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ECONOMY & FINANCE
by Fran on Wed Apr 22nd, 2009 at 01:56:03 PM EST
The World From Berlin: Germany's 'Pathetic' Public Banks Need Overhaul - SPIEGEL ONLINE - News - International

Berlin has little choice but to help German banks rid themselves of toxic assets at taxpayers' risk, write media commentators. But in doing so it must insist on a radical restructuring of the publicly owned state banks, or Landesbanken, which have outlived their usefulness.

 Clouds loom over Germany's top banks in Frankfurt, the financial capital. Germany moved closer to ridding its banking sector of toxic assets on Tuesday at a meeting of government ministers and financial regulators who said they expected to have a firm plan to set up "bad banks" -- waste dumps for junk securities that are weighing down banks' balance sheets -- in place by the summer.

The officials agreed to work on finalizing a draft law in the coming weeks, present it to Chancellor Angela Merkel's cabinet by mid-May and get it approved by parliament by the summer.

The value of toxic assets in German bank balance sheets is estimated to be in the hundreds of billions of euros. The bad banks plan, under which banks can set up state-guaranteed companies and transfer their junk securities into them, is aimed at regenerating the financial system and boosting the stalled flow of credit into the economy, which is in its worst recession since World War II.

by Fran on Wed Apr 22nd, 2009 at 02:04:36 PM EST
[ Parent ]
BBC NEWS | UK | England | Dorset | Dorset towns plan to accept euro

British tourists are being encouraged to holiday on the South Coast this summer by two Dorset towns which will accept unwanted euros.

Businesses across Bournemouth and Poole will accept the European currency in a move to welcome holidaymakers that may shun trips to the continent.

Hotels, restaurants and guest houses are among the traders which plan to take on the scheme.

Tourism chiefs believe the move could be worth about £10m to the region.

The figure is based on the estimate of half a million tourists each spending 20 euros as a part of their holiday budget.

by Fran on Wed Apr 22nd, 2009 at 02:07:10 PM EST
[ Parent ]
Umm, the euro is legal tender in the UK. Marks and spencers mark all their products with prices in euros as well as sterling and accept them in payment.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Wed Apr 22nd, 2009 at 05:03:18 PM EST
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Marks and spencers mark all their products with prices in euros as well as sterling and accept them in payment.
At the official exchange rate?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 22nd, 2009 at 10:39:01 PM EST
[ Parent ]
Helen:
the euro is legal tender in the UK

Umm, wouldn't that require an Act of Parliament?

And don't merchants still have the right to refuse to accept euros as payment?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Thu Apr 23rd, 2009 at 03:46:59 AM EST
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Right. Just because some merchants accept it doesn't mean it is legal tender.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Apr 23rd, 2009 at 04:35:04 AM EST
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Darling reveals 50% tax rate for high earners - UK Politics, UK - The Independent

Chancellor Alistair Darling today gambled on a rapid economic recovery to rebuild Britain's battered finances as he revealed that borrowing this year would hit a record £175 billion.

In a grim Budget statement he outlined the full depth of the economic crisis.

Mr Darling warned that output would shrink by 3.5 per cent this year - more than doubling his previous forecast.

by Fran on Wed Apr 22nd, 2009 at 02:08:49 PM EST
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It's not people who are on high wages we worry about. It's the ones who have escaped being on a wage and earn stratospheric amounts of money that are effectively untaxed.

Darling knows this and has done nothing about it cos he's scared shitless of the City.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Wed Apr 22nd, 2009 at 05:05:01 PM EST
[ Parent ]
50% is a start, although it won't do much more than piss off some of the mid/upper manager types.

A crackdown on tax avoidance would be much more interesting.

Considering that the chances of Darling still be chancellor after the next election are somewhere between not very much and absolute zero, you'd think NuLab might finally be able to find a spine for its last hurrah.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Apr 23rd, 2009 at 08:43:36 AM EST
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German chancellor hosts economic crisis summit | Germany | Deutsche Welle | 22.04.2009
German Chancellor Angela Merkel met with industry, banking, government and union leaders in Berlin on Wednesday to discuss how to best cope with the fallout from the current economic crisis.  

A week before the German government is to issue its next economic forecast, Merkel called representatives from key businesses, banks and unions to a meeting in Berlin to try to assess the size of the crisis, and hammer out a course of action to avoid massive layoffs.

The government has already passed two stimulus packages it says are worth 81 billion euros ($104.7 billion), but the coalition is considering additional measures. It has, however, rejected calls from service-industry union ver.di and metal-workers' union IG Metall to finance a third, 100-billion-euro stimulus package.

Economics Minister Karl-Theodor zu Guttenberg said the "overwhelming majority" of participants at the meeting agreed that talk of a third stimulus package "lacks any foundation."

by Fran on Wed Apr 22nd, 2009 at 02:12:20 PM EST
[ Parent ]
RGE 2009 Global Economic Outlook (via email, hence no link).

Many analysts and commentators are pointing out that the second derivative of economic activity is turning positive (i.e. economies are still contracting but a slower rather than accelerated rate) and that green shoots of an economic recovery are blossoming.

RGE Monitor's analysis of the data suggests that the global economic contraction is still in full swing with a very severe, a deep and protracted U-shaped recession.

Last year's economic consensus forecast of a V-shaped short and shallow recession has vanished. While the rate of economic contraction is slowing compared to the free fall rates of Q4 of 2008 and Q1 of 2009, we are still a long way away from the economic bottom and from a sustained recovery of growth.

In particular, in Europe and Japan there is little evidence of a positive second derivative of economic activity.

by Bernard (bernard) on Wed Apr 22nd, 2009 at 04:00:44 PM EST
[ Parent ]
The above message brought to us by the letter "L".

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 22nd, 2009 at 10:42:35 PM EST
[ Parent ]
The Short Term Set Up in US Equity Markets

Served by Jesse of Le Café Américain, as a guest post in Naked Capitalism

After noting that the action in the stock futures market has been moving around furiously since the big bank CEOs met with Obama, Jessie suggests the following:

To our minds, it is just as likely that we are being set up for a terrific leg down. In our experience the big dogs tend to dominate certain portions of the short side at the apogee of a stock market pump. Our target for a failure point on the SP June futures is about 858-864.

-Skip-

Let's see if they can keep it floating up. This does not look like a sustained ramp however, but the pump that sets up the dump.

-Skip-

The best probability based on the data at hand is that we are seeing a pump and dump, in order to provide some income to the beleaguered banks through their proprietary trading desks.

We have not been tracking it, but we wonder if Goldman Sachs has fully placed its large secondary equity offering designed to pay back their TARP funds. The markets often miraculously levitate in sympathetic conjunction with key IPOs and equity tranches.  If they have, then the pump and dump gains in likelihood.



"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 22nd, 2009 at 11:37:19 PM EST
[ Parent ]
The very next post below Jessies' is from Tyler Durden of Zero Hedge fame:

SPY Have Become Hard To Borrow

Developing story: Traders confirm several locations indicating SPDRs are no longer automatic borrow and have made their way to the Hard To Borrow list: pre-borrow call is needed versus automatic short prior, as not enough underlying inventory.

Have fun hedging the market when you can not short. Wholesale market squeeze is being orchestrated.

-Skip-

next step - bidless (and offerless) market. A good analogy would be trying to sell Helmlsey Manor in West Palm Beach. Then again, a 200 point drop in the market on bad news (once they come) from 855 will be less bad than from 755. Even DC is taught simple subtraction.

LOOK OUT BELOW!  
Looks like the market is going to jump off a tall building.  Hey, all of the parachutes and trampolines have already been bought up!  Wouldn't want Joe Schmo profiteering, now would we?  Well, I guess one could always short the big financials.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Apr 23rd, 2009 at 12:01:44 AM EST
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I'm back to shorting the financials. I went in too early (as in I'm down a bunch at the moment) but I'm not worried at all.

you are the media you consume.

by MillMan (millguy at gmail) on Thu Apr 23rd, 2009 at 01:48:39 AM EST
[ Parent ]
With so many people suspecting 'pump and dump' market manipulation, what is the SEC doing?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Apr 23rd, 2009 at 04:36:15 AM EST
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Smoking crack, probably.

What does the SEC usually do?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Apr 23rd, 2009 at 08:46:17 AM EST
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After the rousing success of the US Tea Bag parties on April 15th the Repubs will be looking for the next opportunity to rev up their base ... could be this coming July 4th with all the flag waving, etc.  They'll want the dump to be well along by then to have a good "catastrophe/ it's all Obama's fault" effect.  At least that's my prediction on the timing, at least as accurate as Sy Hersch on Iran invasions. :)

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Thu Apr 23rd, 2009 at 08:39:24 AM EST
[ Parent ]
FT.com: Darling is doing his best to clean up Brown's mess (Willem Buiter's Maverecon, April 22, 2009)
Mr Darling is doing his best to clean up the mess left by his predecessor, Gordon Brown. The fiscal profligacy of Mr Brown, now prime minister, after New Labour's first term and his leadership since 1997 in the global financial regulatory race to the bottom have left the UK suffering from multiple imbalances. It is in its worst fiscal shape ever in peacetime - in the G8, only the US and Italy come close. It has a bloated financial sector, including a banking sector that is too large to save unless state support is restricted to the UK high street banking bits of UK-based global banking groups. It has a distorted and moribund housing sector and excessively indebted households.

...

Under the best possible scenario, taxes will have to be raised and/or public spending cut on a permanent basis by between 5 and 6 per cent of GDP to regain fiscal sustainability. The necessary permanent fiscal tightening could easily be larger. The pain will be widely felt. The ambition to bring British infrastructure back up to the level it achieved at the end of the 19th century has been postponed by another quarter-century. Education and health will suffer.

...

Mr Darling will therefore need luck as well as skill and determination to get Britain through this Great Contraction without having to go another round in the financial crisis. I would consider the case for a government of national unity. It would help if Mr Brown - responsible more than any one for this debacle - were to resign.



Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Apr 23rd, 2009 at 05:14:31 AM EST
[ Parent ]
Economist's View: Using Anti-Trust Law to Break Up Banks that are Too Big to Fail - Mark Thoma
So more and more I'm starting to thing there may be a single explanation after all, that the regulators of these markets were captured by powerful forces that wanted the game to continue.

The power of regulators, and the will to enforce the regulations, must match - in fact exceed - the will and power of those being regulated to resist having constraints placed on their behavior.

I've talked about why ideology may have eroded the will of regulators, but their will is partly a function of their power. So long as we allow huge, clearly over-sized financial institutions to exist, this problem will potentially be present.

by Bernard (bernard) on Thu Apr 23rd, 2009 at 08:20:34 AM EST
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