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A very interesting story, or is/was it?

By ATWadmin On June 20th, 2010 at 4:58 pm

 

As many of you know, I have dabbled in the past with works of fiction, so perhaps you can understand when I tell you that I really respect both good writing, a good plot, and a sound basis in reality.

Courtesy of Pajamas Media &  James C. Bennett

The PIIGs who fell to Earth

Just past the bank closing time of 4 pm on Friday, passers-by at a number of secluded locations throughout Germany could hear the rumble of diesel engines coming to life, as rows of large unmarked trucks escorted by security vehicles began moving out onto the public highways. Roads were busy coming out from the city centers as holiday-makers were anxious to enjoy one of the last weekends of summery weather. Traffic was light coming into town, so the long convoys had little trouble moving quickly.  A few outbound motorists gazed with curiosity at the sight, but most paid little heed.

The convoys reached their destinations — the rear entrances of most of the major bank locations throughout the Bundesrepublik. The security vehicles, blue lights flashing, blocked off the ends of the streets, and uniformed men began unloading one trolley-load after another of boxes, as armed guards scanned the streets. Within an hour the trucks were empty, and the supervisors spoke briefly into their mobiles. Then the men began extracting other boxes, filling the trucks again. Another hour, and they were gone.

In her office in Berlin, Angela Merkel waited by her phone.  A small group of advisors waited with her, unusually quiet.  Their eyes moved back and forth between the clock and the telephones. Finally, a ring shatters the silence. The defense minister picks it up. He listens, nods, barks an acknowledgement into the phone, and hangs it up. He turns to the chancellor.

Der Rubikon ist gekreuzt worden.

She nods. She turns to the foreign minister.

Time for the first call, then.

The aide dials a very private number. It is answered. He hands the handset to the chancellor.

Nicholas. This is Angela. I am very sorry to have to tell you this, under such circumstances. But you will understand why it must be like this. And I wanted to tell you first.

She relayed her news.

The aides could hear the scream of pure anger as Merkel held the phone away from her ear. The tirade continued for about half a minute. Then there was complete silence. She put the phone back to her ear.

My dear Nicholas, you can hardly complain. After all, you threatened me with the same thing back in May. You see, when you did that, you made explicit what has been the case for some time now. You have placed us in the Prisoner’s Dilemma. You are familiar with that?

Of course. We French know philosophy. The first prisoner who cooperates, gets the deal. In order to avoid having one prisoner betray the others, they must all have confidence that none will cooperate.

And among the Euroland nations with the ability to have a strong currency, the situation is the same. If any one suspects that another is about to leave, the only thing to do is leave first. When you threatened to leave, we realized that was the position in which we had been put. So we had to make our preparations.

Sarkozy spoke in a calm, level voice.

But I was not serious. It was a bargaining position.

Perhaps. But the Prisoner’s Dilemma requires certainly, not probability.

Sarkozy was silent for a long moment.

This is irrevocable? There is no action on our part that could stop this from happening?

No. We did not call to bargain. The time for that is past. The position of German bonds has begun to erode. We decided we had to act.

Very well. When will the public announcement be made?

At 11:50 tonight. The decree takes effect at midnight. That will give some time for adjustments to be made before the markets open.  And of course New York will be closed Monday, as it is a holiday there. We will close Frankfurt as well for the day; you may want to close the Bourse. I imagine Cameron will close the London markets as well.

Ah, who knows what he will do. Who will you call next?

The other major Eurozone leaders, except of course for the PIIGS. It is better that they have no warning.

Of course. What about Obama?

Just before midnight. I see no reason why he should have much warning. He might actually try to do something about it. Then I will call the Asians, too — Japan, and the Chinese.

What about Von Rompuy?

Who? Oh yes. Why would I want to call him?

I see your point. Well, I am sorry that it has come to this. Of course, we must follow your lead, and we have little time to make the practical arrangements. You will excuse me, I need to make some calls.

Of course. I am sure you will need to summon your Cabinet.

Actually, New York is still open. If I call my broker I can get a few short contracts placed before they close.

At 11:45 that evening, Merkel hangs up on Barack Obama, pleading urgent state business. All of the leaders they felt obliged to pre-warn had been contacted,  and a variety of conversations, of various degrees of unpleasantness, had been concluded. All that remained was the public statement. Both a press release and a video had been prepared for release to the Web and to traditional media. Several television monitors were turned on, tuned to the various cable news channels. A few minutes after midnight, first one and then all channels featured stunned presenters reading in disbelief, while glaring banners crawled across the screens.  Ah, one was about to run her video. They turned up the volume.

…we now bring you the video released by the German chancellor.

“My fellow German citizens, fellow Europeans, and fellow citizens of the planet.  The continuing financial crisis has forced the German Federal Republic, acting on a consensus of all major parties, to take the following emergency measures. Effective at 2400 hours on September 3rd, which is to say midnight tonight, the German Federal Republic withdraws from its participation in the European Monetary Union and from its membership in the European Central Bank., effective immediately. The euro is no longer the official currency of the German Federal Republic. We are introducing, again effective immediately, a new national currency which will be called the New Deutschmark. The New Deutschmark will be valued initially at a rate of one NDM for one euro, but of course it will be allowed to float freely henceforth on international money markets. All debts and contracts denominated in euros will be deemed to be denominated in NDM under German law; all bank accounts in Germany denominated in euros will be automatically converted to NDM at a one-to-one rate. For the next thirty days, all euro notes bearing serial numbers denoting issuance in Germany can be exchanged for NDM notes at a one-to-one ratio; all other euro notes will be exchanged at the prevailing international rate. We have distributed large supplies of the new NDM notes to most major banks, and they will be available for withdrawal no later than Tuesday, and perhaps some before. As you can see, they are the same size and color as their euro equivalents, so that they may be used in vending machines.

“Of course, as Germany will no longer participate in the European Central Bank, staring immediately, our members of its Board will withdraw. It is welcome to remain in Frankfurt, but we understand that it may choose to relocate, in which it will receive every assistance from us. We will, of course, expect the prompt return of our contribution to its reserves.

“This news undoubtedly comes as a surprise to most.  You must understand that it was not possible to announce this news in advance. If we had permitted any period, no matter how short, to remain between the announcement that we would withdraw from EMU, and the actual withdrawal, speculators would drive down the value of the euro and all German assets denominated in that currency would lose substantial value. There is no good reason why such losses should be suffered. Furthermore, it is a fact that another major Eurozone nation had threatened a withdrawal from EMU in the course of a negotiation a few months ago.  This was alarming to us, as the first nation to leave will suffer the least damage. We could not take the chance that another would be first to leave, exposing us to more risk.

“We of course remain firm in our membership of the European Union and fully committed to the European project. Other EU member nations, including the United Kingdom, Denmark, and Sweden have participated fully in the EU without having been part of the euro experiment, and we, like them, will support EMU from the outside. We believe this action is the best available solution to the current crisis, as without our participation, and possibly without that of several other nations, the remaining Eurozone members will find a fiscal policy appropriate to their economic needs, and the currency’s value on the international market will serve as a boost to their export industries and tourism trade, easing economic adjustment. As the rates adjust, their existing international debt, which will remain denominated in Euros, will prove easier and easier to service and repay without external assistance.

“Thank you, and good night.”

The announcer, still appearing stunned, looked down at his desk.

“We will switch to our financial correspondent momentarily to discuss this startling  development, but I am now told that we will first cut to Paris, where President Sarkozy has scheduled a last-minute press conference as well.”

At the studio, Sarkozy endured a last powdering from the makeup artist as an aide handed him a sheet of paper. He looked confusedly at the president.

Monsieur le Président, c’est le fin, non?

 

Sarkozy stared back, calmly.

Enfin.

HAS THE SKY FALLEN YET?

By ATWadmin On May 24th, 2010 at 11:49 am

So the Chancellor has lifted the foot from the accelorator of government spending for the briefest moment. Predictably, the MSM talks of “cuts” as if the sky is about to fall on legions of destitute nurses booted into the gutter.

Let’s be clear, Gideon Osborne (in future, announcements in the Commons please) has merely stopped borrowing for a couple of weeks. In the last year the state borrowed £145.3 billion simply to preserve the scale of Brown’s government, now bloated with more than 6 million people. Until the next announcement, Osborne means to keep borrowing on a catastrophic scale, but by just £6 billion less than the previous bunch. He means to reduce borrowing over five years, but as for the structural debt which will be inflated by many times, there’s not a peep.

Today must be just a start. This £6 billion is the proverbial rounding error when set against total spending. The Chancellor must stand in the Commons at the same time every month and announce greater reductions in borrowing and spending than this. The axe must become bigger and sharper and swung about freely regardless of the fake outrage from media which would be dead without the state to prop them up.

Where should the cuts be? It doesn’t matter, just tell all departments their budgets are shrinking month on month, year on year. Asking for priorities ahead of reductions means you’ll long be waiting since every spending item looks necessary. Just allocate less money and the apparatchiks inside each department will prioritise immediately.

CONFIRMING THEY MAKE IT UP AS THEY GO ALONG …

By ATWadmin On November 2nd, 2009 at 6:51 pm

Arse, meet elbow:

21 OCTOBER 2009Gordon Brown has dismissed a call by Bank of England boss Mervyn King to order a break-up of Britain’s banks.

31 OCTOBER 2009Alistair Darling, the Chancellor, will confirm over the next few days that Royal Bank of Scotland (RBS) and Lloyds Banking Group, both of which are majority-owned by the taxpayer, will be split up.

Why Does Government Hate The Low Paid?

By ATWadmin On September 30th, 2009 at 3:56 pm

WHO stands to benefit?

Tips left in bars and restaurants must not be counted towards workers’ wages, the Government has ruled. The change, which comes into effect tomorrow, makes it illegal for businesses to use gratuities to boost staff pay to the minimum wage.

As always, the benefit goes to larger companies who wish to impose higher costs on smaller competitors and so put them out of business. Such has been the driving force of almost all business regulation. What, you don’t think Big Business Inc is in favour of free markets, do you?

Who stands to lose out? Anyone willing to work for less than the minimum wage since their competitive edge is wiped out, and employers must choose to lose money in the increased costs of keeping these workers employed, or to cut hours or jobs to maintain lower costs.

Losing out also will be those who aren’t employed at all because small employers cannot afford the increased costs. Americans found that FDR’s forced increase in labour costs when there was a surplus of labour in the 1930s was disastrous. 

Says Mandelson:

“When I leave a tip I don’t expect it to be used to make up the minimum wage. I want it to go to the person who has served me as a thank you for their service – this is a basic issue of fairness.”

Says the man whose government then promptly taxes that minimum wage under the violence of law.

Bubble? What bubble?

By ATWadmin On July 24th, 2009 at 4:22 pm

The Chairman of the Fedzilla ….

 … still the Chairman despite being precisely wrong again and again.

The Wider (and Deeper) Economy

By ATWadmin On May 25th, 2009 at 7:59 am

 

In amongst the many commentators predicting and prophesying doom, gloom and all stages inbetween, probaly the most apt was the ‘recession indicator’ which wasn’t shaped as a ‘W’, nor as a ‘V’, but as a ‘√’ sign, which for the mathematically literate amongst us, is a Root Sign.

 

However, in this particular case, it was described as A Moat-shaped recession!

THE KING HAS LOST HIS CROWN…

By ATWadmin On February 11th, 2009 at 9:26 pm

In a statement of the bleeding obvious the governor of the Bank of England, Mervyn King, has warned that the UK is “in a deep recession” in 2009 and said rate cuts may no longer work.

In its latest forecast for economic growth and inflation, the Bank says that the UK economy will decline sharply in the first half of the year. And it says that there is a significant risk that the recession will be even longer and deeper than expected. The Bank forecasts the economy will shrink by 4% from mid-2008 to mid-2009.

So, what is unswerving Mervyn going to do? Simple, he will print money – qualitative easing in posh econo-speak. Yes, that’s worked REAL WELL for Mugabe, hasn’t it? King has this all wrong. Destroying the incentives for citizens to save by essentially erasing interest rates is wrong-headed. Keeping tax rates high on business is wrong-headed but there is no relief in sight there. Propping up inefficient business to stop necessary market corrections is also wrong-headed. King has been behind the curve-ball all along on this and he is STILL behind it.  The Bank of England has not shown any independence of thought and is exposed as a fraud – a catspaw for Government.

CAPPING ENTERPRISE…OR BURYING IT?

By ATWadmin On February 7th, 2009 at 6:56 pm

So, it is reported that British bankers could be hit by Obama-style caps on their salaries and bonuses as Gordon Brown attempts to quell a furious backlash against City greed.

UK officials said yesterday they may follow the lead of President Barack Obama by imposing strict ceilings on staff remuneration at all banks that benefit from taxpayer aid. The capping could be coupled with provisions forcing firms to defer awards or make the majority of payouts in shares rather than cash.

I oppose this for several reasons.

1. For starters, this sort of socialism-lite argument will be taken and extended to the private sector if it is tolerated in the semi-State sector amd that would be absolutely intolerable and a direct cap on enterprise. What is wrong with cash reward, exactly?

2. Unless the State OWNS the banks as a majority share-holder from whence does it get the right to impose such a draconian decree?

3. Genuine talent will flee such a punitive regime, leaving these sem-state banks full of third raters.

Now THAT said, I fully agree that there have been more than a few – at all levels – within our banking system who have performed abysmally from a commercial perspective. However, they have terms and conditions of employment which, just as in the mighty Public sector, must be honoured to the letter of the law. A jihad against bankers achieves little.Personally, I would sack them all.

But shall we punish the regulators who presided over this debacle? How about the politicians who boasted of ending the years of boom and bust? I was also wondering if those who have benefited financialy from the share performance of these banks in recent years would like to hand their profits back? That would, of course, include pension funds. I was wondering if those people who made profit buying and selling property based on loans obtained from these banks would also care to hand back their cash?

I am all for ensuring that the consumer gets best value for money and is not ripped off. But to try and suggest that ONLY bankers carry reponsibility for this is a joke. ALL who got themselves carried away in the great debt balloon need only look in a mirror to see where the problem started.

A REDUNDANT POLICY…

By ATWadmin On February 6th, 2009 at 8:52 am

So, let’s review the latest government policy.

“The minimum amount of money that employers must pay staff they make redundant is set to be increased by the Government, The Independent has learnt. In another attempt to ease the pain of those worst affected by the recession, ministers have launched a review of the minimum payments to which people are entitled by law when they lose their job.”

So, a company is struggling to survive and is faced with the nightmare that it has to make some employees redundant. The new great wheeze is to FORCE those struggling employers with even greater financial burden! Doesn’t government realise that this will lead to even more people becoming unemployed as more companies go under trying to finance the fiscal fantasies of politicians seeking to curry favour with an electorate they have already betrayed?

LITTLE INTEREST IN INTEREST CUTS?

By ATWadmin On February 5th, 2009 at 8:24 am

It is being speculated that the Bank of England will once again CUT interest rates today, by 0.5%, in a vain attempt to help the UK climb out of the recession (or is that “a depression”, Gordon?). Cutting interest rates will soon cease to be weapon for this government as we approach 0% so what will these one-club golfers do then?

This policy is plain stupid. For starters, many lenders will not pass all of this latest putative cut on to mortage holders and worse still it really punishes those who are savers. Remember that this country has six times as many savers as borrowers but nonetheless it is they who are being punished by government policy as their income from savings also now approaches zero. It seems to be that the reckless, the foolish, the greedy are the people that government most cares about whilst the frugal, the cautious, the modest are those that take the hit.

Funny old world.