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Thread: EUCOM Economic Analysis - Part I

  1. #201
    Council Member Firn's Avatar
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    Since last year there is some adjustment underway in Germany. A good example is the last Tarifverhandlung between the strong IG Metall union and employers, with 4,3% pay rise for next year. The deal is for only done for South-Westgermany, better Baden-Wrttemberg or 800,000 but will most likely be adopted by the rest of the country with its 3,6 million workers.

    From the FAZ

    This is good news for the workers and if I look at the results of many a German company and the dividends it is more then justified. Anyway this should make it easier for struggling countries to become competitive but it is just a small step on a long road.

    I enjoy btw the service of Deutsche Welle. It has also an English channel, which is a bit strange, and has great short videos about business:

    To China and back

    German Green technology for Japan

    Boomtime in China - bringing German-type training to China.


    P.S: Nepal: Efficient water mills produce electricity

    An uncle of mine is in the business and here in the Alps there are still small "social" plants. Having been in the Himalaya, with many villages far away from roads and many streams I have wondered about this topic. Properly done it should be highly efficient and bring big benefits.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  2. #202
    Council Member Fuchs's Avatar
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    Quote Originally Posted by Ulenspiegel View Post
    Here I disagree, with PV and wind you have really huge markets and with crude >70 USD it is already a no-brainer in many coutries to install them. In contrast to biotech the existing technology works in these fields :-).

    Wind is only good in some places (mostly within about 400 km of the open sea) and photovoltaic power is only cost-effective for small autonomous applications away from the power grid or in areas with a high percentage of dispersed light (due to high percentage of clouds during daytime). Areas with much direct solar radiation such as Spain are better off with solar thermal powerplants.


    By the way; it seems I should emphasis the "future" aspect of the Biotech stuff that I listed. It's now too late for France to jump on the wind and solar power train. Even the German PV module producers are dying in droves because the Chinese squeeze them out of the market in cloudy Germany!

  3. #203
    Council Member ganulv's Avatar
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    Quote Originally Posted by Fuchs View Post
    Even the German PV module producers are dying in droves because the Chinese squeeze them out of the market in cloudy Germany!
    Do the German subsidies compare to those given by the Chinese government?
    If you don’t read the newspaper, you are uninformed; if you do read the newspaper, you are misinformed. – Mark Twain (attributed)

  4. #204
    Council Member Fuchs's Avatar
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    The problem is that the buyer of PV modules has advantages from the regulation, not the German producer directly. If I remember correctly, German exports of PV modules enjoy no advantage from our government (other than publicly funded research and the usual advantages offered to all other exports as well).

  5. #205
    Council Member Surferbeetle's Avatar
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    Energy provides a number of interesting engineering (and business) opportunities. The differential between natural gas prices in the US and Europe is significant, ~ $2 USD per million British thermal units (US price) and ~ 10 USD per million British thermal units (European price) and is an interesting arbitrage problem to think about....keeping in mind that the financial services industry comprises ~4.5% respectively of German and French 'gross value added', 7% for the UK, and ~14% of Switzerland's GDP. Natural gas turbine production by European firms such as Siemens and Alstom and Ultra High Voltage Direct Current (UHVDC) equipment by firms such as ABB may be places to watch/invest. The effects of 3D printing technology upon engineering and manufacturing is also very interesting to think about, while international regulatory questions are always an issue. The bigger question in my mind is, however, getting through the Greece issue and estimating where the bottom is really at with respect to share prices. I am not convinced we are at a capitulation point even though market volumes seem to indicate many retail investors are long gone....

    TEXT-Fitch says U.S. shale gas boom threat to euro chemical costs, Wed May 16, 2012 10:30am EDT, Reuters

    US wholesale electricity prices are around a third lower than in 2010, and natural gas prices at a 10-year low are a key contributor. Henry Hub gas prices are USD2 per million British thermal units (mmbtu), compared with around USD10/mmbtu for European gas. Pressure is mounting for Gazprom, Europe's main supplier of natural gas, to break the link between its long-term contract prices and oil. However, with no competitive pressure probable from US natural gas exports before 2015, the differential between US and European prices is unlikely to reduce materially in the short term.
    EIA, Natural Gas Prices (Dollars per Thousand Cubic Feet, except where noted)
    http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm

    European Financial Centres 2012, Special Report, Financial Times, www.ft.com

    Siemens, You are here: Home Energy Power Generation Gas Turbines
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    The Siemens gas turbine range has been designed and refined to help you meet the challenges of a dynamic market. Our 15 models with capacities from 5 to 375 MW, are designed with your profitability in mind. Whatever the application, our gas turbines meet the requirements for efficiency, reliability and environmental compatibility, giving low life-cycle costs and the best possible return on investment.
    Alstom, Home/ Power/ Fossil/ Gas power/ Gas turbines
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    We have 4 distinctive gas turbines on offer to meet your operational needs:

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    Industries and utilities Power T&D Solutions HVDC HVDC Classic UHVDC
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    The increased interest in recent years for transporting clean and renewable energy from remote hydro generation plants has also increased the interest in higher DC transmission voltage than presently used (i.e. 600 kV DC). This has led to development of Ultra High Voltage Direct Current (UHVDC) at 800 kV DC.

    800 kV Ultra High Voltage Direct Current (UHVDC) transmissions are economically attractive for bulk power transmissions of 5,000 – 8,000 MW over 1,000 – 1,500 km or above. 800 kV HVDC transmission projects are already in execution phase, and 800 kV is now an established voltage level for bulk power transmission over long distances.
    The printed world, Three-dimensional printing from digital designs will transform manufacturing and allow more people to start making things,
    Feb 10th 2011 | FILTON | from the print edition, The Economist

    FILTON, just outside Bristol, is where Britain’s fleet of Concorde supersonic airliners was built. In a building near a wind tunnel on the same sprawling site, something even more remarkable is being created. Little by little a machine is “printing” a complex titanium landing-gear bracket, about the size of a shoe, which normally would have to be laboriously hewn from a solid block of metal. Brackets are only the beginning. The researchers at Filton have a much bigger ambition: to print the entire wing of an airliner.
    Foreign Corrupt Practices Act by wikipedia, http://en.wikipedia.org/wiki/Foreign..._Practices_Act

    Euro-Austritt Griechenlands kostet Deutschland 77 Milliarden Euro von Malte Fischer, 12.05.2012, WirschaftsWoche

    Ein Austritt Griechenlands aus der Eurozone, verbunden mit der Einstellung des Schuldendienstes, würde die Euro-Länder 276 Milliarden Euro kosten.
    The Endgame in Greece—How a Bank Run Can Be Part of the Solution, by Jacob Funk Kirkegaard | May 16th, 2012 | 02:22 pm, The Peterson Institute for International Economics

    If the deposit flight continues unabated, the ECB will be in an awkward position, because it will likely be called upon to provide capital to Greek banks to make up for lost deposits. Presumably the ECB would do so only with a mandate from euro area political leaders, perhaps including explicit euro area sovereign guarantees to continue to lend to Greek banks or allow Bank of Greece Emergency Liquidity Assistance (ELA) to continue. Such a demand would echo what the central bank did when it was forced to accept default-rated Greek bonds after the restructuring in March. As Belgian central bank president Luc Coene said this week: “The issue is one for the politicians…. It will be a political issue—where is the balance of solidarity—rather than a technical issue about whether the banks have been sufficiently recapitalized or not.” The ECB would of course not want to be seen as pushing Greece, leaving that role to elected politicians.

    Euro area leaders would then have to decide what to do. They would probably not want to see the Greek banking system collapse immediately, so they would likely go along with the ECB lending money to Greek banks. But they would probably also demand that Greek politicians sign up to the IMF program, or even that they scrap the elections and form a unity or technocratic government. This may seem terribly undemocratic. Such demands would have to be packaged to make them look like the idea came from Greece. But such things have happened before. Only last November, the EU pushed for the installation of technocrats to run the governments of Greece and Italy. Despite the claim by Merkel and Hollande that they would “listen to the Greek people,” Greek bank depositors may speak louder than Greek voters. If a bank run presented an opportunity to win a Greek agreement to stick with the IMF program, European leaders would almost certainly seize it.

    More broadly, a devastating domestic bank run in Greece could strengthen the case for keeping the euro area together while it heads toward a fiscal and banking union. Euro area leaders in Germany, France, and elsewhere know that a euro exit by a member state would be very costly throughout the currency region, making them vulnerable to blackmail from opportunistic populists like Alexis Tsipras in Greece. But now the example of Greece has illustrated a new factor—namely, that the threat of a bank run taking place in any country considering a euro exit acts like the functional equivalent of a preemptive nuclear strike on political forces advocating such an exit. Because of the Greek example, populists across the euro area have awakened to a new political reality—that will be blamed for destructive domestic bank run if they pursue their exit strategies.

    By bringing forward the economic costs of a euro area exit to the present—before any voters back a euro exit in their country—a bank run in Greece will not only help produce the “right result” in that country (i.e., a pro-IMF program majority), but prevent such policies from even being articulated by populist leaders elsewhere. Such political neutralization of populism would be a huge prize for euro area leaders.

    Utilizing the threat of bank runs does take euro area brinkmanship to a dangerous new level. Euro area leaders should think carefully about proceeding down this road. It should only be contemplated if euro area leaders are willing to proceed to pan-euro area bank deposit insurance and other dramatic integration measures to avoid the spread of contagion and bank runs to other member states. If they are prepared to do so, they can call Alexis Tsipras’ bluff by fomenting a bank run in Greece before the new elections are held.
    What is market capitulation? by investopedia

    The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a bottom in prices and consequently a good time to buy stocks.
    Sapere Aude

  6. #206
    Council Member Surferbeetle's Avatar
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    Forgot to add a link for Rolls-Royce in my previous post.

    Rolls Royce, You are here: Home > Energy > Products > Gas turbine engines > Trent 60
    http://www.rolls-royce.com/energy/en...ines/trent_60/

    The Rolls-Royce Trent 60 is the most advanced aeroderivative gas turbine available today. Delivering up to 64MW of electric power in simple cycle service, at 42 per cent efficiency, the Trent 60 has established a new benchmark for fuel economy and cost savings. It also offers operators fast delivery and installation times and beneficial performance.

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    On to...

    The anatomy of the eurozone bank run, May 20, 2012 4:21 pm by Gavyn Davies, Financial Times, www.ft.com

    A bank run is now happening within the eurozone. So far it has been relatively slow and prolonged, but it is a run nonetheless. And last week, it showed signs of accelerating sharply, in a way which demands an urgent response from policy-makers.

    The fear of bank runs is deeply ingrained in all economists who know anything about the genesis of the Great Depression in the United States in the early 1930s. Then, the failure of the Bank of United States in December 1930 led to multiple bank runs across the country. Bank failures in the following two years wiped out personal savings and greatly exacerbated the collapse of demand in the economy.

    The classic account of the crisis, by Milton Friedman and Anna Schwartz, concluded that the collapse was largely the fault of the Federal Reserve, which failed to provide enough liquidity to keep the banks functioning and thus end the panic. After the crash, the establishment of the Federal Deposit Insurance Corporation was intended to ensure that deposit holders never again had to live in fear that their savings would be in jeopardy. What are the lessons for the eurozone?
    The standard central bank response to this problem is to provide enough liquidity to solvent banks to ensure that deposit holders are always able to withdraw their money, in which case the panic is eventually supposed to subside. The ECB has done this to the full extent required; in this respect it is not possible to criticise the ECB for failing to fulfill the role of lender of last resort to the entire system. Yet the continuing drain on deposits has not been halted.
    Therefore, the run is being caused by concerns about exchange rate risk, not necessarily by the fear of bank failure as such. This makes it much more complicated to deal with, since it is very difficult to offer guarantees against future exchange rate losses to today’s depositors. Germany would not want to stand behind such guarantees to Greek and Spanish citizens in the event of a euro break-up.
    Who is Gavyn Davies?

    Gavyn Davies is a macroeconomist who is now chairman of Fulcrum Asset Management and co-founder of Prisma Capital Partners. He was the head of the global economics department at Goldman Sachs from 1987-2001, and was chairman of the BBC from 2001-2004.

    He has also served as an economic policy adviser in No 10 Downing Street, an external adviser to the British Treasury, and as a visiting professor at the London School of Economics.
    Sapere Aude

  7. #207
    Council Member Firn's Avatar
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    Cameron urges Hollande to back Eurobonds but rejects Eurotobin tax. Hollande wants to press for Eurobonds but also the Eurotobin tax. Merkel supports him on the transaction tax but refuses Eurobonds. And Cameron...

    I really seems beggar thy neighbour has become very fashionable among the big countries.

    Personally I do think that Eurobonds could help in the short term, something which makes in my mindset quite attractive, however they carry a whole bundle of potential longterm problems. It is strangely similar to the Euro idea but with more downsides for the competivess of Eurozone on the world stage.

    Internally Italy the huge transfers from the North to the South have been extremely inefficient at creating national wealth, with the multiplier being certainly much smaller then 1 and getting lower. The South champions quite a few rankings, sadly mostly when it comes to things like the auto blu, the cost of the casta politica in general and unemployment etc.

    The various regions have but little incentives to become more efficient as the lira and now the Euro kept rolling to support the deficits. This is one of the reasons why we lost competitive ground.

    In the European context it will punish the good performers and help the poor ones. Economy is no morality game, but this should go only for the short term and a crisis. To ingrain such a behavior into the Eurozone is highly dangerous for the future of Europe, especially considering the success of the Euro. The Euro did ingrain the belief into Greece and other countries that credit comes cheap and is (always) readily available. It didn't do a lot of good, didn't it.

    @Suferbeetle: The classic account of the crisis, by Milton Friedman and Anna Schwartz, concluded that the collapse was largely the fault of the Federal Reserve, which failed to provide enough liquidity to keep the banks functioning and thus end the panic. After the crash, the establishment of the Federal Deposit Insurance Corporation was intended to ensure that deposit holders never again had to live in fear that their savings would be in jeopardy. What are the lessons for the eurozone?

    I wanted just to add that Friedman and Schwartz really do sound rather leftist in this regard compared to part of the politcal spectrum of the US if we consider the attacks on the FED for doing their job at pumping liquidity by many and quite creative means into the market. The ECB has done so far a good job in some areas but it was so to conservative in others.
    Last edited by Firn; 05-20-2012 at 06:54 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  8. #208
    Council Member ganulv's Avatar
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    Quote Originally Posted by Firn View Post
    I wanted just to add that Friedman and Schwartz really do sound rather leftist in this regard compared to part of the politcal spectrum of the US if we consider the attacks on the FED for doing their job at pumping liquidity by many and quite creative means into the market. The ECB has done so far a good job in some areas but it was so to conservative in others.
    I don’t think the Fed is run by the Illuminati or the Elders of Zion, but I do think it needs to be called to task for its role over the medium and long terms.
    If you don’t read the newspaper, you are uninformed; if you do read the newspaper, you are misinformed. – Mark Twain (attributed)

  9. #209
    Council Member Surferbeetle's Avatar
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    Firn,

    Labels of left and right are too confining for 'free market thinkers'...

    Fiscal imbalances, financial transaction taxes, general mismanagement, and proposed recovery tactics, techniques, and procedures are all topics of interest/still very much under consideration:

    Investing in Change (The reform of Europe's financial markets) edited by Andrew Gowers

    The American Phoenix (and why China and Europe will struggle after the coming slump) by Charles Dumas and Diana Choyleva

    Vorbeben (das Buch zum Crash) von Wolfgang Munchau

    Judging from the recent YPF and Bankia experiences (among many others to include IndyMac, Hokkaido Tokushokku bank, Long Term Credit Bank, Nippon Credit Bank, Long- Term Credit Bank, RBS, HBOS, UBS, Credit Lyonnais and Sparkassen) partial and full nationalization always remains in the governmental quiver

    Along those lines this paper on nationalization as a strategy makes for an interesting read:

    A Proven Framework to End the US Banking Crisis Including Some Temporary Nationalizations, Adam S. Posen, Peterson Institute for International Economics
    Testimony before the Joint Economic Committee of the US Congress hearing, “Restoring the Economy: Strategies for Short-term and Long-term Change”
    February 26, 2009

    That self-preservation, not profit-maximization, strategy by the banks usually entails calling in or selling off good loans, so as to get cash for what is liquid, while rolling over loans to bad risks or holding on to impaired assets, so as to avoid taking obvious losses, and gambling that they will return to value. The result of this dynamic is to create the credit crunch of the sort we are seeing today, and this only adds to the eventual losses of the banks when these losses are finally recognized.2 The economy as a whole, and nonfinancial small businesses in particular, suffer in order to spare the positions of current bank shareholders and top management (and, on the firing line, bank supervisors).
    A hedge fund, sovereign wealth fund, or private equity firm with cash is not staying out of these markets for distressed assets at present just because the prices have not yet “fallen enough”; such investors are staying out because the assets are indeed toxic with indeterminate prices.

    I would suggest that much of the American political spectrum (not to mention the Western political spectrum as a whole) still (!) fail to recognize that irrespective of whether they hold 1st class, 2nd class, or 3rd class tickets ticket on the Titanic, the end result of a collective political navigation failure is still the same.

    Fortunately Democracy is a wonderful thing, there is no Arab Spring for us, instead we can just vote the bums out.
    Sapere Aude

  10. #210
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    "Judging from the recent YPF and Bankia experiences (among many others to include IndyMac, Hokkaido Tokushokku bank, Long Term Credit Bank, Nippon Credit Bank, Long- Term Credit Bank, RBS, HBOS, UBS, Credit Lyonnais and Sparkassen) partial and full nationalization always remains in the governmental quiver"

    Good timing (or maybe, poor), depending upon one's outlook.

    Mortgage Crisis in France - Bank Bailout required?

    To quote from the article:
    A direct nationalisation would likely mean some form of capital injection - an unpalatable outcome given the new government rhetoric and the fact that the existing owners' stake would have to be wiped out. CIF is 100% owned by 56 regional cooperative entities.
    Just imagine - a newly elected President who wants to take on the banks, may have to as one of his first acts in office, bailout a bank.

    Why do I hear echos of 2008 in my head (see Bear, Stearns and both the Bear Stearns High-Grade Structured Credit Fund and the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund - Re: Subprime mortgages).

    President Hollande - Welcome, now you get to find out that governing ain't easy.

  11. #211
    Council Member Fuchs's Avatar
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    It's probably cheapest to just let them all crash, then nationalise the remains (banks are little more than balance sheets and employees - the balance sheets are crap, and many of the employees are working in socially useless if not harmful jobs) and destroy the investment banking and risk management departments. Rebuild the risk management departments as really, really tiny staffs and enforce rules that make risk management efforts largely unnecessary.


    It's too bad that European governments lack competence in regard to financial markets so badly. Just look at the nonsensical parts of the Basel agreements, such as the empowerment of the rating agencies. The governments were regulating the banks as if the banks were doing simple late 19th century banking only.


    Well, we have highly developed and organised societies and that enables us to use electricity by simply plugging a device in, it enables us to have a shower, to use on a road where almost everyone drives orderly, to work in multi-thousand people companies and to have a kind of magic chat over any distance.
    The other side of the coin is that certain institutions are not only highly developed, but also quite rotten and we seem to be complacent enough to just tolerate that.
    Germany for example could vote Merkel out of office, but the replacement is guaranteed to be 95% incompetent on economics, just as most of our ministers of the economy have been for four decades.

  12. #212
    Council Member Surferbeetle's Avatar
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    Quote Originally Posted by Watcher In The Middle View Post
    Good timing (or maybe, poor), depending upon one's outlook.
    Hey Watcher,

    I would go with most likely poor for the investors/traders caught in this event, but positive for the rest of the financial system.

    Why?

    IMHO our/the western political class has cravenly passed on exercising their duties to ensure that the market is able to kill unsustainable enterprises before they became to big to fail, and now the only way left is via nationalization. Voters are also part of this in that we have not exercised appropriate supervision and due diligence of those we have elected. Perhaps Monsieur Hollande will take the opportunity given and do the right thing?

    Hopefully his econ team can ensure that the nationalization, breakup, and sale of the remaining assets is a case study in how to repay taxpayer funds plus interest.

    Hollande Names Pierre Moscovici As French Finance Minister, By Helene Fouquet and Mark Deen - May 16, 2012 12:33 PM MT Bloomberg News

    The young Moscovici started in politics as a supporter of the Communist Revolutionary League and left it in his late twenties for the Socialist Party, where he steadily rose to become one of its leaders and a specialist of European affairs.

    Moscovici, like Hollande, studied at France’s elite Institute for Political Sciences and Ecole Nationale d’Administration in Paris. After working for the Socialist Party for several years, he ran for deputy in 1997 in the eastern Doubs region.
    Hollande also named Michel Sapin Labor Minister, Laurent Fabius Foreign Minister and Manuel Valls Interior Minister. Jerome Cahuzac will run the budget ministry. For the first time, the French government will have an equal number of men and women in its cabinet, Ayrault said.
    You might also remember the recent case of Dexia...France has a significant piece of the the liability associated with that failure as well.

    Dexia, from Wikipedia, the free encyclopedia, http://en.wikipedia.org/wiki/Dexia

    Dexia N.V./S.A., also referred to as the Dexia Group, is a Belgian-French financial institution active in public finance, providing retail and commercial banking services to individuals and SMEs, asset management, and insurance. The company has about 35,200 members of staff and core shareholders' equity of €19.2 billion as at 31 December 2010, and provides governments and local public finance operators with banking and other financial services. Asset Management and Services provides asset management, investor and insurance services, in particular to clients of the two other business lines. In 2008, the bank received bailouts for €6 billion, and it has become the first casualty of the 2011 European sovereign debt crisis. Negotiations are taking place for its breakup.[2] Its headquarters are in Saint-Josse-ten-Noode, Brussels.[3]
    Fortis is a 2008 casualty worth looking at.

    Fortis (finance), from Wikipedia, the free encyclopedia
    http://en.wikipedia.org/wiki/Fortis_(finance)

    Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue[1] but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities remaining.

    The Benelux countries were Fortis's home base and its strength. Fortis's banking operations included network (retail), commercial, and merchant banking; its insurance products included life, health, and property/casualty lines. Products were sold through independent agents, brokers and financial planners, and through branches of Fortis Bank. It was listed on the Euronext Brussels, Euronext Amsterdam, and Luxembourg stock exchanges.

    The company was broken up after having critical difficulty financing its part of a joint acquisition of ABN AMRO (as a member of a consortium which also included Royal Bank of Scotland Group and Banco Santander). After receiving a bailout from the Benelux governments, its Belgian banking operations were sold to BNP Paribas, while its insurance and banking subsidiaries in the Netherlands were nationalised by the Dutch government and renamed ABN AMRO. The Dutch insurance arm of Fortis was split off as ASR Nederland.[2]

    Fortis retained the rest of its insurance operations (remaining the largest provider in Belgium),[3] and changed its name to Ageas in April 2010, with ownership of the Fortis brand having passed to BNP Paribas.[3]
    @ Fuchs,

    The Great Depression was an example of relatively quickly clearing the market of malinvestments while Japan's 'Lost Decade' is an example of a more controlled clearing process.

    Tough choices either way...
    Sapere Aude

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    "Hopefully his econ team can ensure that the nationalization, breakup, and sale of the remaining assets is a case study in how to repay taxpayer funds plus interest."

    Actually, I agree fully with this approach. It's what we should have done here in the US (except not to nationalize, but make them file Chapter 11/Chapter 7 in federal bankruptcy court). And then we should have kicked out all the upper level management in disgrace (& board of directors), and then assigned a task force of special prosecutors to look into each occurrence.

    But we didn't do that, and we've been paying for it ever since (undoubtedly, with more to come).

    France in particular needs to get to the bottom of this entire real estate mortgage crisis really fast and decisively, because otherwise, you just might see France turn into "Spain, Part II". Don't do like the US is doing -trying to 'push it all down the road'.

  14. #214
    Council Member M-A Lagrange's Avatar
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    Quote Originally Posted by Watcher In The Middle View Post
    France in particular needs to get to the bottom of this entire real estate mortgage crisis really fast and decisively, because otherwise, you just might see France turn into "Spain, Part II". Don't do like the US is doing -trying to 'push it all down the road'.
    Makes too long I'm not living in France so I don't really see where you are coming from. If it's true that real estate market in France is getting a little crazy, I do not believe you can compare the situation to Spain. If real estate is too expensive in Paris, it remains accessible in "province". Also, it's a hell to get a credit from the banks. The problem is more that banks do not play their role anymore by refusing to allow grants to small enterprises. This basically kills a lot of business, even if they are health but need cash to fund their growth.

    but i might be wrong.

  15. #215
    Council Member Firn's Avatar
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    Well almost all banks are indeed greedy when others are greedy and fearful when others are fearful. It is just all too human and at the same time a strange case of Dr Jekyll and Mr Hyde. Only that both extremes will make the economy suffer be it a couple of years down the road or now.

    @Surferbeetle: Banks are unique institutions as when many a banca becomes rotta the economy suffers greatly. As we have seen in dire times it is the citizien who covers the downs of those big banks while he has little from the ups. I believe we really should give a nod to the law of medieval Genua and literally break the big banks, but in away that the pieces can stand on their own feet.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  16. #216
    Council Member Fuchs's Avatar
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    Quote Originally Posted by Firn View Post
    @Surferbeetle: Banks are unique institutions as when many a banca becomes rotta the economy suffers greatly.
    It depends. The real economy had been complacent about the leeches in the financial industry and the big consulting firms, but since the crisis began they broke largely free from the banks.

    Large corporations not only have a lot of liquidity - they also have their own means to emit bonds and such for foreign capital.

    Small businesses have always been better off by dealing with regional savings & loan institutions instead of with the big banks.

    Medium-sized companies are in between.


    The real economy did its job of mitigating the risks of association with the big banks to the point that German big banks are now desperately in search for large loan customers. These well-done homeworks may be part of the reason why the German economy can now grow faster than long term average (which would be in real terms: working age population growth about -0.5% + annual technological progress rate about +1.5% = 1% p.a. total at most since the capital stock doesn't change much).

  17. #217
    Council Member Surferbeetle's Avatar
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    @ Firn

    Banks have been vital to financing large engineering efforts for aeons; the Assyrians had them back when. Speaking of which there was a Tel outside of Mosul with amazing views of the Tigris and incredible work (way too heavy to carry by even a team of rapists of history) that must have been quite the amalgam of engineering, politics, and finance of pull off and build ... Eurobonds will be interesting to watch and see what results.

    @ Fuchs

    The distinctions between large, medium, and small banks are perhaps not as clear cut as one might think....and to stir the pot a bit, simplifying...Krugman thinks TBTF can work if managed while Greenspan thinks killing some TBTF off is not a bad thing...

    The Economist has a timely multi-section report on Banking worth reading:

    Special report: international banking: Banking goes digital, May 17th 2012, 4:46 from Schumpeter, Our correspondents discuss how new technologies will affect the future of retail banking, The Economist

    Spain is arguably the world’s most competitive banking market. Thanks to its fiercely independent regions, it has a remarkable number of banks for its size. Even more remarkable is the number of branches, some 43,000, which works out at one branch for every 1,000 people, or about six times the number in Britain and more than twice as many as in France and America. “With too many players you end up overbanked because every bank wants to be everywhere,” says Pedro Rodeia at McKinsey. This keen competition pushed some smaller banks to lend recklessly, causing a banking crisis that blew up the economy. Yet it also forced banks to squeeze out costs, which at Santander and BBVA account for less than 50 cents of every euro they earn, despite their huge branch networks. Most large retail banks in other countries would be happy with anything below 60 cents.

    Spanish banks embraced modernisation relatively late. Having been trapped in a bubble for many years during the fascist dictatorship, once they were freed they were able to leapfrog rivals in more developed markets. The most important innovation was the rapid and almost universal adoption by bank customers of electronic bill payments. Spain’s banks have a huge advantage in not having to process cheques or handle transactions in their branches. They have invested diligently in installing the latest and most effective computer systems, making their banks enviably efficient. Their rapid growth and the economic troubles at home raise some question marks. Even so, they have developed an innovative model of banking that is being exported around the world. It may also hold some clues about what banks elsewhere may soon be doing.
    Sapere Aude

  18. #218
    Council Member Firn's Avatar
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    Quote Originally Posted by Surferbeetle View Post
    @ Firn

    Banks have been vital to financing large engineering efforts for aeons; the Assyrians had them back when. Speaking of which there was a Tel outside of Mosul with amazing views of the Tigris and incredible work (way too heavy to carry by even a team of rapists of history) that must have been quite the amalgam of engineering, politics, and finance of pull off and build ... Eurobonds will be interesting to watch and see what results.
    An amalgam of engineering, politics and finance to build a palace for a reign who staked its claims with captured enemies. They certainly wanted to spread the word of their deeds. The Sumerian merchants trying to account for their goods could not knew that once those marks would enable the Assyrian kings to tell us how they slaughtered the sons of this and that lord in front of his eyes. Or the amount of tribute they collected.

    Thankfully the situation in the Eurozone is not quite that grim, and the stronger nations are not plundering the weakest one but are sending money, if with strings attached.

    As some of you recall I still hold Greek bonds which lost relative little in nominal value. If Greeces does split from the Eurozone I'm quite sure that this credit will at best worth only a third of its current value. With the GDP measured in neodrachma the debt in Euro would be north of 300% I guess, and that after the famous haircut. Too much even for a far stronger country.
    Last edited by Firn; 05-22-2012 at 06:00 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  19. #219
    Council Member Surferbeetle's Avatar
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    Quote Originally Posted by Firn View Post
    Thankfully the situation in the Eurozone is not quite that grim, and the stronger nations are not plundering the weakest one but are sending money, if with strings attached.
    Things have not gone 'biblical' yet, but it is very interesting to see how on edge the normally cool, dispassionate, and very cerebral FT has become of late regarding this topic. Andrew Roberts May 18, 2012 7:47 pm article, "Europe’s hubristic imperial overstretch", Gideon Rachman's May 21, 2012 7:40 pm, article, "Time to plan a velvet divorce for the euro" and Martin Wolf's May 17, 2012 7:10 pm article, "A permanent precedent" are well written examples of this trend.

    Looking across the channel, we also see posturing in some, not unexpected, quarters:

    "Europa braucht den Euro nicht", Thilo Sarrazin schreibt den Euro ab von Tim Rahmann, 22.05.2012, WirschaftsWoche

    Diplomatie ist nicht die Stärke von Thilo Sarrazin. Der Ex-Finanzsenator und ehemalige Bundesbanker hat ein klares Freund-Feind-Schema und denkt gar nicht daran, lange um den heißen Brei herumzureden. Sarrazin stilisiert sich spätestens seit dem Erscheinen seines 2010er-Bestsellers „Deutschland schafft sich ab“ als Mann, der die „unbequeme Wahrheit ausspricht“.

    Kritiker nennen seine vereinfachten Thesen populistisch. In seinem neuen Buch „Europa braucht den Euro nicht“, das heute erscheint, kommt Sarrazin erneut schnell zum Punkt: Der Euro ist ein politisches Projekt, dem jegliche ökonomische Grundlage fehlt. Die Gemeinschaftswährung hat dem Kontinent mehr geschadet als genützt. Kurzum: Europa braucht den Euro nicht. Und Deutschland schon gar nicht.
    EUROPA IN DER KRISE, Griechische Linke droht mit Euro-Katastrophe, 22.05.2012, 18:00 Uhr, Handelsblatt

    Die Euro-Krise treibt seltsame Blüten. Dass einmal die erfolgreichen griechischen Linken gemeinsam mit den zerstrittenen deutschen Genossen in der Bundespresskonferenz in Berlin auftreten, um gemeinsam gegen Bundeskanzlerin Angela Merkel (CDU) und ihre harte Sparpolitik Front zu machen, hätte man sich wohl in den kühnsten Träumen so nicht vorgestellt. Die Spitzenvertreter der am Boden liegende Linkspartei, Fraktionschef Gregor Gysi und Parteichef Klaus Ernst, zeigen sich denn auch mehr als erfreut, dass der Chef der griechischen Linksradikalen, Alexis Tsipras, ihrer Einladung in die Hauptstadt gefolgt ist.

    Nach Paris ist Berlin die zweite Station für Tsipras‘ Mission, den Euro-Rettern klar zu machen, dass sie Gefahr laufen, das ganze Euro-Projekt in den Sand zu setzen, wenn sie an ihrer harten, den Griechen aufgezwungenen Reformpolitik festhalten. „Wir brauchen alle einen Plan, um eine Katastrophe abzuwenden“, sagte der Anführer des Wahlbündnisses Syriza. Denn eine Auflösung der Euro-Zone würde am Ende die ganze Welt in Mitleidenschaft ziehen. Es müsse daher alles getan werden, dass diese Entwicklung nicht Realität werde. Unmissverständlich macht der Linken-Politiker klar, dass es weniger an den Griechen liegt, das Schlimmste zu verhindern, sondern einzig und allein an den europäischen Staats- und Regierungschefs. „Die EU-Staaten sollten nicht auf Lösungen beharren, die in die Katastrophe führen“, lautet seine unverhohlene Warnung.
    But there are still cooler heads out there looking for solutions:

    Parallelwährung als Alternative, Griechenland hat nicht nur die Option «Austritt mit grossem Knall» von Christof Leidinger, 23. Mai 2012, Neue Zürcher Zeitung

    Allerdings gibt es nicht nur das «Dabeibleiben» oder das «Austreten mit grossem Knall», sondern weitere Möglichkeiten. Zum Beispiel die Einführung einer Parallelwährung zum Euro. Sie könne helfen, eine ökonomische, soziale und politische Katastrophe mit unvorhersehbaren Ansteckungseffekten zu vermeiden, ohne dass die europäischen Institutionen und der Internationale Währungsfonds taktischen Erpressungsversuchen nachgeben müssten, heisst es in einer Studie der Deutschen Bank.
    Vor dem EU-Gipfel, Die EU streitet über Eurobonds, Von HENDRIK KAFSACK, BRÜSSEL, 22.05.2012, FAZ

    In der EU herrscht vor dem Gipfel der Staats- und Regierungschefs an diesem Mittwoch offener Streit über den Umgang mit der Schuldenkrise. Im Mittelpunkt steht dabei insbesondere die Frage der Einführung von Eurobonds, also der gemeinsamen Begebung von Staatsanleihen durch die Euro-Staaten. Die Bundesregierung sehe in der Schaffung von Eurobonds weiterhin nicht den richtigen Weg, um die Schulden- und Wachstumskrise der EU zu bekämpfen, hieß es am Dienstag aus Regierungskreisen in Berlin. Die Staats- und Regierungschefs sollten bei dem gemeinsamen Abendessen an diesem Mittwochabend besser über die Förderung des Wachstums debattieren.

    Für eine Debatte über Eurobonds machten sich außer dem französischen Präsidenten Hollande der italienische Regierungschef Monti sowie EU-Ratspräsident Van Rompuy stark. Beim dem informellen Gipfel an diesem Mittwoch geht es offiziell um die von Frankreich erhobene Forderung, den verschärften Stabilitätspakt um einen EU-Wachstumspakt zu erweitern. Dieser soll etwa die gezielte Förderung kleiner und mittlerer Unternehmen und junger Arbeitsloser oder den Ausbau des Energie- und Verkehrsnetzes umfassen. Konkrete Beschlüsse werden nicht erwartet. Das Treffen soll vielmehr das nächste offizielle Gipfeltreffen Ende Juni vorbereiten.
    Skeptisch gegenüber Eurobonds zeigt sich auch der konservative spanische Ministerpräsident Mariano Rajoy, dessen Land in der Schuldenkrise selbst stark unter Druck geraten ist und daher von gemeinsamen Anleihen vermutlich profitieren würde. „Der wichtigste Motor für Wachstum in der EU ist die Finanzstabilität“, hatte Rajoy am Montag in Chicago während des Nato-Gipfels gesagt. Über gemeinsame Anleihen von Euroländern sagte Rajoy, diese benötigten Zeit. Wichtiger seien aber Maßnahmen, die schnell wirkten.
    Quote Originally Posted by Firn View Post
    As some of you recall I still hold Greek bonds which lost relative little in nominal value. If Greeces does split from the Eurozone I'm quite sure that this credit will at best worth only a third of its current value. With the GDP measured in neodrachma the debt in Euro would be north of 300% I guess, and that after the famous haircut. Too much even for a far stronger country.
    I still have a small sum still sitting on 'black' in the finance sector of the 'core' as the wheel spins. We will see what happens...
    Sapere Aude

  20. #220
    Council Member Firn's Avatar
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    From the Guardian

    10.36am: Germany has just managed to sell two year bonds at its lowest borrowing cost ever -- with a yield of just 0.07%.

    This morning's sale of two-year Schatz bonds proved popular with investors, even though the bonds won't pay a coupon (a regular payment). Investors snapped up €4.555bn of the bonds, at prices that mean they will have received just 0.07% per year when the money is repaid in 2014. That's down from 0.14% previously.

    Germany had offered €5bn of bonds, and could have sold the lot if it had accepted higher yields in return.

    This is the first time that Germany has sold a 0.0% coupon* bond - it took the move after seeing record demand for its debt. This indicates that investors are prioritising capital safety at any price, rather than worrying about profitability.
    Such low yields mean of course that inflation and GDP growth are lowering the debt burden. For private money Germany did, like the UK and the US pay little and now nothing. I don't know the turnover of debt but it should be around 10-15% IIRC. For the state it would certainly make sense to strech the years and lower the yields asked, considering how much demand there is for this 'safe' heaven.

    Especially the UK would greatly benefit from sound public investmen, just like the US and Germany would lend a helping hand to other members of the Eurozone. To some extent it is just the old sad story of persons being greedy when others are greedy and fearful when others are fearful. This concept is rightly ingrained in us humans through our long evolution but it is a poor guideline for macro.

    9.38am: New sales figures from the British high street have dealt a blow to hopes that the UK economy is recovering.

    UK retail sales fell by 2.3% month-on-month in April, much worse than the 0.8% decline predicted by economists. That's partly due to a drop in fuel sales (after motorists rushed to fill up in late March after a brief panic over a truck drivers strike). On a year-on-year basis, sales were also disappointing - down by 1.1%, versus a forecast of an increase in 1%.

    So the UK consumer is reining in its spending, in the face of cutbacks and slowing economy at home and the euro crisis abroad. Not good. As Howard Archer of IHS Global Insight said:
    @Surferbeetle: Just a war of words, but rather heavy ones. It won't get biblical but this crisis will leave its traces in the European mind. Insults and pain tend to do.
    Last edited by Firn; 05-23-2012 at 01:27 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

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