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Thank goodness Spanish banks came in and bought out several of our high street banks during the last crisis.

Used to be a time when you got a global economic crisis once every 70 years or so - World Wars were more common - but now they come along almost as often as every 18 months or...

Hang on, this is the same one isn't it!

Paul,

Given the latest news on comodities prices, oil company profits, bond write downs and social unrest (it is going to be a busy year for you).

I decided to revisit the predictions I made on this blog at the beginning of the year as copied below.

How do you think I did thus far?

I would be grateful if any hedge fund who used them would donate a small percentage of thier profits to the following adress:

DELETED

25. At 2:14pm on 31 Dec 2009, you wrote:
#16

Making socio economic predictions for 2010 is a bit like nailing jelly to the wall at the moment. In the absence of any 'experts' why dont we have a go so we can compare against Paul's Tuesday night guests.

Likely driving underlying factors are:

Sovereign debt..keeping the lid on it. The boys in the IMS will have another busy year.

Continuance of the transfer of prosperity from west to east.

Tentative recovery in some economies will be stifled by oil security of supply concerns (Iran)/ middle east stability generally / rising prices to meet demand generally.

Re-emergence of Islamic extremism (I think they have been re-grouping of late)


Net result:

Asia will continue to do ok generally as will countries with a varied comodities base (not 1 trick ponies)combined with reasonable governance (australia / Brazil)


The west will have a turbulent time, there will be some high profile corporate collapses post christmas. Budgets will be cut, there will be strikes as living standards are eroded and taxes raised, this will be against a backdrop of increased instability overseas stretching security.

Therefore invest in the east, varied comodities economies and defence, take short positions in western stockmarkets (especially travel, luxury items and anything reliant on oil) towards the end of the first quarter.


Off you go then Hedge funds, go and make a few Billion.

Concerning Mr Browns comments today - sensational! I hope you all took my tip on the 5 to 6 available earlier in the week on the lib dems polling more than labour.

something tells me that price will not be around any more.

Is there any relationship between the rating agencies who have been shown at other times to have vested interests in relation to how they rate, and those who will get a tripled rate of interest on money lent to govts?

If there is we need to hear about it. There is not enough looking at that sort of scene behind the scene

THE SCENE BEHIND THE SCENE (#3)

On the nail SC. Let's look at the WHOLE of the Westminter Ethos and the global power matrix, of which Goldman Sachs is a pimple (nnd 'rating' is probably a sore. Then we might ask 'JUST HOW CORRUPT IS THE EU?' The Great Tony scam? The list is endless.

Merkel is playing a political game here...
She knows the bailout has to happen as the German and French banks can't cope with the haircut and the Euro won't survive the default as the markets will just pick off the next PIGS by turn to get them out of the Euro. Perhaps we should consider if the markets want a hard North European Euro rather than a Euro diluted by the profligate Club Med economies? She knows the German population don't really want to bail Greece out (and why should they) so she is demanding a high price and a long term plan...her party is after all facing elections shortly. She also knows that only a high price extracted from Greece will encourage the other PIGS in the queue for bailout to take action to sort themselves out Ireland style. There has to be a strong chance that she will delay too long. If the price extracted is too great then don't bank on a warm welcome for German tourists in Greece this summer - you may even get a sunbed before lunchtime, and the kids will resume stoning German coaches in Crete.

Was it Laocoon who warned never to trust Greek bearer gilts? He of course lost rather more than his shirt over a horse?

The danger here - as with Laocoon's warning - is that of a self-fulfilling prophecy. As debt is downgraded, the cost of servicing that debt goes up, leading to further downgrading. A vicious circle.

As the first PIIGS domino topples, how far will the pile fall?

Nah, let's drag it back... and down again. I know it was a forces of darkness mic, but it is still news, surely?

And I still get a bit of say, soon, in what happens here. That EU thing seems to be a boat that has sailed.

It has turned out that, for all else new and sparkly that may be brought to bear, the most potent forces are often what we hear from a politician's own mouth.

Mr. Brown has done all he can. Now we have Michael White to 'explain' for him. Also, Peter Mandelson.

That might present a problem still.

On top of yesterday's little juggle with who votes and for whom and when, I just heard these:

'We don't always say what we mean'. Uh-huh. And...

'Gordon will say in public what he feels in private'

That would be excepting a wee while ago then...?

Thank heavens it is not a time for novices.

Just struggling a bit with gilt values and the volatility ahead - I hope you can help ( Bank of England hold £200bn gilts under QE).For example I think the Bank of England Asset Purchase Facility Fund bought a government gilt known as UKT 4 070322 on 19 October last year. I'm not sure, but I think the price paid was 101.445 pence ( I might have read the excel sheet wrong on the website). If that bond is the 4% gilt redeemable on 7th March 2022, the Â鶹Éç data shows that gilt now worth 97.28p ( going up and down).If I am right ( maybe I'm not) does that mean its lost 4.1% of its value since BoE bought it?If HM Treasury ( taxpayers) are indemnifying losses, who is publishing the paper profits and losses in the Fund.If this gilt has been loaned to banks and other institutions, who takes the profit or loss whilst it is loaned? Percentage losses such as this could translate into billions. On the other hand, there could be profits to fund public services, maybe or does BoE take profits?

Anyone know where the global stats are on this for the QE fund as a whole?

I think I've seen a glimmer of light through the fog (maybe other people are there already).

The Conservatives say they will imnplement cuts to tax increases in the ratio 4:1. Labour says 2:1.

This is a significant difference. And as we're obviously not going to get any more detail about cuts, then this might be one of the best pieces of information to help decide who to vote for.

It would be useful to confirm these ratios and flush out the LibDems.

Eighteen months ago taxpayers around the world were drafted in to bail out the financial markets from default. This has cost taxpayers and savers a whole bucket of money.

Now it would seem the financial markets have come back for some more money from the taxpayers because of the government debt caused by the original default.

Kipling wote that if you pay Danegeld then you never get rid of the Dane. Albeit a bigotted view but it makes sense.

I think it is time to get rid of the financial markets as I have no more money to fund them in the manner to which they have become accustomed. When the next banking default comes lets look in the other direction and let them go bust. I have had enough of this!

So it appears that the draconian measures in Ireland have not done the trick. It will be an interesting experiment of whether 'cutting' public expenditure leads to reduced public expenditure or merely rearranges the budget heads under which such expenditure is required e.g. reduced town hall budgets but increased unemployment and housing and social services expenditure. It wont be very interesting for the majority of the populations of Ireland and Greece. Halving public capital works is also negative economics both in value terms and in the multiplier effect in a depressed economy. It's back to the Thirties. Quick roll back the stone covering J.M. Keynes tomb and hope for sign of life!

naturally of course, when Greece had its recent tory/Blairite govt, that hid the depths of the economic quagmire they had deliberately created, the 'markets' had absolutely NO idea that this financial gerry-mandering was going on. Nope, just like the credit card companies who deliberately targeted the unemployed in the 80s and 90s, loading them with debt that was entirely unsustainable, the 'markets' had not the foggiest of what was *really* going on in the Greek Exchequer.

can you really stomach that notion?

the German and French finance capitalists knew full well what was happening across the southern EU, - they after all were the ones throwing the cheap credit at them.

the question becomes - are we Europeans going to allow our hard won gains, our freedoms and rights, our economic security and Democratic systems, to be stolen away by the never-ending greed of Bankers and the whole ruling class... YET AGAIN?!?

i've come to conclusion that after 12 years of frontline government gordon is exhausted and it would not be kind to elect him nor wise for the country. tired people make catastrophic mistakes.

So, 5 minutes to discuss the Greece with no live interview?

Can you please explain?

10-15 minutes on raps! Oh what fun ! Its the "real mccoy" says Paxman..is this what newsnight has become?

P.S I am not an old man !

WELL - YES! IT'S CALLED 'EDGY'. (#14)

Parliament plays party games and does a bit of bad government on the side.
Â鶹Éç news and c/a, plays edgy games and does very little else.

It's all going awfully well.

I was reading a post on a forum today from someone who had posted about how poor Newsnight was last night.

I read it and silently disagreed with the poster.

You know, I am having second thoughts now.

Surely the rapper music item - utterly pointless and self-indulgent IMPO - should have been dropped to make way for the impending economic collapse of Europe. I turned over to Sky.

When the collapse comes I don't want Paxman banging on my door wanting my stash of baked beans!

To agree with the other posters, last night my head wanted to watch Newsnight for an in-depth review of the impact of the downgrading of Sovereign debt across Europe, but my heart wanted to watch the football on ITV.

Thank you for devoting another sizeable chunk to a non-newsworthy, self-serving musical piece. No need to ponder any further - I watched and enjoyed the football.

@11

Correct. I noted a while back that the "savings" in public expenditure costs were less than 20% of the supposed level - for exactly the reasons that you state - loss of tax revenues, loss of retail expenditure, etc. (afraid I can't find the link)

It was also noteworthy that when Greece announced it's first austerity package, they had to downgrade growth predictions which increased their debt financing THIS YEAR.

One of the most surprising things in this crisis is the reaction of other Bond Markets, particularly the UK to this rapidly spreading crisis. I for one would have expected UK GILT yields to rise sharply, but in fact they are marginally down on a month ago.

If you look at the yield on the 10 year GILT, the benchmark, it has drifted down from 4.10-4.15% a month ago to 3.95% this morning, whilst Italy has moved more or less in the opposite direction. Now at the height of the financial crisis the yield on UK GILTS sat between Germany, the lowest and France, once markets realised the hugh Fiscal problem the UK has yields started to climb until at the beginning of this year they were a shade above Italy.

Now take into account that markets don't like uncertainty and are presumably expecting a Hung parliament and you would expect GILT yields to rise quite sharply. The fact that they have not suggests that markets still have confidence that the UK will meet its obligations.

The Prime Ministerial debate tonight will be fascinating, because the party leaders will be discussing the Fiscal position against the background of a spreading crisis. The differences between the parties, essentially whether to cut in Q3 Q4 2010 or in 2011, seems quite small in terms of a problem that will take at least 5 years to solve. Having a credible plan to tackle the problem would reassure market that the UK is serious about getting the deficit down and thereby reduce the governments interest costs. The UK has arguably been lucky so far, that luck could well run out.

As for Greece, the reality is that Greece cannot pay back its debts and will have to default. How long it takes Europe to accept reality is another matter.

Paul re #8 above, just tracked down a clause in the Public Finanances appendix to Budget 2010. It says

" the Bank of England Asset Purchase Facility Fund (BEAPFF), which is
a monetary policy instrument that is also excluded from the measures
excluding the temporary effects of financial interventions. As at the end
of December 2009, the scheme had added some £18 billion to the National
Accounts measure of PSND, mainly from gilts which for PSND are valued at
face value and this was lower than the market price paid."

No discussion or debate at all on this. Can you believe it? A measure designed to boost nominal spending has added £18 billions to Public Sector Net Debt. BEAPFF Ltd is wholly owned by Bank of England, controlled by two BoE employees. They account to whom? Where is the scrutiny of this Fund? Who is letting us know how it impacts on government borrowing? Where are its projections? Does anyone care or is £18 billions just background noise!

Greece is being used as the excuse of what happens when you go into debt and why cuts are necessary to keep the banksters to the life they are accustomed to. It only represents 2-3% of EU GDP so mathematically it cant have this effect on the Euro unless of course the effect is magnified by the level of bets by the hedge fund sharks. No analysis is ever made of the credit rating agencies why? Much like no analysis was ever made of the accounting firms in the era of Enron. Having given good credit ratings whilst government bonds are sold, just before they dumped, the credit rating is downgraded. There is collusion between the credit rating agencies and the big banks. After all how come they are all based in the US?