Baltic Dry Index. 1340
LIR Gold Target by 2019: $30,000. Revised due to QE.
"The secret of life is honesty and fair dealing. If you can fake that, you've got it made."
Groucho Marx
This weekend a time for reflection. Are the Greeks smart enough to dump the Euro? What about the Irish and the Ports? The European Monetary Union is starting to unravel. Below, some European ministers fake some honesty and fair dealing. Across the North Sea and English Channel, tiny Scotland sets out to copy Iceland.
Europe meets to discuss Greece debt restructuring
Senior European ministers were locked in secret discussions with Greece on Friday night that may lead to a restructuring of the embattled nation's mountain of public debt.
By Philip Aldrick, Economics Editor 11:50PM BST 06 May 2011
Finance ministers from Germany, France, the Netherlands and Finland met their Greek counterpart, Giorgos Papaconstantinou, in Luxembourg as part of efforts to draw a line under the eurozone's sovereign debt crisis.
A restructuring of Greek debt, which would see the terms of the loans extended and borrowing rates reduced, is understood to have been central to the talks.
Greece was the first member of the single currency block to fall in May last year, when it accepted a €110bn (£95bn) rescue package. Ireland followed in November with €67.5bn of external help, and Portugal last month agreed in principle to an €80bn deal.
Greece has since had the rate on the emergency loan cut in return for pushing through further austerity. Ireland is also trying to negotiate more favourable terms, while Portugal claims to have secured a better deal than either of the others.
Sources said the negotiations would address all such concerns, from a restructuring of Greek debt to easier terms for Ireland and a final deal for Portugal. The future leadership of European Central Bank (ECB) was also said to be on the agenda, amid speculation that German Chancellor Angela Merkel opposes the widely-fancied Italian head of the Financial Stability Board Mario Draghi taking over from Jean-Claude Trichet in November.
----News of the secret meeting sparked frenzied speculation that Greece was about to exit the euro and reintroduce its own currency, as many analysts have said might be in its best interests. However, the speculation was quickly denied.
The Greek finance ministry described the initial report in Germany newspaper, Spiegel Online, as "completely untrue and ... provocative". "Such articles ... undermine Greece's efforts and those of the eurozone and serve only the interests of speculators," it added.
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Following Thursday’s UK elections, the United Kingdom is headed towards a constitutional crisis. Scottish nationalists swept nearly all before them in Scotland, and the UK’s weak governing coalition now hold just 20 seats in the Scottish Parliament to the SNP’s 69. There are 129 seats in the Scottish Parliament. By constituency it’s even worse. Her Majesty’s UK weak coalition government was reduced to just two English border constituencies, plus the golf course district of Ayr, (Conservative,) plus the 2 northern islands constituencies of Orkney and Shetland (Liberal Democrats.) North of the border Her Majesty’s loyal opposition is the remnant of the old socialist Labour Party, who managed to reduce a double digit poll lead at the start of the campaign into a rout. A rocky time lies ahead for the Union. UK Pounds anyone? Hopefully, in the referendum to come, Scotland won’t vote to become the next Ireland.
“Land of the hill and heather Land of the awful weather. Land where the midges gather- Scotland the Brave"
Anon.
Scotland would be as bust as Iceland if it had been independent
By Jeremy Warner Economics Last updated: May 6th, 2011
Never mind Sean Connery and the ordinary Scottish voter, the Scottish National Party – now basking in the glory of a landslide electoral victory – has always counted some pretty high powered business leaders among its supporters. One of them, Sir George Mathewson, used to be chairman of Royal Bank of Scotland, which until the banking crisis was generally regarded as the finest example of Scottish financial achievement. I’ve not spoken to him for a while, but in the past he was always very much in favour of Scottish independence.
Mathewson’s main argument in favour of separation was actually quite a good one – that it was the only way in which Scots would ever be able to rid themselves of the dependency culture and stand on their own two feet. The process of adjustment would be brutal, he admitted, but ultimately worth the price.
Well maybe, but the fact of the matter is that had Scotland been independent when Royal Bank of Scotland and HBOS, both Scottish registered banks, went under, it would now be more bust that even Ireland and Iceland. As a likely member of the euro, there would also be no obvious path back to salvation. Assuming he had not already been defenestrated in the manner of Brian Cowen, Mr Salmond would by now be begging Westminster to restore the union.
Do the maths. It has cost the UK taxpayer £70bn to recapitalise the Scottish banks – this was no UK banking crisis, but a Scottish one – and the sums needed would undoubtedly have been a great deal larger had not taxpayers from the UK as a whole been standing behind the liabilities. Shared among a population of little more than half the size of London, that’s £14,000 per head.
The idea that had the Scot Nats been in charge, these two banks would have been better regulated, is an interesting theory but also completely fanciful. The Edinburgh financial and political elite is if anything even more defined by cronyism than Dublin’s. Puffed up with its own sense of self importance, the hubris would very probably have been worse still.
But let’s for the moment take leave of the real world and assume the banking crisis never happened. Could Scotland feasibly go it alone? The bottom line is not without taking a huge hit to living standards and/or public services. During the election campaign, the Scottish Labour Party attempted to cost the SNP goal of quitting the UK and came to the conclusion that without major spending cuts and or tax increases, there would be an ongoing structural budget deficit of £14bn a year, equal to around £2,600 per head of population. Bang goes free university tuition and bang goes free prescriptions. And bang goes an awful lot more to boot.
Ah but the Scots have north sea oil, you say. Well yes, but the Labour Party calculation is after taking account of £4bn a year in North Sea tax revenues. Depending on where the line in the sea is drawn, it might be a bit higher than that, but unless you include fields which are unmistakedly in English waters, it’s not going to close the deficit.
More.
It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine.
P.G. Wodehouse.
After almost single handedly creating havoc in the commodities markets by last month suggesting to their clients the top was near and they should exit commodities, yesterday Goldman recanted. Higher prices, after all, lie ahead they now suggest. Any chance the Goldmanites went short before they put out their sell recommendation, and now that prices have fallen, have covered and gone long? We’ll never know of course, and even if they did such actions are not illegal in the ferocious world of commodities trading, where traders routinely sell their granny to make an extra nickel. Still we now know that the Goldmanites created “triple-A” CDOs designed to fail, which the peddled to their mugs while they shorted against them. They can’t help it of course, “God’s work” requires great sacrifices of judgement, taste, and ethic’s.
“Overheard at Goldman Sachs”:
“We assume that you know what you’re doing,
In this ill-advised trade you’re pursuing,
But the opposite bet
That we place on your debt
May eventually hasten your ruin.”
Goldman Sachs says oil price fall is temporary
This week's oil rout is just temporary and prices could surpass recent highs by 2012, according to Goldman Sachs.
By Garry White 6:37PM BST 06 May 2011
"It is important to emphasise that even as oil prices are pulling back from their recent highs, we expect them to return to or surpass the recent highs by next year," Goldman said.
The comments from the investment bank, which warned its clients to sell oil and other commodities last month, halted the five-day slide in crude prices. Brent crude hit $105.15 at one stage on Friday but rallied to $2.46 at $113.26 in afternoon trading, although still down almost 10pc this week.
The bank said the recent fall was prompted by weak macro-economic data and US inventory data – and did not rule out a further limited short-term fall in oil prices if data continued to disappoint.
"We continue to believe that the oil supply-demand fundamentals will tighten further over the course of this year, and likely reach critically tight levels by early next year should Libyan oil supplies remain off the market," Goldman added.
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009.
GI.
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