Archive for Investment

Greece cannot be forced out of the Eurozone

Why the Eurozone will have to give in to Greece

  • Greece’s Government wants a managed default; not to leave the Eurozone
  • The ECB can make it very difficult for Greece to stay in the Euro,

 

BUT

 

The emperor is naked! There is no mechanism to force an exit and the ECBs supposed powers are irrelevant – see below the likely course of negotiations if they go to the brink and over it.

  1. Greece refuses to agree to austerity and threatens default.
  2. EU threatens to force them out of the Eurozone. Bluff called as there is no mechanism to force this on a country
  3. The ECB refuses to lend to Greek banks hoping that the Greeks will back down. Bluff called.
  4. ECB refuses to lend and the banks fail
  5. Immediate bank nationalisation by the Greek Government and a default on all the banks debt.
  6. This will be followed by immediate default on the Greek debt
  7. Greece then continues to use Euros within a nationalised banking industry, noting ECB can do
  8. Impact on Greece? Limited as the country is viable economically

Now, let’s watch what happens. My guess…..large amounts of Greek debt will be written-off – the market prices the debt now at 56% of face value – see here. The interest paid on this debt is now around 10%. Seems like a great deal – buy Greek debt and get 10% per annum and it’s in Euros – brilliant. Don’t do it.

Can the EU change the rules and create a mechanism to force an exit from the Eurozone? Hmmmm…….need to check it out. I suspect such a move would need to be adopted unanimously.

 

 

Leave a comment »

Bitcoin is tricky to combat – good!

Bitcoin – what is it? Think of it as a video game. It has rules but, unlike video games, Bitcoin is “distributed”. This means that the rules cannot be changed without every participant of Bitcoin agreeing. This means that the rules won’t change – ever. If there are better rules then a new Bitcoin will develop.

The rules say that Bitcoins can be exchanged, can be created and have a limit – they cannot exceed 21 million. They can be created by “hard work”, called “mining”. Basically anyone who has the funds can invest in computer hardware to create Bitcoins. The more that are created, the more difficult it is to create new Bitcoins. The return on investment, i.e. the return on investing time and money in “mining” Bitcoins, is high at the beginning and lower towards the end (on the basis of today’s technology).

What is great about Bitcoins is that they can be exchanged without banks, Governments and regulators. It is akin to barter and brings power to the people not to the institutions.

Note that should you buy Bitcoins then changing them back to “country currencies” is under attack by Governments. This is Bitcoins vulnerability but also it’s strength – if Bitcoin takes off, why would you ever want to exchange it for another currency!

 

Leave a comment »

Why is everyone so worried about Greece?

Greece is tiny country on a European and world scale. Why is it in the news so much? This is certainly a reasonable question.

Read the rest of this entry »

Leave a comment »

Rise up O men of Greece!

I will not rest in my pleas to the Greek people to refuse categorically the pernicious austerity measures being implemented by their Government. Do not allow them to destroy generations of Greeks to save the bankers.

Some figures:

Greece joined the EU in 1981 and has spent at least $250 billion in defence spending since then. There debt is around $450bn. Remember that the German and French armament industry have done very well out of this as have their bankers who have lent Greece the money to gorge itself on missiles and such like. Greece is number 23 in the defence spending league!

I urge you to default on this debt! Say no to your Government now and make the Governments and bankers of the EU, the UK and the US face up to the consequences of their greed. Let’s cleanse ourselves and them in the process!

Leave a comment »

The FSA now has a plan that allows banks to fail!

If the FSA now has such a plan then it is possible to let banks fail without the economy collapsing. If so then why didn’t we have that plan in place before? Read the rest of this entry »

Leave a comment »

Public sector pensions – what do you mean you won’t tell me!

Write to your MP or anyone in Government and ask them for the amount that Public Sector pensions represent of total expenditure relative to the Private Sector? Will they tell you? Well your MP doesn’t actually know and can’t find out – the Treasury don’t report their figures like that sorry. They will tell you what Defense spending is but not what amount of Defense spending is related to pensions. Who asks the difficult questions of Government I wonder?

Typically a Public Sector worker will accumulate 1/60th of their final salary for each year worked. If they contribute 5%, i.e. 1/20th each year, so 1/20th of their average salary, and let’s say that their salary doesn’t increase, then for 10 years of work and a total contribution of 50% of their annual salary ONCE they receive circa 17% of their salary from the age of 60 EVERY YEAR!

Total madness whoever thought up this scheme – this is a bigger Ponzi scheme than Madoff’s!

Leave a comment »

Quantitative Easing – why?

The Government buys its own bonds from banks with money that it creates. Bond prices go up, interest rates go down and banks keep buying bonds of which there is a good supply since Governments are so indebted. The money supply goes up, there is no impact on economic activity except via two mechanisms – interest rates being low reduces borrowing costs for those on variable rates and the exchange rate weakens boosting exports. The latter is the undeclared objective – it is called “beggar thy neighbour”. It doesn’t work. When will journalists stop pandering and call a spade a spade?

Leave a comment »