumph for the French over the hated Anglo Saxons but a strategic catastrophe for the world.

I look forward to reading what Merkel and Sarkozy will announce with great splendour and then watching it unravel on Thursday in the money markets. Incidentally the press communique will already have been written. before Merkel sets foot in France. The visit is only for the snappers front page pics!

It is as I opined some time ago the collision between politicians desire and need to be relected domestically and the EU crats desire for a United States of Europe that will bring the whole Eurozone edifice crashing down. Merkel is in deep political trouble in Germany. Her coalition is unravelling. The EU and the Euro are very unpopular in Germany. Sarky also has an election to win in France next year but following DSK's litte trouser problem le petit Napoleon should triumph at the polls once more. A good communique today on the lines Sarky saves Europe once more would of course help.

PS French and UK bonds used to trade at roughly the same spread to bunds. Now the French spread has blown out to 64 basis points with the UK coming in to 20 basis points. The French costs of the bail out plus public sector pension liabilities are starting to hit the French credit rating. Interesting. 

Del Young's emails have also been hacked

I wrote earlier this week about how my email system had been hacked and as a result I had received some silly replies from well known South West Faragistas. I spoke to Del Young at the end of the week and he recounted a similar tale. His emails had been hacked. His address book had been stolen and he was similarly puzzled as to why anyone should bother to do this.

The first common factor between Del and me is we both were elected and served on UKIP's NEC.  Del had previously, as I wrote, received telephone death threats which he reported to the police but no one was ever prosecuted although it seems the culprits were traced. The second common factor between us is that while on the NEC we opposed some of Mr Farage's proposals as not advancing our core policy to get out of the EU.

I do not believe in coincidence but I know smearing opponents is an all too common  and despicable tactic in UK politics. Del Young, David Abbott and myself have only ever stood up for UKIP's leave the EU policy. That UKIP's leadership now seems intent on joining a Pan European, EU sponsored party is a matter of deep regret to us and many other UKIP members and ex-members. I hope it fails and UKIP returns to its core values.

Europe in Crisis

The above is the title on AEP's piece in today's DT business which broadly covers the same points I made in my blog yesterday. He quotes the German economics Professor Grossman as saying, "The debt crisis will be resolved through higher inflation.That will hurt everybody and raise the borrowing costs for Germany". Hissing Sid Issing, former chief economist at the Bundesbank said, "the EMU project is spinning out of control".

"Far from evolving into an authentic fiscal union controlled by a European parliament elected according to democratic principles it is turning into a deformed creature where moral hazard is unchecked and the EU is intruding on sovereign matters". All pretty much the points I made yesterday.

"By subverting the no bail out clause the EU is drowning hitherto solid countries in over-indebtness" Its exactly the same as the UK banking crisis where a solid retail bank, Lloyds, was encouraged by Brown for short term political expediency, the Glenrothes by-election,  to take over an indebted bank, HBOS turning Llyods into a basket case as well.

The markets realised today this is what is happening to France with its huge holdings of PIGS debt and huge commitment to underwrite the EU stability fund. Hence the sell off particularly in French bank shares and Sarky having to cut short his holiday.

AEP writes, 'Berlusconi lashed out at the EU after a leaked letter showed how the ECB had dictated the exact details of Rome's new austerity policies as a condition for ECB Italian bond purchases'

Berlusconi told the Italian paper Il Messagero, 'They make us look like an occupied government. They bought the bonds to save themselves not Italy'. Exactly! That is the quid pro quo I referred to yesterday and Berlusconi now realises they are ruled by Germany. The markets rightly see France as a busted flush with worse economic fundamentals than the recently downgraded US.

The King of Threadneedle Street was today backtracking on his growth forecasts inflation forecasts and recanting on his inflation targeting remit. Not surprising then the FTSE took a dive.

Plenty of hot air is forecast for Westminster tomorrow.

Euro on the cusp

I underestimated the lengths the EU would go to preserve their sacred Euro. Forcing the ECB to buy up huge quantities of Spanish and Italian bonds, up to €200 bn, is a high risk strategy. Trichet is not keen on this and it shows clearly the ECB is not an independent central bank like the Bundesbank but is subject to political control from Brussels. This truthful exposure will not go down well with the Germans who hate inflation after they suffered a total wipe out of their currency and savings in 1928 and 1945 at the hands of politicians. There is no way you can pump that amount of liquidity into Euroland without dramatically increasing inflation. That is a solution beloved of politicians since the days of Rome as it enables them to pay off debts in a devalued and debauched currency.

The person who will pay the political price for this is Dr Frau Merkel and the financial bill will have to paid by the German people already enraged at the loss of their beloved Bundesbank for a mess of pottage or should I say ravioli and moussaka. Merkel is now n the same position as John Major after sterling got kicked out of the ERM in 92. She has joined the walking dead!

The EU solution as articulated by the German Finance minister is more Europe. The French are jolly keen on this as it increases their power and the Germans again pay. There is a funny cartoon in Private Eye in which Biggles says to von Richthofen, " You will pay for this" and von R. replies, "Ve Germans always pay". Well I am not so sure Fritz is going to stump up again this time without a very big quid pro quo.

As the FT put it today, "A single currency can only survive if its political foundations offer coherence. The crisis suggests that, in the absence of further reforms, the euro simply lacks the appropriate underpinnings."  Stephen King who wrote the FT piece then goes on to point out how the Rouble area fell apart after the break up of the Soviet Union. That is the other part of the bicuspid that the EU now finds itself on, the break up of the Eurozone.

King finishes, " If the euro is not to share the rouble’s fate, its member nations will have to agree on a lot more than just the level of interest rates. They will also have to create a fiscal framework that allows for cross border transfers, resolves conflicts between creditors and debtors and supports the Bostonian principle of no taxation without representation”. A neat point but who in the EU represents the tax payers? Not the Eurocrats or MEPs for sure. The problem is the EU does not do democracy. It does elitism.

And therein lies the seeds of the next crisis. Just as the seeds of WWII lay in the resentment of the German undefeated army in 1918 so the seeds of the next Euro crisis will be the resentment of the German people having to transfer their taxes to fund the PIGS and if the German's as I expect demand control of the PIGS's tax systems, the resentment of the PIGS populace against their perceived German overlords. Rather than stopping European conflicts the EU may be creating the next one!

Local LibDems notice Nigel's nasty EDF associates

First I must apologise to those who received spam emails purporting  to come from me. I did not originate these. My email account was hacked into about 5 days ago whilst I was in France and my email address book stolen. I did not think I was worth hacking but obviously someone does.

The interesting thing was the responses I received from those who received this obvious spam. Most people realised my email account had been hacked and replied warning me about this. The dyed in the wool Farage supporters in the South West however reacted differently. Jeff Mager who asked me to remove his name from my address book  but Jon Kelly's reply is so priceless I reproduce it below:

Eric

Are you crazy?

Why are you sending me this shit?

Didn't you know Piers Merchant is dead?

John Kelly

Mr Kelly shows the true intelligence and talent required of a loyal Faragista.

More seriously on my return I glanced at the reader's letters page of our local weekly Western Gazette to see a letter from a local Lib Dem District Councillor, Jon Gleeson asking how UKIP MEP William Legge, aka the Earl of Dartmouth, can sit in the EFD group with Mario Borgheze the Italian MEP who admires the ideas of Norwegian mass murderer Anders Breivek. Mr Gleeson writes,

"I invite Mr Dartmouth to use this opportunity to leave the EFD group or to reply to this letter justifying his defence of Mr Borghezio, otherwise it is quite clear the Italian MEP's remarks can be painted with the same brush as UKIP"

I look forward to reading the reply from the son of Raine but I must point out to Mr Gleeson that Mr Legge, a Faragista who is  Mr Kelly's equal in all respects   was only following the UKIP party leader's orders. 

I am sure Clegg over will be raising this Legge over matter with N Farage when the time is ripe and not in the letter pages of the West Gaz but in the national media.

Why the BBC and UK papers go easy on Farage racist political allies

I received an email last week from Andrew Edwards which raises this issue. An issue I have written on and which Del Young and I have been discussing on and off for the last 4 years. I reproduce Mr Edwards email below.

"Anti-immigration ally of Silvio Berlusconi says Breivik had 'some excellent ideas' - Daily Mail

Ex-Berlusconi minister defends Anders Behring Breivik - The Guardian

Norway killer Anders Behring Breivik emailed 'manifesto' to 250 British contacts -The Telegraph

Three headlines, three references to the related comments from Lega Nord MEP's, Mario Borghezio and Francesco Speroni.  Yet not one mention, anywhere, of the fact that Nigel Farage MEP leader of UKIP is formally allied to these men within the EFD group of Europarl.

Why, it's almost as if there's a conspiracy to protect Farage???  Here in the UK this man speaks out against the politics of the BNP, yet in Brussels he and his cronies happily sit alongside people who make the BNP look positively liberal!

Yet not a peep from your newspapers.  WHY???

Farage has issued a damage limitation statement calling for the Italian MEP's to apologise, but rather than asking them to apologise like good little boys, why isn't he informing them that he's breaking his formal alliance with the Lega Nord? 

The reason of course is obvious - it would cost Farage money!

But why is the media aiding and abetting his ability to keep his current level of EU benefits? "

Mr Andrews rightly points to money as being Farage's motivation in this but why do the media not mention Farage's close links with these Italian racists?

The explanation in three letters is BNP, the favourite bogey man of our liberal elite and a designation Farage freely applies to those who oppose him in UKIP. To report Farage's links and financial symbiotic relations with Liga Nord would make it clear that UKIP's EU allies are not just as racist as the BNP but are considerably worse!

Think back to how often Farage has appeared on high profile BBC TV political programmes like Question Time.shows. Is it because of his intelligence, wit or political perception? Does he compare with other controversial QT non-mainstream figures like George Galloway, David Starkey, Melanie Philips, Simon Heffer, Peter Hitchen etc or of course the man whom Farage wants to be TV show and all Robert Kilroy Silk? Obviously not. Farage does not appoach the intelligence, verbal skill or political courage of the aforementioned. Do you think he could have gone into a US Senate committee kangaroo court like Galloway and win? So why is he  on QT more often than most cabinet ministers?

The BBC charter requires it to give some airtime to minority parties including the right wing. The BBC is a left wing liberal elitist organisation. So how can they fulfil their mandate and further their political objectives. Easy! In the words of David Cameron portray UKIP as a group of Fruit Cakes and loonies and who better to do that than UKIP's  leader N Farage who can always be relied upon to burnish that image with a bit of help from QT chairman and ex Bullingdon member Dimbledore. Farage smirks and thinks he is a great man and has done awfully well. Dimbledore smirks and knows the truth

There is another right wing UK political party with MEPs called the BNP.  The BNP worry the BBC. They did invite their leader Griffin onto QT just the once before a London audience in which the North London Jewish community seemed to be very well represented. The choice of that locale and audience gives away the BBC agenda and fears. They could have put this on in Lancashire, the region Griffin is an MEP for, in a town like Blackburn, fellow Griffin QT panellist Jack Straw's constituency, or Bolton or across the Pennines in Huddersfield or Bradford with an audience containing many Muslims to boo and hiss Griifin but they instead chose London and the North London Jewish community to hurl abuse at Griffin. All they achieved was to offend the British sense of fair play and make the TV home audience feel a bit sorrow for Griffin.

The BBC hates the  North of England, knows little of its culture and despises those who live there. Look at how many of their staff have refused to relocate to Salford! Much safer to stay in London. Does anyone know how many Jews work for the BBC and how many Muslims? For such a politically correct organisation as the BBC do not we, the licence payers, not have a right to know?

Farage suits the BBC agenda very well. He has in the words of the Civil Service mandarins been house trained or in le Carre spy terms been turned. The BBC has what Farage craves so he can be manipulated and controlled here in the UK by the political elite as easily as he is manipulated and controlled by the Eurocrats in Brussels.

That Mr Edwards is why the media will continue to 'protect' Farage. He is their tame, house trained right wing pussy cat. But if Farage is indentified in the UK media with the racist views of his EU Liga Nord allies then he is immediately exposed and the BBC etc have to start all over again finding and house training a more acceptable right wing face to maintain its pretence of 'balance'.