Economic crisis

Alsacien

MIA
Moderator
#1
To the disappointment of some viewers, a financial apocalypse did not come soon enough.
The new playpen is open, in your own time carry on......
 
#2
Maybe we could have had two threads?

Eurozone Survive and Prosper...

Eurozone Fail..

Respective views could then have been put in either and the discussion would be more focused on the individual title?

At the risk of seeing this post go down the plug hole is not the curtailment of debate systematic of how the EU power brokers play when the going gets tough? Italy and Greece have their leaders replaced without the consent of the resident populations, punitive conditions requiring Sovereigns to pay up to the stability fund without recourse to question or debate I could go on!

The issue boils down to one simple and fundamental issue. Will the richer nations of Northern part of the zone subsidise those in the Southern part of the zone so those populations can continue to enjoy the standard of living they have become accustomed to?
Whether or not these poorer Countries are prepared to moderate their standards of living is academic, the problem is now and the problem is real.

Yes: Eurozone survive and prosper..
No: Eurozone Fail
 

Wordsmith

LE
Book Reviewer
#3
The new playpen is open, in your own time carry on......
Thank you for the new playpen, but I'm just wondering about the logic.

1) Close old playpen because you feel it has served its purpose.
2) Open new playpen for the same topic.

Am I missing something?

Wordsmith

(Unless the new playpen is a PFI initiative and we're now paying twice as much for the same service...)
 
#4
Well chaps Mothercare is having a bit of a crisis. Taken from todays DT.

The group saw like-for-like sales tumble 6.2pc in the year to March 31 in the UK, where it plans to cut store numbers from 311 to 200 by 2015 in a bid to save £13m a year.
 
#5
Crisis? What crisis?

In all seriousness, why should most of us care?
The increase in the cost of living is comfortably offset by low mortgage interest. The slow painful; demise of Greece an the subsequent failure of the Euro isn't going to ruin my week
 

Bouillabaisse

LE
Book Reviewer
#6
Well, it might. The populations of Greece, Spain, Italy and Portugal add up to about 127 million, all of whom are legally entitled to move to Britain to work or claim benefits. It doens't take too many of them to work out that they're better off living in a council estate in London or Liverpool than on the streets of Athens or Madrid to seriously damage our economy.
 

Alsacien

MIA
Moderator
#7
Thank you for the new playpen, but I'm just wondering about the logic.

1) Close old playpen because you feel it has served its purpose.
2) Open new playpen for the same topic.

Am I missing something?

Wordsmith

(Unless the new playpen is a PFI initiative and we're now paying twice as much for the same service...)
"coming soon" on a year old thread ........ ?

I hope folks avail themselves of the opportunity to diversify the topic a bit into a few more specific threads. That way people can look at bits that interest them, rather than have to trawl through a giant crayon fest.
 
#8
Crisis? What crisis?

In all seriousness, why should most of us care?
The increase in the cost of living is comfortably offset by low mortgage interest. The slow painful; demise of Greece an the subsequent failure of the Euro isn't going to ruin my week
Depending on where the dominoes fall following a Grexit and the financial damage that causes the BOE may well have to raise interest rates anyway...

In any event most mortgage products have over the course of the last few Months been de-linking themselves from the BOE rate as banks look to recapitalise and rake in greater profits. Maybe you haven't had to re-mortgage lately or are one of the lucky few that got those lifetime BOE tracker deals?

Make hay while the sun shines is excellent advice. The low rates we currently see are a blip in history never before have then been so low or for so long. Sooner or later they must go up. Sensible people will be hedging against that by paying down as much of the debt as they can whilst the rates are low, leaving them well placed when rates do go up.
Those that have used the spare funds on new cars or holidays are asking for trouble and in time it may well find them.

The last years of the boom saw persons taking out mortgages for 6 or 7 times annual earnings in order to be able to afford the insane prices which were the market. Average mortgage rates up till 2008 and the crash from 1985 are around 7% (see graph below). The average mortgage in 1985 may have been around £50,000 of which 7% average repayment would have meant £3.500 a year. Today the average mortgage is going to be much more, lets take a conservative figure of £125,000.
The same repayment on that at 7% will be £8,750 per annum such is the effect of leverage. In 1992 the UK was forced out of the ERM and rates rose to an eye watering 15% and whilst they did not stay there for any period of time it still did untold damage to the UK housing market. An average mortgage today at say £125,000 at that figure would mean annual payments of £18,750. Who today could afford to meet that?

IRGraph.jpg
 

Alsacien

MIA
Moderator
#9
Maybe we could have had two threads?

Eurozone Survive and Prosper...

Eurozone Fail..

Respective views could then have been put in either and the discussion would be more focused on the individual title?

At the risk of seeing this post go down the plug hole is not the curtailment of debate systematic of how the EU power brokers play when the going gets tough? Italy and Greece have their leaders replaced without the consent of the resident populations, punitive conditions requiring Sovereigns to pay up to the stability fund without recourse to question or debate I could go on!

The issue boils down to one simple and fundamental issue. Will the richer nations of Northern part of the zone subsidise those in the Southern part of the zone so those populations can continue to enjoy the standard of living they have become accustomed to?
Whether or not these poorer Countries are prepared to moderate their standards of living is academic, the problem is now and the problem is real.

Yes: Eurozone survive and prosper..
No: Eurozone Fail

Start a poll if you care about it. Then those obsessed with Europe can fill it with Telegraph links, and everyone else can ignore it.
 
#10
Start a poll if you care about it. Then those obsessed with Europe can fill it with Telegraph links, and everyone else can ignore it.
No need I take the view we will know which way it will all pan out by the end of next Month. To put it in your analogy the Greeks will either drive the bus off the cliff or they won't.
 

Wordsmith

LE
Book Reviewer
#11
Several big potential hiccups on the horizon:

31st May: Irish Referendum. I'll bet there are a lot of Irish looking at Greece being bullied and thinking "should we sign up to this pact?"

17th June: Greek Election. This has the potential to deliver either a Syriza led coalition or an inconclusive result. Either will cause problems.

End of June: Spanish Bank Audit. If this independent review decides there's more bad debt on the books than has been admitted, Spain's going to have borrowing problems.

Its not only the Greeks that have the potential to cause problems.

Wordsmith
 
#12
Yerman Yanis For Europe’s sake Greece must renege on its bailout commitments – my op-ed in Le Monde So basically he says tell the Troika to take a running jump:
...
o that Greece will not borrow another euro from the troika until and unless a rational plan is in place
o that this ‘rational plan, must apply to all member-states, rather than privilege Greece at the expense of Ireland, Portugal, Spain etc.
o that until such a plan is in place, Greece will strive to live within its meagre means within the Eurozone, suspending temporarily all payments to all creditors
...
Looking at Greece I suspect they'll be unable to make any decision, they are stubbornly Europhile but probably unable to meet the bailout terms even if they got it together to say yes.
 
#13
CG wrote "Both the Irish and the Greeks will be told to keep voting until the EU, Germany and the ECB get the right outcome.
The chickens will be coming home to roost soon."

I don't think so. First off I suspect that the Greeks may be a bit bolshie and will resent being strong armed in any way. Whatever the Irish and Greeks vote for may not please others, but c'est la vie. Political Teddies may dissapear into corners, but election results of whatever kind have to be accepted, voting until the right outcome happens is a non starter. Meanwhile the "economic crisis" will stumble on and the world will continue to rotate.
 

Wordsmith

LE
Book Reviewer
#15
The Spanish Bank Runs must be going apace....Where did this come from?

BBC News - Bankia shares are suspended in Madrid
Something to do with the bank's management asking for a 15 billion euro recapitalisation perhaps? (And that after the Spanish government recently pumped 4 billion euro euros in). It would appear there are a lot of impaired loans in the books. Bankia is only the forth largest Spanish bank (it was cobbled together from a number of Caja's).

One wonders what horrors are lurking in the bigger banks' books. The independent valuation of their assets will be interesting.

(I don't think its a problem purely confined to Spain - a lot of UK banks have difficult to value impaired loans in their books - they're being 'revalued' down to a reasonable value as fast as can be done without hitting the headline profits).

The bank jog continues...

Wordsmith
 
#16
Something to do with the bank's management asking for a 15 billion euro recapitalisation perhaps? (And that after the Spanish government recently pumped 4 billion euro euros in). It would appear there are a lot of impaired loans in the books. Bankia is only the forth largest Spanish bank (it was cobbled together from a number of Caja's).

One wonders what horrors are lurking in the bigger banks' books. The independent valuation of their assets will be interesting.

(I don't think its a problem purely confined to Spain - a lot of UK banks have difficult to value impaired loans in their books - they're being 'revalued' down to a reasonable value as fast as can be done without hitting the headline profits).

The bank jog continues...

Wordsmith
So it is reasonable to assume then that the balance sheets of UK banks are being supported with near ZIRP and QE? Our banks have a huge exposure to domestic property the value of which is being artificially held up by these two policies.
Of course if the crash (which the Country needs to get back onto a stable footing) is allowed to happen then the balance sheets of significant UK banks will take a huge bashing. Maybe even tip some of them into insolvency? RBS excepted of course for obvious reasons!!

The UK has yet to experience the same property crash which has already occurred in Ireland and Spain. This aside the UK is as much a basket case as they are, the only difference being of course is we can inflate by printing.
 
#17
On Bloomberg Irish Treaty Vote Will Be ‘Very Tight,’ Minister Hayes SaysGobshite! It's not even close, practically everybody in Ireland's tugging their forelocks at "The Germans".
...
The yes camp leads 50 percent to 31 percent, with 19 percent still undecided on how to vote, Paddy Power said last week, citing a Red C phone poll of a 1,005 adults between May 14 and 16. Excluding don’t knows, 62 percent of Irish people support the compact, the polls showed.
...
 
#18
#19
In IT Talk of Greece leaving euro 'irresponsible'
COMMITTEE ON EU AFFAIRS: PEOPLE ARE “playing with fire” when they speculate about Greece leaving the euro, the Oireachtas Committee on European Union Affairs heard yesterday.

Minister of State for European Affairs Lucinda Creighton warned of the “very, very damaging” implications if Greece abandoned the euro.

Talking about Greece leaving the euro was effectively talking about the breaking up of the euro, she said.

This was “thoroughly irresponsible”, and she said she was disappointed the head of the International Monetary Fund had been involved in speculation about the exit of Greece from the euro.
...
Ireland is in a rather strange position, when Merkel talks about the innate prudence of the Swabian Hausfrau, the Irish equivalent rather approves being by nature rather more careful with the money, harder working and unlike the stolid Kraut having bred a clutch of replacement strivers. Austerity is second nature to Irish mothers, probably the most conservative demographic in the EU and they have been hit hard as public services decline and the brood flits to escape longterm unemployment. This perhaps explains the quiet Irish acceptance of trying to get the banjaxed Irish economy rolling again with the handbrake firmly applied by the Troika.

On the other hand the cute hoor male of the Bogtrotter species like Septics are by nature gamblers fond of high rolling risks, slapping down a big wad of other peoples down on some unlikely development deal or less obviously astute civil servants pouring money into public education back in the 70s. It was this optimistic entrepreneurial instinct that stoked up the boom and as the bets got longer and longer finally led to the bust. They are of course totally unabashed and up for another roll of the dice ASAP. This acceptance of risk is of course a major capitalist virtue and the constraints of the Fiscal Compact don't sit well with it. It's quite likely Ireland will struggle back up on its feet but there is an inevitably about it finding some way to make big bets and failing at which point more finger wagging usury will not be a very helpful response.

That bit of Ying and Yang leads me back to the politics of a Greek exit. Ireland and Spain are very different from Greece, but you'd scarce know it from the way the Troika Smurfs get on. If the Bubbles are ejected from the Euro, there'll be a feeling of there but for the grace of God go I in the rest of the PIIGS. If this is all going to be about trying to recklessly ram Hartz like reforms through in economies sinking into debt and depression what's this Euro yolk good for then?
 

Wordsmith

LE
Book Reviewer
#20
So it is reasonable to assume then that the balance sheets of UK banks are being supported with near ZIRP and QE? Our banks have a huge exposure to domestic property the value of which is being artificially held up by these two policies.

The UK has yet to experience the same property crash which has already occurred in Ireland and Spain. This aside the UK is as much a basket case as they are, the only difference being of course is we can inflate by printing.
The price of property in the UK has always been controlled to a degree. The principal tool was the multiple of salary that you could get for a mortgage. When it was 3.5 x earnings, this kept house prices to 3.7 - 3.8 times average wage. When that idiot Brown allowed the controls to be relaxed, we got the house price boom of recent years. Average house prices are still 4.3 x average earnings, so they still have a way to fall back to the traditional ratio.

As people that took out excessive mortgages are now struggling to pay them back, this partially explains the subdued economic recovery. If Brown hadn't have engineered the house price boom, UK PLC would be in better shape today.

Wordsmith
 

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