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Wednesday, 28 December 2011

Luvvie logic

I sing in a choir, and it is great fun. I also play a few instruments, sometimes in public, and I am always buying new music to practise, learn develop and sometimes perform. So I am happy to contribute to the composer/ arranger/ publishers' profits because without them I wouldn't have so much too play or sing. But is there is one thing that gets my goat every time that I see it, it is the brash assertion across many pieces that I buy nowadays that says "It is illegal to photocopy music".

Which is bunkum. There is no law in the land that says it is illegal to photocopy music per se, any more than it is illegal to photocopy text or pictures. What is illegal is to breach the copyright on a copyright protected work, but a quick Google shows that there are plenty of sites offering copyright free scores, which of course you are perfectly entitled to photocopy.

Indeed, if I were to transcribe a version of an old tune such as Greensleeves, I would be reasonably confident that there were no copyright issues, and without going into the minutiae of the Berne Convention, most countries seem to allow me to copy the original publication of music free from copyright 50 or 70 years after the composer's death.

The reason I mention this is that I came across a different version of the same thing from a similar source. A long-standing acquaintance, a professional film editor, is a member of BAFTA. This means that he receives a DVD for each of the more than one hundred films that have been nominated for a BAFTA award. Some of these have been released earlier this year, while others (for example, Spielberg's War Horse) have not been released here. Naturally the distributors who send out these films are very careful and they "watermark" the disks and send out strict notices that they are provided solely for the purposes of evaluating the films for a BAFTA award.

Fair enough, but the blurb on each DVD ends with the threat "Any unauthorised use will be prosecuted."

It will? Under which statute? Sure enough, if the recipient chucks the DVD into a duplicating machine and sends the copies to a Far Eastern wholesaler, then they deserve to get done, but what about every other "unauthorised use"? There is only one authorised use, so any other use such as letting friends see the film, using the silver discs as a bird scarer or kitchen tool for flipping burgers or scraping pans is an unauthorised use, but I don't think any of them amounts to a crime that can be prosecuted under our existing laws.  There might be a breach of contract, a civil case for whatever, but criminal prosecution?  I think not.

OK, this might sound like pettyfogging, but it exemplifies the attitude from many "progressives" that starting with the position that (a) is wrong, therefore we outlaw (b) and say that doing (c) will be prosecuted. A more reserved attitude would say that in order to prevent abuse of (a) we need to create some statutes to interdict those acts and only those things specifically made illegal by the legislation are illegal. Which doesn't quite have the same impact, but at least it wouldn't get my goat.

But we see exactly the same behaviour from the likes of UKUncut and OccupyLSX: (a) is wrong, (b) is a close proxy for the people/person doing (a), so I am quite justified in harrassing (b).

For example, in the case of OccupyLSX, the "poor" (whoever they may be) will suffer under the "cuts" (even though spending is actually increasing and the only cuts are cuts in proijected spending increases), and the problems were all caused by "The City" (not just a part of it), and the London Stock Exchange is core part of the city, so the protesters are quite justified to defecate on the steps of St Pauls. OK, the last logical step defeats me at the moment, but to a radical luvvie they are all part of the same establishment cabal (allegedly) so that is all right.

Is it too much to ask that in 2012, the media will actually try to deconstruct these arguments to show that they are held together by little more than blind prejudice? Yes, it probably is.

Sunday, 25 December 2011

Merry Christmas

Pope Benedict XVI has attacked the commercialisation of Christmas, as he held the traditional Christmas Eve Mass at St Peter's Basilica in Rome.

 In his homily, he urged worshippers to "see through the superficial glitter of this season and to discover behind it the child in the stable in Bethlehem".

..... as though the Vatican City is not full of glitter.

Friday, 23 December 2011

LabourTV caught out again

One of the recurring themes in this blog has been how the BBC persistently talk down UK economic statistics before they are announced, and then drop the story when their predictions of doom turn out to be false.

Yesterday, we had it again with the presenter of John Humphries, the Today Programme saying "We know the economy is slowing down, which is another way of saying the nation won’t be getting much richer, if at all. But today the latest revised growth figures will be published and everyone seems to think they will show it’s even worse than we thought."

I am not sure who counts as "everyone", because "everyone" was proven wrong, but the BBC doesn't apologise or even give the good news as much prominence as its earlier predictions of doom and gloom.

The bias is so obvious, even the Daily Mail has noticed.  So it must be true.

Thursday, 22 December 2011

Alan Hansen: disgraceful

How dare a highly-paid TV personality give us his views on racial politics without knowing the current list of taboo words for non-Caucasians.

If this was the USA, the NAACP would be all over him.

Wednesday, 21 December 2011

Banks take cheap money shocker

The European Central Bank has reported strong demand for an offer of unlimited three year loans. Banks were urged to take the funds to ease pressure on the eurozone financial system.

More than 500 European financial companies took €489bn worth of loans from the ECB’s longer-term refinancing operations, or LTROs.

Of course what are those banks going to do with loans priced at 1%.  Most likely they will use it all to buy European government bonds yielding several hundred basis points more, in a straightforward carry trade.

That in turn allows the various European governments to raise the cash they need to back their recent IMF commitments.

So nothing really happened except cash flow from the ECB to the IMF via the banks and national governments.  The banks make a spread, and you dear tax payer, will be picking up the tab.

Tuesday, 20 December 2011

In other news

Jon Bon Jovi has denied online reports that claimed he had died.

And I am prepared to take his word for it.

Do as I say not as I do

Yesterday we had the spectacle in parliament of the Labour Party attacking the government for its own mistakes. I don't like to discuss immigration here, not least because I have worked in many other countries and lived round the world, but in this particular case, the issue provides an illustration of Labour stupidity.

Yesterday, Chris Bryant called the immigration minister to explain a newspaper report of a leaked memo that showed an increase in the number of convicted illegal immigrants awaiting deportation.. What was the minister doing about it, government out of control etc...etc?

Not so replied the minister, the majority of those cases involved former prisoners released on the orders of the courts not the Home Office. Moreover, they were released because they had not got the correct travel documents to be sent home, either because of a lack of cooperation from the convict or from their home government. Policy has now been changed so that unlike under the last government, preparations for deportation begin 18 moths before the end of the sentence.

But the killer blow was when Mr Green pointed out that the comparison was not with the status quo in March 2010, but over 2 years ago in March 2009, with most of the increase in that number being under the previous government. Indeed, when Bryant accused the Conservative government of releasing foreign prisoners who went on to commit 3 murders, he missed the fact that one of the "murderers" was acquitted, while another was release, committed the crime and was sentenced during the last government.

But then we had the same thing this morning. Margaret Hodge and others came on the airwaves with their blather about tax avoidance and big business (more on that in a later post), and condemning Dave Hartnett for having too many lunches with big tax payers and tax lawyers.

Now that may be appropriate or not, but when did these 107 lunches take place? From 2007 to 2009. remind me again. Who was running the country at the time?

You couldn't make it up

Well, it seems they did.  The world's second or is it third largest economic world power said a few weeks ago that it was going to raise a trillion dollars, euros, or whatever, and we all laughed, especially the Chinese.  It was fairly obvious that with most of the world's spare cash in the hands of despots from Jeddah, Kazakhstan to Beijing, the chances of a 13 figure cash call to bail out the cradle of democracy always looked pretty slim.

So then the Eurocrats, who if truth be known had never raised a penny from the markets, decided that they could get by for the moment on a more modest €200 billion, €50 billion of which would come from EU members who had no particular interest in the euro.  Well that fell through and now we get this:

EU Member States support a substantial increase in the IMF’s resources. These resources will enhance the IMF’s capacity to fulfill its systemic responsibilities in support of its global membership, which is especially important given the ongoing economic slowdown and financial market tensions. The IMF’s involvement will be based on normal IMF conditionality.

The EU, and in particular Euro area Member States are fully aware of their special responsibility in the current circumstances. Therefore, on 9 December, euro area Member States have committed to enhanced governance to foster fiscal discipline and deeper integration in the internal market as well as stronger growth, enhanced competitiveness and social cohesion.

Ministers confirmed today that, as part of a broader international effort to improve the adequacy of IMF resources, euro area Member States will provide EUR 150 billion of additional resources through bilateral loans to the Fund’s General Resources Account.

Burden-sharing among euro area Member States will be based on quota shares resulting from the 2010 quota reform.

The Czech Republic, Denmark, Poland, and Sweden indicated their willingness to take part in the process of reinforcing IMF resources. The United Kingdom has indicated that it will define its contribution early in the new year in the framework of the G20.

For some Member States, commitments will be subject to parliamentary approval.

The EU will also work expeditiously to implement in full the 2010 quota and governance reform of the IMF.

The EU would welcome G20 members and other financially strong IMF members to support the efforts to safeguard global financial stability by contributing to the increase in IMF resources so as to fill global financing gaps.

I just love the last paragraph: Hey world, send all your money to the eurozone black hole; if you don't there'll be trouble. Every struggling business should cut and paste it mutatis mutandisinto all of their letters to their banks.

The upshot is that the Germans have agreed to put up about €40 billion, which is barely more than the €38.5 billion that Italy and Spain hae agreed to put up - to bail out Italy and Spain amongst others. If the rest of the world would like to chip in €960 billion to sustain their export driven economy, they would be very grateful.

Monday, 19 December 2011

From the comments in Le Figaro

From a commenter on the web pages of Le Figaro:

"Soyons juste, on riait aux nez des rosbifs quand on allait adopter l'euro. On s'est moqué d'eux en les traitant avec le plus grand dédain. Maintenant, il s'avère qu'ils ont eu raison et la France a le boulet des autres attaché au cou et les rosbifs non.. et on est fâché contre eux?

Puis nos délégués les cassent carrément avec des insultes à la c..? Même si on n'est pas chaque fois tous d'accord, au moins leurs représentants se comportent avec un minimum de dignité. L'euro est un désastre et on ne veut pas admettre qu'on a eu tort.

Sarkozy veut chercher quelques votes chez Marine parce qu'il voit que le nationalisme est très efficace. Sans doute, il en a parlé avec Noyer avant qu'il n'ouvre la bouche. Compte tenu des commentaires ici, Sarko a peut-être une chance raisonnable de réussir! Effrayant."

Or for those who funked their French O-level.

"Let's be fair, we were laughing in the face of the "rosbifs" when we were going to adopt the euro. We made fun of them, treating them with great disdain. Now it turns out they were right, and France has the weight of  the other [euro members] round their necks, unlike the rosbifs .. and we are angry with them? 

Then our politicians insult them outrageously? Even if we don't always agree with them, at least their representatives behave with a modicum of dignity. The euro is a disaster and we do not want to admit we were wrong.

Sarkozy wants to get some votes from Marine [Le Pen] because he sees that nationalism is very effective. No doubt he had spoken with Noyer before the latter opened his mouth. Given the comments here, Sarko may have a reasonable chance of success! Scary."

Couldn't have put it better myself.

Christmas embargo

"...one prefers to be French than British at the moment on the economic level" - François Baroin, French economy minister
" ... they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and where credit is slumping" - Christian Noyer, governor, Bank of France

I regret to announce that after last week's unfortunate but obviously co-ordinated outbursts from the Governor of the Bank of France and the French Finance Minister, that the Masterley household will boycott French wines this Christmas, including unfortunately, Champagne for which at present we have no suitable substitute, although suggestions are welcome in the comments. In extremis we may resort to consuming stocks in the cellar and refrain from seasonal purchases.

Whilst we believe that in the long term, there is scope for a strong consumer-producer relationship with selected French vineyards, we believe that in the present political climate it would be wrong to make large-scale purchases of claret and Burgundy, and we shall be continuing our buying in support of Chilean miners, which we believe is a suitable short-term substitute.

In one exceptional move and in the absence of any suitable substitute, an embargo-busting slug of brandy was used in the preparation of a highly recommended canapé dip: fried bacon, flambéed in brandy, with double cream and served with Brussels sprouts on a stick.  The offending item was £5.99 from Tesco. At that price seems to approximate a combination of kerosene and lighter fuel, and we suspect that sales of his particular brand will do little to strengthen the French economy.

Overweight leader of starving nation dies of heart attack

The world's only hereditary communist leader is reported dead.  The leader of the most insulated and backward nuclear power has suffered ill-health  for many years.

The world is on tenterhooks awaiting whatever sort of delusional response might come from his 28 year old son and heir in order to prove his ability to front up the military committee that oppresses the people at the northern end of the Korean principle and stops them joining up with one of the more dynamic nations of the world.

On the other hand, he and the rest of his family could bring down the whole farce and open up his country's borders.  That would be one Christmas present worth having.

Thursday, 15 December 2011

Moody and poor: is France going under M. Noyer?

Now it's getting nasty from the French. Its central bank chief has suggested that Britain's debt should also be downgraded, inviting the obvious response that:
  1. The government that cause the UK's financial problems has been replaced.
  2. The UK government has a deficit reduction plan that has been shown to the rating agencies and the markets, with which they are broadly happy - hence the lower yield on UK government debt that on German debt, not just French debt, although UK gilts yield about 100bp less than their French equivalent.
  3. The UK is not tied into the euro-zone and has no obligations to lend to other countries to suuport its currency.
  4. Having an independent currency has allowed the UK government to deflate by 15%, so that the odds of default on their sterling denominated debt has reduced proportionately.
  5. UK government borrowing is around 90% of GDP.  French government borrowing is about 98% of GDP.
  6. YK government debt duration is about 9 years, A lot of French borrowings mature soon.  New bonds will have to be issued at the relatively high yields.
Any central bank governor worth his salt could have figured that out.

Yet another EU summit has been called for early next year, amid fears that last weeks fiscal compact is falling apart.  A bit like last month's €1 trillion Chinese funding that has been swept under the carpet.

Which is a good time to remind the French that the Chinese still like the look of £100m of UK infrastructure products, that dozens, nay scores of Chinese firms are listed in London (none in Paris or Frankfurt) and that there is even one Chinese member of the London Stock Exchange. Just thought I would mention it.

While on the other hand, that great international financial bellweather the Dagong Global Rating Co has downgraded French government debt citing the fact that the French banking system's exposure to Portugal, Italy, Ireland, Greece and Spain has reached €852.36 euros. Which is rather a lot. Moody's has downgraded France's three big banks due to their difficulty borrowing money. The agency cut Credit Agricole and BNP Paribas from Aa2 to Aa3, and Societe Generale from Aa3 to A1.

I might add that the name of the Governor of the Banque de France, M. Noyer, translates into English as "to drown".

Sarkozy hits out - gets downgraded

Sarkozy yesterday hit out at David Cameron,. calling him "an obstinate kid" because he refused to sign a eurozone treaty.

France was promptly downgraded, not one but 2 notches.  One can only presume that Sarkozy knew this was coming - the rating agencies usually give some warning to the issuer, so this can only have been Sarkozy saying "Hey, look over there".

In other developments, the EU seems to think that it has agreed on our behalf for us to contribute €50 billion to the IMF as part of the €200m contribution from EU countries, €150 billion coming from eurozone countries and the rest coming fromnon-eurozone countries, i.e. the UK.

This comes from an IMF report of a meeting with hte eurozone countries which differs from the EU released version and is not what the British government says happened.  Sounds like the Germans and Brussels civil servants have tried to stitch up the British, but the IMF let the cat out of the bag before Brussels and Bonn could stick it to Cameron.

Not only can they not run a currency zone.  They cant even stab a politician in the back.

French politician guilty- world yawns

A French court has given former President Jacques Chirac a two-year suspended prison sentence for diverting public funds and abusing public confidence. Mr Chirac, 79, ho was apparently fit and well enough only 4 years ago to be President of one of the most important nations in the world, unfortunately suffers from Saunders syndrome and suffers from memory lapses

He was convicted of paying members of his party for non-existent local government jobs, which sounds less like corruption and more like fraud to me. In a bizarre twist the prosecution had urged the judge to acquit Mr Chirac and nine others accused in the trial, but clearly the wrong payoffs were made because the accused still went down albeit with a soft landing.

Of course Chirac wasn't the only politician to pick up a criminal record from the case. In 2004, several politicians including Alain Juppe were convicted in connection with the case. Mr Juppe was given a 14-month suspended sentence, but the fact that he wouldn't get through a CRB check hasn't held him back; he is now France's Foreign Minister.

Chirac is the first French head of state to be convicted since Marshal Petain.  Of course, if Dominique Strauss-Kahn makes a political comeback, which seems entirely possible if not likely, then I would lay good odds on him being the next.

Wednesday, 14 December 2011

Where is Baroness Ashton?

A couple of months ago I posted that she was a waste of space.

Hard to say I was wrong.

Christmas tips

One of the best tips for surviving the Christmas season is to exhibit the most exquisite manners to those you meet, and in particular to show good grace to those who offer you presents.

If for example somebody offers to pay you £50 billion a year and to let you fish for 80% of the stocks in their territorial waters, do not go off in a hissy fit just because they didn't agree to your pet money scheme.  Bear in mind that they may not have the time or inclination to play with you all the time, and just be grateful what you do receive.

In fact, be mindful that all those temper tantrums do not go unnoticed, and all that foot stamping and talk of retribution simply marks you out as a nasty little person who will probably get less next year. And that nice Mr Wong from down the road might miss you off his Xmas list altogether.

Tuesday, 13 December 2011

You can tell when a European politician is lying - their lips are moving

Barroso says UK demand put EU internal market at risk
Of course it wouldn't and it never did.  What the British veto did stop was a Europe wide Tobin tax that would have destroyed the London markets as all the business there moved to Switzerland, Hong Kong, Singapore, New York or Dubai.

But you can tell who the real losers are by their anger: the EU politicians who thought they would be onto a nice little earner (they wouldn't).

In fact London is the most open market in the world, which is why it is the most established international market for trading of foreign currency and Eurobonds and a whole lot of commodities, but rather than being regulated by the bureaucrats of Brussels, it takes a more worldly view with its banking regulatory norms agreed in Basel with the entire world community, not some power crazed nation barely 65 years on from its seven figure bout of ethnic cleansing.

The stupidity of politicians

There is no finer example of the stupidity of politicians than the attempts reported in the media to remove a British MEP from the chairmanship of a European Parliament committee on financial regulation.

As though the chairman who is supposed to act independently of national interests is any less capable, or that monetary regulation will be applied any differently in the UK than elsewhere.  The only difference is currency and fiscal approvals from the EU Commission, which only applies to 17 out of 27 member states at the moment and probably at least 4 less than that within 12 months.

Hostile crapshoots

The FSA wants hostile takeovers by banks to be made illegal, on the basis that it is too risky.

I can't say that I disagree with any of that, but if the FSA had been doing its job properly then hostile bank takeovers would not have been possible. RBS would not have been permitted to blow many billions of capital on a pool of assets that it didn't understand.

The reason there is no criminal penalty for such reckless behaviour is simple.  There is a presumption that banks are sufficiently tightly regulated that they wouldn't be able to do the boardroom equivalent of staking all their chips on red at the roulette table.  There are already criminal offences if directors act recklessly or negligently.  Further sanctions should be unnecessary for banks because they are regulated.

The FSA report reads as follows:
RBS management and Board undoubtedly made many decisions which, at least in retrospect, were poor. They took risks which ultimately led to failure. But if they had taken similar risks in a non-bank company, the question of whether regulatory sanctions were applicable would not have arisen. That is because in non-bank companies the downside of poor decisions falls primarily on capital providers, and in some cases on the workforce, and to a much lesser extent on the wider society.
The ABN AMRO acquisition illustrates the point. The due diligence conducted was inadequate to assess the risks. But it was typical of all contested takeovers, and in non-bank sectors of the economy launching a bid on the basis of limited due diligence might be a reasonable risk to take if the Board believed that the upside opportunities justified it. If the acquisition went wrong, shareholders would suffer, and it would be for them to decide whether to sanction the management or Board by firing them.
The glaring hole is that the FSA was not doing its job.  RBS bought ABN for £50 billion on the basis of 2 ring binders of data and a CD, That is probably too little to support a £10 million overdraft facility, let alone an equity purchase 5,000 times the size.

For the FSA there is a simple 5 step bank supervision process

  1. Why are you doing that?
  2. I really don't think you should be doing that
  3. I said I really don't think you should be doing that
  4. Stop that
  5. You're fired

But if RBS' purchase of ABN is to be treated as a criminal act in future, what is the FSA's reaction to the supposedly friendly but similarly blind pucchase of HBOS by lloyds, which was forced through as a political imperative by Brown & Victor Blank  ...   with scarcely a murmur from the FSA.

Monday, 12 December 2011

Worse than useless

Last year I blogged that the FSA employed more than 241 employees who were paid more than £100,000.

A few months later I blogged that the FSA had given the directors of RBS a clean bill of health but declined to publish their report in full.  I speculated that was because it would show the full incompetence of the FSA.

Then about 8 months ago, we had Gordon Browns admission that putting the FSA was probably a mistake.  Thanks a bunch.

A couple of weeks ago I blogged that Mervyn King said that when the sub-prime mortgage market was discussed by central bankers none of them thought the size of the market was enough to cause a problem.  That was because the banking supervisors failed to recognise the scale of the settlement risks in the credit derivatives markets built on the back of the sub-prime debt.

Funny then that today the FSA reports that RBS nearly collapsed in 2008 because of poor management decisions, inadequate regulation and a flawed supervisory system, which doesn't really fit with the clean bill of health they gave a year ago.

The FSA admits that its own supervision was "flawed" and "provided insufficient challenge" to RBS. And it says RBS had too weak a capital position to proceed with the takeover of parts of the Dutch bank ABN Amro. The report concludes that the FSA was too focused on conduct regulation at the time and its prudential supervision of major banks was inadequate.

Good to know that the deals that threw a spanner in the works of the world financial system were passed for money laundering purposes though.

FSA Chairman Adair Turner's salary for 2010/11 is £426,000, rising to £500,276 including bonuses. Chief Executive Hector Sants will take home a total of £806,810 in salary and benefits this financial year, an increase of £33,743 on last year, according to the FSA's Annual report 2010/11.

Turner defended the actions of the regulator on the BBC's Andrew Marr show on 15 February 2009. His comments were that other regulatory bodies throughout the world, which had a variety of different structures and which are perceived either as heavy touch or light touch also failed to predict the economic collapse.

According to Turner, in line with the other regulators, the FSA had failed intellectually by focusing too much on processes and procedures rather than looking at the bigger economic picture. In response as to why Sir James Crosby had been appointed deputy chairman when his bank HBOS had been highlighted by the FSA as using risky lending practises, Lord Turner said that they had files on almost every financial institution indicating a degree of risk.

He did not apologise for the actions of the FSA, which had overseen the near total collapse of several major banks, and accepted that his organisation had not foreseen the likely consequences for Lloyds Bank of its merger with the ailing HBOS arranged in September 2008.

Despite raging controversy over bonuses for employees of the struggling Lloyds Bank, he sought to justify upcoming bonuses averaging 15 per cent for his approximate 2,500 staff, arguing "If you're saying we should now cut the bonuses (of FSA employees), you're saying you should cut their pay by 15%"

Sunday, 11 December 2011

Scottish independence: how's it looking?

Assuming that an independent Scotland would have to adopt the euro (who is going to lend in a puny currency such as the Scottish pound?), then how does their economy stack up against the 3% permissible deficit of the Euro zone?  I suspect that it is not that good, and they will be up before the European beak every other week

Saturday, 10 December 2011

Godwins law in a few easy steps

Very amusing to see the indignation about Britain in the German media.  On the one hand they are grumbling about friends not helping in a crisis, on the other hand the von Lambsdorff;'s and the Bendit-Cohn's of the world want to drive Britain out of the EU.  Bendit-Cohn's idea is to impose financial regulations on all EU countries in order to drive Britain towards leaving the EU.  Talk about cutting off your nose to spite yor face.

The simple response is that it is the eurozone's problem and it is for the eurozone countries not the EU to fix the problem.  Britain signed up to be a member of a free trade zone and has never signed up to a common currency agreement, let alone of the German Lander.

In a sense, Der Spiegel answers itself by a a link at the bottom of the webpage. We signed up for what we signed up for and nothing more, and unlike the other states of Western Europe we are not going to keel over or sue for peace in response to German demands.  At the moment we are at the stage of the Scandinavian non-aggression pacts.  Can we expect the annexation of Memel and Bohemia/Slovakia next.

Friday, 9 December 2011

With one bound he was free

There are plenty of stories emerging today about how the devious French have schemed for years to uproot the financial markets from London and move them to Paris, at least insofar as they relate to Europe.  But it ain't gonna happen, not least because Cameron has refused to let financial services be regulated by the EU.

But there are other reasons:

  1. The Americans and the Japanese.  Their bankers and traders like to live in London.  It is a big city and easy to adapt. Paris is fine for weekend trips, but you wouldn't want to live there.  Hard to settle in, few international schools, and then there is the French
  2. Language: everybody learns English at school these days.  The English, well some of them, learn French, but for the rest of the world, it is a second choice.  OK, they could do business in English, but English speaking support staff come at a price in France, while spoken and written English comes as standard in London.
  3. Legal systems. London contracts are written under English law.  Sometimes they might agree to US law, but except in particular circumstances, usually some common law based system, not codified European legal systems.  Which means that a large French financial centre would require lots of trained Anglo-Saxon lawyers.  Cheaper to get the real thing in London.

Crystal balls

Speaking to the House of Lords Economic Affairs Committee, the Chancellor urged the public not to assume that a eurozone disintegration would be felt in the UK for only one or two years. "There would be enormous damage," Mr Osborne said. "Those who say we'd have a year or two of hardship and then bounce back out of it may be somewhat optimistic."

Which is all very interesting, but pointless.  Osborne no more knows what the outcome would be than any other commentator.  When Mervyn King is asked what is going to happen next he replies that he doesn't know, so how the hell Osborne thinks he knows is beyond me.

The more likely outcome is that there will be little obvious impact jut as there was little immediate impact when the euro was created.  The Greek baker, the German butcher and the French candlestick-maker will continue with their business as before.  Governments will still pay rates of interest according to the risk of their non-payment and life will carry on with or without the euro and with or without the UK.

The only tangible difference will be whether if Britain is marginalised, will it want to continue to contribute a net £8 billion a year to the EU?

Wednesday, 7 December 2011

Super bazookas

According to another pink paper, negotiations have been started over a much a much bigger financial “bazooka” to present at this week’s European Union summit that could include running two separate rescue funds and moresupport for the International Monetary Fund. This three-pronged rescue system would form part of a carefully crafted package EU leaders hope will win over financial markets, just two months after a similar summit failed to convince bond investors. The rescue system would be introduced alongside proposals to rewrite EU treaties with far tougher budget rules for the eurozone. Well that ain't gonna work, and the politicians and bureaucrats are too stupid to realise why, so let me explain. We are now at the position where it is the lenders of last resort that are at risk or potentially at risk of default. There is no real backstop (if we discount the US and China). Sure there is the IMF, but do we really thing that the world's countries from Afghanistan to Zimbabwe are going to backstop the euro? No the idea is that the Euro area is going to bolster its finances by borrowing top boost its financial resources. It will then have enough cash to bail out countries as required? Does that make sense? Of course not because the whole euro area or may be EU becomes more indebted. Of course to a politician, much like a businessman whose business is going under, the obligation to repay the loan gets ignored as though it is somebody else's problem. The rest of the world sees it differently. The country/company is up a creek and it needs to find a paddle, not borrow more money. For the euro zone countries that means taxing more or spending less. It also means more exports and fewer imports. In the long run there is no other solution, but that doesn't stop the incompetents in Brussels trying to take control of a €500 billion or €1 trillion fund, despite their obvious lack of relevant experience or talent. Expect to hear a lot more in the coming weeks from the likes or Messrs Barroso and Juncker (ex-PM of a country with a population smaller than the city of Nottingham).

Monday, 5 December 2011

So how is this going to work?

France and Germany have reached a “comprehensive” agreement on a new set of fiscal rules for the eurozone which they will ask a European Union summit in Brussels to approve on Friday. The proposals effectively amount to the “fiscal compact” asked for by Mario Draghi, president of the European Central Bank, to enforce budgetary discipline in the single currency region.

Mr Sarkozy said he had agreed with Ms Merkel’s demand for a revision of the full EU governing treaty to enshrine an enhanced fiscal disciplinary regime.

The changes will include more “automaticity” in the process of punishing states that breach the EU’s 3% public deficit limits. A move to fine a country will in future only be overturned if a qualified majority of eurozone countries agrees to overturn it.

Ms Merkel has watered down her demand that the European Court of Justice adjudicate on breaches of fiscal rules. Under the compromise, each eurozone government will have to adopt in its constitution a “golden rule” that prevents it from persistently running budget deficits. The ECJ will merely rule as to whether each eurozone country’s “golden rule” complies with the new treaty.

OK, so you are an Italian or a Greek.  Right now you have a government that you have not elected having terms dictated to it for a new treaty giving powers to a foreign body to decide whether they are to fine your country if the government you haven't elected fails to collect as much tax as it expected to pay all its bills.

And if your government fails to pay, what is the recourse?

Thursday, 1 December 2011

Airheads enrich banks at the expense of charities

According to The Register, Anonymous and other hacktivists have joined together to launch an attack on banks in response to recent crackdowns against the Occupy protest movement.  TeaMp0isoN and Anonymous are joining forces to run OpRobinHood, which will involve using stolen credit details to donate to charities and others, supposedly at the expense of banks.

OK, so far so good as long as they don't do anything illegal, although they probably will ....  They say
In regards to the recent demonstrations and protests across the globe, we are going to turn the tables on the banks. Operation Robin Hood is going to return the money to those who have been cheated by our system and most importantly to those hurt by our banks. Operation Robin Hood will take credit cards and donate to the 99% as well as various charities around the globe. The banks will be forced to reimburse the people there [sic] money back.
Which sounds very devious, but it doesn't work like that.

When banks identify a fraudulent transaction they usually reverse the transaction and levy a chargeback – a reversal of a prior outbound transfer of funds. So while customers with compromised credit cards might not lose out, charities who receive fraudulent donations will probably end up out of pocket.

Ah, say the activists, we want the charities to move their money out of the evil banks and into credit unions. Well OK, its a point of view, but:
  1. The charities probably want to use their bank accounts for receiving donations and making payments, both of which are more easily done from a bank account than a credit union account, and
  2. They could have asked the charities first.