Day 4188: Not a Grexit But a Grey In?

Monday:

The Greek elections have voted in a bunch who are vaguely more in favour of sticking to the austerity package and keeping the bailout money coming in.

Which is good because Greece needs to stay IN the Euro. But cut everything by 30%.

Seriously, if you can get past the fact that Greece is vastly UNCOMPETITIVE because they're stuck with a bad exchange rate, the benefits of being IN are enormous.

Cutting everything by say 30% is EXACTLY what you get with a DEEP devaluation: everyone's salary is cut by 30%, but all internal prices are cut by 30% at the same time. Everyone with savings, bad luck 30% goes up in smoke. But everyone with DEBTS, there's 30% less to pay on them. And yes, that includes the GOVERNMENT's debts, so bad news for those German banks.

Of course the cost of your imports JUMPS (causing inflation, probably, depending on how dependant on imported food and fuel you are). But YOUR goods become much cheaper for EXPORTS. Or (equivalently) it's cheaper for people with Euros to come and spend them in your country. Remember, everything is 30% cheaper.

And if you want to sell TOURISM then you want to make it EASY for your (RICH) neighbours to come visit with no fiddly money changing. So the advantage of staying IN the widely traded currency union is OBVIOUS.


Really, what's more worrying is the French voting in the Socialists who what to chuck the whole Franco-German recovery plan in favour of a SPENDING SPREE.

Honestly, democracy! Who's idea was that?

Oh, it turns out it IS the Greeks fault after all.

Day 2744: Sarky v Mandy

Sunday:


There appears to have been "un peut d'un spat", as they would say En Français, between President Sarcastic of France and Mr Mandy "Mandy" Mandelbrot, one time Prince of Darkness and now Trade Commissioner of the European Union.

First, Monsieur Sarcastic appeared to blame Mandy for the Irish "No" to the Lisbon treaty.

Then Mr Mandy slapped down Monsieur Sarcastic for being a PROTECTIONIST.

This actually goes a bit deeper than the French being peeved about their Presidency of the Union being Royally Republicly shafted by the Irish. It goes to how we respond to the darkening economic clouds.

Monsieur Sarcastic and the French are merely at the forefront of people who say it is time to look out for our own interests and hike tariffs on imports to make sure that European – by which they mean FRENCH – Farmers can continue to prosper.

And this is just as worrying as the rumblings coming from the campaign trail in Americaland – fortunately not so loudly as in the early part of the year – about protecting American farmers and industry too.

This is a very BAD idea.

Everyone should remember that the Great Depression of the 1930s was caused not by the Daleks in Manhattan but by everyone reacting to the Wall Street Crash by slamming up trade barriers. And world trade grinding to a halt caused a LOT more damage to jobs in all the countries that put up trade barriers than ever the crash did. Because once you put up trade barriers, then everyone else reacts by putting up barriers to you too. So you can't sell your exports meaning that they are wasted and other people can't buy them so they have to go without. It makes a bad situation worse.

To his credit, Mr Mandy is resisting the pressure from the French Presidency.

"No one's going to bully me!" he says.

Liberals have ALWAYS supported moves for freer trade. Trade spreads economic well-being as well as binding the world closer together in ties of friendship and co-operation. You only have to LOOK at the European Union to see how SUCCESSFUL this policy is – not only have we not had a WAR in absolutely ages, but all the countries of Europe are getting better off.

Look at China too, where freer trade with the West has led to growth in prosperity. Ironically, this has fed into our current problem because now more people in China can afford to eat MEAT, which means there is a need for more grain to feed COWS and SHEEPS and CHICKENS, which all compounds the shortages due to drought and biofuels.

But equally these shortages are driving UP food prices, so farmers should be BETTER OFF even without protectionism.

Higher food prices also make economically viable more projects to recover agricultural land from desertification and encroaching seas. AND it increases the pressure to end the destructive civil wars in Africa that are stopping farmers from farming. But only so long as it is possible for those farmers to get their products to a market to sell them. Hence we need more free trade, not less.

It is all too easy to play to the HOME CROWD, promising to keep people's jobs safe. What is HARDER is actually to explain to them that the only REAL way to keep jobs safe is to be more open to trading fairly and freely with the rest of the world.

Day 2642: France One; England Nil

Wednesday:


A nice slap-up dinner for Mrs the Queen when French President Monsieur Sarcastic [A: Surely he has now become Monsieur So-Cosy?] came along to visit telling us how he wants to be our bestest friends now.

But then Mr Frown gets lost somewhere in the castle.
I believe this is called a Win-Win situation.

PS:

It is no wonder that Mr Frown and M So-Cosy got along so well… after all they are both THATCHERITES, aren't they.

Day 2581: Let's Blame the French!

Saturday


Oh hurrah, just when it looked like the world's economy was going to go to hell in a handcart, along comes the jolly old French to offer up a SCAPEGOAT.

The news that a Rogue Trader has cost top French bank Société General a whopping €5 billion, even better that the bank had been warned in advance, gives the economic incompetents who are running Great Britain and America the chance to point their fingers and say: "THEY were dumping their dodgy deals; THEY'RE to blame!"

Of course, the reality is that it was almost certainly the other way around.

Far from CAUSING the mad selling panic last Monday, Soc Gen were UNLUCKY enough to get caught up in it. Their Trader, Mr Jerome Kerviel, had left them in a sticky position with a number of deals that meant they would have to sell shares at a loss. What would NORMALLY happen, though, is that you could HIDE this by bundling those losing shares up with some NEW deals and roll the whole lot forwards in the hope that eventually you would come clean. Sort of like an endless DOUBLE-or-QUITS bet. Except of course, it can't REALLY be endless. And when a day like last Monday comes along and EVERYTHING is going downwards, suddenly there nowhere left to hide and you have to make the losses become "real" – i.e. cough up the dosh.

So, Société General didn't start the Market's plunge… but they might well have made it a whole lot WORSE because when other people might have stopped trading, they just had to keep on selling and it kept the spiral going.

And yet, and yet… funnily enough, there ARE some people who are treating Mr Kerviel as some sort of HERO – and not just for BOPPING the NOSE of a big institutional bank. The slightly loopy and yet disturbingly CREDIBLE suggestion is that by a DOMINO effect, he may have SAVED THE WORLD! Because he left the bank owing billions, THEY dumped them on the Market, that turned a fall into collapse which in turn panicked the Federal Reserve enough that they actually woke up to the danger inherent in America's poor economic position and THAT is what caused them to cut interest rates so dramatically that it might actually make a difference.

Or it might not, but that is the sort of chain of logic – and by logic I mean whimsical fantasy – that city traders love to cling to in a crisis. And lo, the markets did recover a bit.

Until the next panic!