Category: Europe

Economics Update

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Bad news from the Euro Zone, with Eurozone employment falling by 0.5% in the 3rd quarter, and Euro zone industrial output fell by 0.6% in October, and by 11.1% year over year.(!)

We are also looking at a spike in food prices over the next year, leading to an increase in inflation that all the economists and the economic journalists ignore, because, after all, it’s not core, because it’s just food.

In currency, Abu Dhabi has agreed to bail out Dubai, which has made people feel more secure, so they are selling dollars, which pushes the currency down.

In energy, crude oil fell for the 9th straight day largely on demand concerns.

The Hague, Bitches

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We have new revelations on the British investigation of what happened during the march to the invasion of Iraq, the sort of investigation that US politicians have specifically eschewed, has revealed that Tony Blair was informed that Saddam had no WMD before the invasion:

Tony Blair was aware of last-minute intelligence revealing that Saddam Hussein had probably dismantled his chemical and biological weaponry, a key adviser has said.

Sir John Scarlett, who was the head of the Joint Intelligence Committee in the run-up to the war, said that two reports received in March 2003, which suggested that Iraq’s weaponry had been taken to pieces, were sent directly to the former prime minister. He also said that Mr Blair was made aware of doubts over Saddam’s access to the warheads needed to deliver them.

We now have enough evidence for the ICC to start an investigation, and perhaps enough for an indictment.

Please though, make it a secret indictment, so you can apprehend Reverend Smiler when he steps off the plane in Brussels.

Economics Update

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Surprise! Geithner and Bernanke:
As popular as a case of the Clap.
H/t Calculated Risk


And ore Americans than ever are on food stamps, h/t Naked Capitalism

Well, we have a bunch of good news on the consumer front, with retail sales growing by 1.3% in November, more than the 0.6% forecast, and the Reuters/University of Michigan Consumer Sentiment Index rose to 73.4 in early December, up from 67.4 last month, and well above the forecast of 69.0, which is all very good, since the holiday season is a huge part of retail sales, but the Discover Financial Services survey is showing that consumers are looking to slash their spending by 15%.

Yeah, I’m confused too.

I would also note that the number of people collecting food stamps hit a record, 37.2 million, which raises the question if, “food stamps are the soup lines of this Great Depression?”

We are now seeing some rumblings of inflation on the other side of the pond, with UK factory input prices rising at fastest pace in a year, 4%:

Input prices gained by 4% last month from November 2008, and by 0.4% from October.

Output prices – the prices of goods leaving UK factories – rose 2.9% on the year, the fastest pace since February.

Output prices – the prices of goods leaving UK factories – rose 2.9% on the year, the fastest pace since February.

So we are likely going to have some of the central banks out there, most likely the ECB, panicking and jacking up rates at just the wrong time.

Still, the retail sales numbers drove the dollar rises to a 2-month high, though interestingly enough, oil fell for the 8th straight day, to $69.87/bbl, which is kind of odd, increased consumer sales implies increased demand, but a rising dollar may trump that in the mind of oil speculators.

F%$# the Shareholders, They Are Worthless Punks

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I don’t think that. I own shares in a number of Vanguard®‘s funds, but it’s clear that’s what the banks, and the bankers think about their shareholders.

We know that the UK is allocating a special levy on bonus funds for financial institutions, which will shrink the size of the bonuses that bankers get. The banker’s solutions is to increase the size of the pools to maintain the same outrageous bonus levels.

The way that these bonuses are supposed to work is that you allocate a certain percentage of profits in a publicly held firm to a bonus pool, based on the needs of the firm, things like profits, the need for cash on hand, and things like dividends for the shareholders, who are, after the people who own the f%$#ing company.

Well, that’s not how the bankers think, so when that pool gets taxed, you just take it out of the hides of the shareholders, and financial reserves, etc.

This is way beyond mismanagement. This is theft, just like what Conrad Black went to jail for, and it should be treated as such:

Bonuses are supposed to be determined by the amount of money available after you settle accounts for the year. If you decide it by starting from how much you want to pay for yourself, you are doing what Conrad Black did, and he’s now in prison:”

Several of the big US banks, and some UK banks, conceded in private that they were nervous of cutting the bonuses of City staff, partly for fear of causing internal friction, and partly to avoid having top staff picked off by bolder rivals or hedge funds

Disgraceful. Particularly when these guys were the ones who f%$#ed up our system in the first place.

Banking is not a meritocracy, not that it was ever much of one, it’s a kakistocracy.

The Fairy Dust Works*

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Finally in the air

The Airbus A400M has made its maiden flight maiden flight at 10L15 am (GMT +1) today in Seville, Spain.

It appears that they never retracted the gear (not surprising) , and I have no details of the flight plant, but here is some video and picture pr0n.

The most detailed report of the flight that I could find says that the flight lasted for 3h 45m, and that the aircraft reached 800 ft and a speed of 230 kts, below the original goal of 300 kt, but sufficient speed to imply that the gear was raised for some portion of the flight.

*See here for reference.

Economics Update

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There is no wealth creation for ordinary folk, just bubble creation, h/t Calculated Risk


Crude prices, h/t OilEnergy

So, today is “Jobless Thursday, and initial unemployment claims spiked unexpectedly to 474,000.

Truth be told, it’s not a surprise. Non-farm payrolls need to rise at about 300,000 a month, so the “really good” NFP numbers in November, which had a -11,000 number indicates that things still really suck.

We have seen a drop in the U.S. trade deficit in November, which has been driven by export growth, though falling oil prices (see lower pic), and the fact that US consumers are still not in the mood to buy anything, including imports.

We have some good news on household net worth which grew by $2.7 trillion in the 3rd quarter, largely on the recent stock market bubble rally.

In real estate, the 30-year fixed mortgage rate rose this week, and
foreclosures fell in November, though, as the article notes, this may be a a pause more than anything else:

“They’re artificially low because of underlying causes,” said Rick Sharga, vice president of RealtyTrac.

He cites three reasons why foreclosures have dropped in certain states: The holiday season, when foreclosures typically slow down; the government’s mortgage modification program, which has created a slowdown in delinquent loans; and mandatory mediation in more states between homeowners and lenders before going into foreclosure.

In the world of central banks, the Bank of England left its benchmark rate unchanged at ½%, while maintaining its asset purchase (printing money) program.

Something interesting occurring in the world of US Treasurys though, the yield curve is the steepest since 1980.

The nickel tour is that when you buy a 2-year bond, you get less interest than if you buy a 30-year bond, because the risks of a 30-year bond are higher, not in terms of default, but because your money is locked up, and interest rates can go up, or you can need the money in a hurry, etc.

The difference is now 373 basis points (3.73%), with average over the past 5 years being 132 basis points.

It may be a market burp, or it may be inflationary concerns.

In currency, the dollar was essentially unchanged, while in energy, oil fell for the 7th day in a row on economic concerns.

I Really Want to Live in the UK

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Well, we now have the details on Alistair Darling’s proposal to tax bonuses in the UK, and it looks very good: It’s a 50% tax on all bonuses in the banking industry in excess of £25,000.00 ($40,700).

What is interesting is that this is not a tax on income, but a tax on the bonus reserves themselves, so it avoids the human rights:

Instead of legislating for a levy on individual bankers, the Treasury has focused on the simpler and potentially legally safer route of taxing the bonus pool used by banks for staff compensation.

The recipient of such a bonus would still have to pay personal income tax, so, if he would normally have received a bonus of £100K, he would get a bonus of £50K, and that would be subject to taxation by Her Majesty’s Revenue and Customs. (see also here)

It disincentivizes the huge bonus awards, and it fills a significant hole in the UK budget, raising £550 million this year, and £3 billion in the future.

In any case, Bloomberg decided to waste a reporter’s day by making him write a story about how it probably won’t happen in the United States.

Well, duh, banks here are largely succeeding in gutting financial reform here.

Make them pay their fair share of taxes? Fuggedaboudit!

Economics Update

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The Conference Board’s Index of Leading Economic Indicators rose for 7th straight month in November, as did the Japanese coincident indicator index for the month of October.

On the other side of the coin, the National Federation of Independent Businesses is reporting that small business optimism fell in November, and a recent poll is showing that Americans are becoming more pessimistic about the economy, and the Australian consumer is in a foul mood too.

In real estate, by dint of many government efforts to reinflate the bubble, Freddie Mac is reporting that home prices are up for the 2nd straight quarter.

So, we can expect more tax credits and suchlike in order to put off a final day of reckoning.

We had a major monkey wrench thrown into the the works of international finance today, when Fitch’s downgraded Greece’s credit rating from A- to BBB+, which has spooked the markets generally, most notably this news has pushed the Euro lower, with investors moving to the dollar and Yen, mostly the Yen, the dollar was up vs the € and down vs the ¥, looking for a safe haven.

Additionally, an update on Japan’s GDP numbers for the 3rd quarter slashed growth from the initial reading of 4.8% to 1.3%.

The rising dollar, along with reports of strong inventories, drove oil to below $73/bbl.

Wishing That I Was a Brit

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Chancellor of the Exchequer Alistair Darling will be levying a tax on excessive bonuses:

Alistair Darling will try to force a “permanent culture shift” in the City as he announces a one-off punitive super-tax of more than 50% on the bonuses of tens of thousands of bankers as the centrepiece of the pre-budget report.

The chancellor intends his targeted, one-off levy as a clear message that the City has to “start living in the real world” as the financial sector prepares to lavish hefty payouts on its staff.

The new super-tax rate will be aimed at any bonus above a fixed rate, rather than the basic salary of the employee. It is intended to hit many thousands of bankers, but low-paid staff in bank branches will be exempt.

The tax will be set higher than the 50% income tax rate coming in from April for those earning more than £150,000 a year, sources indicate.

Needless to say, the bankers don’t like this, calling the measure, “populist, political and penal.”

I think that they meant the statement as a condemnation, but I found it to be a complement, though I do like the alliteration.

The details are not clear, but I would suggest something on the order of 93% of anything in excess of £400,000.

Now, This is a Rant

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What’s Up With This Pink Tie Thing?

The gentlemen in question is Nigel Farage, Member of the European Parliament (MEP), and former head of the UK Independence Party, which makes him a very heavy duty wing asshole.

That being said, I’m struck by just how well spoken he is. He’s an asshole, and as the defacto head of the UKIP, he is implacably opposed to the EU doing anything, ever, but he is well spoken and thoughtful in a way that is miles beyond people like Boehner, or McConnell, or Bush, or Dick “the Human Snarl” Cheney.

H/t ELP Defens(c)e Blog

Swiss Referendum Bans Minarets

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The ban passed with 57% voting in favor.

This is not good news because it is basically a triumph of right-wing demagoguery.

That being said, there are more issues involved than simply bigotry and Islam.

The elites in much of the developed world have decided that a tight labor market, one which would have factory workers and street sweepers paid more than they currently get, and bankers and factory owners paid less than they currently get, is a good thing. This means that cheap labor economics drives much of immigration.

It’s not surprising that people who are in the bottom 90% income in a society would oppose this. This is a zero sum game, and by driving wages down, they lose.

Additionally, high immigration every country raises questions about societal norms, and these issues have been studiously avoided.

It’s no one else’s business how one prays, but in terms of how one should behave in public in society, there is a legitimate question of to what degree immigrants should be expected to assimilate in their public behavior.

Both of these are significant questions, and they played vote total into the Swiss minaret ban.

Let’s be clear though, there needs to be perspective in determining the bounds of society, and I think that actions like banning the minaret and hijab (head scarf) are nuts, but by the same token, I think that the cloistering of women through the Burqa, Abaya, and Niqāb (which cover the whole face except the eyes) may very well be over the line?

And then there is the modern chador, which covers the body, but leaves the face exposed…It gets confusing.

The bigots would offer is that some Islamic nations require women to wear head scarves even if they are not Moslem, so it’s reasonable for western nations to require that all women not wear head scarves, but when you are holding up Saudi Arabia as an example, you’ve lost the moral high ground.

That being said, my guess is that the most significant motivation for a yes vote was simple bigotry, and there is no simple solution, at least in the short term, because you can not change the hearts of adult bigots.

The best you can hope for is to educate their children to be less bigoted.

What can be done in the shorter term is to address issues related to “race to the bottom” cheap labor policies, and publicly discuss and address concerns participation of immigrants in public society.

If you do acknowledge that there are some issues about immigration and assimilation that are unrelated to bigotry, you will likely peel off enough of the “Yes” votes for referenda like this to fail.

Unfortunately, there is not currently an honest dialog on these issues.

Have to Put my Resume in With These Folks

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Leeds University advertises for lap dance research officer:

The advertised position, in the School of Sociology and Social Policy, is for: “Research Officer – The rise and regulation of lap dancing and the place of sexual labour and consumption in the night time economy”.

The advertisement further stipulates that “prior experience of conducting research in the female sex industry” is essential.

Of course, if this does not appear on Letterman, Leno, or Stewart, they aren’t doing their jobs.

Needless to say, Sharon* is not amused at my suggestion that I apply for the position.

*Love of my life, light of the cosmos, she who must be obeyed, my wife.

Stupid

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So, the crew of the HMS Scimitar decided to do target practice on a buoy, which should be no big deal, only before opening fire, they adorned their target the Spanish Flag, and the ambassador to Spain has been forced to apologize:

The Royal Navy was accused yesterday of using a Spanish flag as a machine-gun target.

Giles Paxman, the UK’s new ambassador in Madrid, was forced to apologise after sailors fired at a red-and-yellow flag affixed to a buoy while patrolling off Gibraltar.

He was summoned to the Spanish Foreign Ministry for a dressing down and officials said he had conceded there had been an ‘error of judgement’.

I’m not entirely sure why the crew did this, it was not for any historical purposes, as the anniversary of the battle of the Spanish Armada was August 8.

My guess is that this has something to do with the 300 year long dispute over Gibraltar, but even so, I think that one ship captain is facing early retirement in Her Majesty’s Navy.

Bye-Bye Ukraine

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Both Sweden and Finland signed on to the new northern natural gas pipeline from Russia to Europe, meaning that in 2012, Ukraine will no longer be the only way for Russian gas to make it to Europe.

This means that gas transit fees to the Ukraine, and the price of natural gas sold to the Ukraine, as well as the gas that is “lost in transmission” (stolen) are all likely to decrease.

In the short term, it means that the Russians want to make sure not to honk off anyone with short term gas disruptions, hence the recent agreement between the two government to waive penalties for Ukraine buying less gas than agreed to in their contract, because they don’t need to when they are an IMF economic disaster zone.

I think that the new pipeline may be why the Azeris are talking about selling their gas to Asia, particularly the Chinese, rather than Europe right now too.

They realize that the Ukrainian pipeline is likely decreasing utility in the future, and they can hook into the Russian system in fairly quickly once the northern pipeline is completed, so having the option to selling to Asian markets is a plus.

Swiss Look to Postpone Fighter Selection

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It looks now like the final decision by the Swiss will likely be delayed until 2011, (paid subscription required) and the size of the order may be reduced from 30 to 22 aircraft.

It looks to me like budget considerations are an issue, which would mitigate against the $100-$140 million Eurofighter Typhoon. The Rafale is somewhat cheaper, at about $80 million, and the Gripen is “cheapest” at $40-60 million, which would tend to favor the Gripen.

Additionally, the Gripen is about ½ the size of the competitors, which means that operating costs would be much less, and the aircraft that it is replacing, the F-5 was never the high end of the Swiss AF fighter mix anyway.

Of course, Saab lacks the industrial connections for potential offset deals too, and if the Swiss wish to train at nearby bases, these bases will either have Rafales (France), or Typhoons (Germany, Italy, and Austria) already deployed there, which might simplify support there.

This makes the entire decision process hard to predict, to put it mildly.

An Interesting Take on the Possibility as Tony Blair as EU President

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George Monbiot, at The Grauniad* says it all when he states that, “Making this ruthless liar EU president is a crazy plan. But I’ll be backing Blair.”

He is backing Blair because if he becomes EU President, he must necessarily work from his office in Brussels, and Belgium has acceded to the jurisdiction of the International Criminal Court (ICC), which means that, unlike in the US and the UK, they can indict him, arrest him, and ship him off to the Hague for trial:

Within the UK, there is no means of prosecuting Blair. In 2006 the law lords decided that the international crime of aggression has not been incorporated into domestic law. But, elsewhere in the world, it has been. In 2006 the professor of international law Philippe Sands warned that “Margaret Thatcher avoids certain countries as a result of the sinking of the Belgrano, and Blair would be advised to do likewise”.

I’m beginning to think that Bush, Cheney, and Rumsfeld should be made EU President too.

*According to the Wiki, The Guardian, formerly the Manchester Guardian in the UK. It’s nicknamed the Grauniad because of its penchant for typographical errors, “The nickname The Grauniad for the paper originated with the satirical magazine Private Eye. It came about because of its reputation for frequent and sometimes unintentionally amusing typographical errors, hence the popular myth that the paper once misspelled its own name on the page one masthead as The Gaurdian, though many recall the more inventive The Grauniad.”