Death Star Economics



More bank scandals, more economic trauma

Wherever you look, today’s favorite scandal is still Barclays, mostly because CEO Bob Diamond said he would reveal “potentially embarrassing details about Barclays’ dealings with regulators if he comes under fire at a parliamentary hearing on Wednesday.” I’m thinking party pictures and strippers. Next thing you know, Diamond quits, effective immediately. Bloomberg’s Nick Dunbar already dubbed him the Republican candidate for 2016.

But speaking of manipulative banks… JP Morgan has been subpoenaed twice in the past couple of weeks because they may or may not have inflated electricity prices in the USread article

Since yesterday’s atrociously bad ISM data, showing the rapid decline of the American industrial manufacturing sector, today continues in the same fashion. British construction activity fell to its lowest levels since December 2009, aka that really bad year, last month. Overall, the Global Manufacturing PMI has sunk to a three-year low, with manufacturing output falling in the US, UK, eurozone, China and Japan in June, says Markit. More QE in the US and UK can be expected shortly. Not even Brazil is doing well anymore, after a better than expected first quarter of the year, forecasts aren’t looking great.

Europe is not doing much otherwise, which I guess is a good sign, but here and there the possibilities of referenda on the EU membership are getting more real. In the Netherlands the situation is very political and contingent on voter support of extremist parties, such as Geert Wilders’s PVV, which presented its campaign program including a separation from the EU today, leading two of its parliamentarians to quit. read Dutch article read English article

In the case of the UK, the idea of a referendum is less surprising, because they like to pretend that they knew the European Union was a bad idea from the start. The prime minister’s opinion is a little muddled in his awful attempt of being diplomatic, but I still have a bit of a Cameron-appreciation-moment anyway, as he said

I don’t believe leaving the EU would be best for Britain. Nor do I believe that voting to preserve the exact status quo would be right either.”

Naturally, this only adds on to the constant back-and-forth in his agenda.

Also, Microsoft has admitted defeat in the online advertising battle with Google. At least sort of. In 2007, Microsoft bought AQuantive for $6.3bn, allegedly its most expensive acquisition. Now, the unit is being written down by $6.2bn. Since the acquisition, Microsoft’s internet business is meant to have recorded operating losses of $9bn. Ouch.

So long, and for the AmUricans, happy 4th of July.


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Suing countries

Yesterday, the ECB was all the rage, because it had said to stop supplying four Greek banks with liquidity. Those banks now have to turn to the Bank of Greece, where they could access liquidity at a much higher price. Alphaville explainshow it actually works. So really, the ECB is playing the role of the parent who lets you suffer because it knows what’s best for you: cutting the money supply for the ‘unnamed four’ is apparently just the ECB’s way of nudging Greece towards a restructuring of their banksGreeks withdrew €1.2bn from their bank accounts on Monday and Tuesday, which sounds a lot more than ‘0.75% of all deposits‘. As for the June elections, the leftist parties are set to win – again. Maybe this time they can actually form a government. read article

In France, Francois Hollande has chosen his cabinet. As neither he, nor his appointed prime minister, have ever held a ministerial office before, they got a couple of people with actual experience around. Well done. Unfortunately for the EU and Angela Merkel, the choice of foreign minister fell on Laurent Fabius, who campaigned against the EU constitution in 2005. “Potentially controversial,” says the FT, “potentially disruptive to getting out of the mess,” says I. read article

As of this morning, Spain is confirmed to have re-entered a recession in Q1 of 2012, resulting in Moody’s announcement to downgrade 21 Spanish banks within the next 12 hours. This is following the downgrade of 26 Italian banks on Monday night. read article

Meanwhile in the Netherlands… Geert Wilders is so worried about the successful ratification of the European Stability Mechanism (currently pushed back in virtually every country, due to panic), that he is planning to sue the Dutch state to postpone the vote. His case: the current caretaker government is not elected and shouldn’t get to have a say in anything that big. read Dutch article

Speaking of law suits against countries: Repsol is suing Argentina – yes, the country. Or in other words, a Spanish oil company is suing a Latin American government in a New York court for nationalizing energy company YPF. read article

McSweeney’s Ben Greenman helps us to grasp the number ‘two billion’ in a Statement from the chairman regarding recent losses.

Also, potentially due to certain recent headlines, there is a JPMorgan elevator gossip Twitter account now, and no, I don’t expect it to be as good as the GS original.

So long.

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Protectionism vs. globalization, round 65

Recap of yesterday’s May Day protests:

Spain saw more than 80 protests, most of which were motivated by the country’s ridiculous unemployment figures. InGermanymore than 400,000 unionists went on the streets showing their discontent with the government’s austerity measures. Obviously, there were demonstrations in Greece and France as well, but since that’s pretty much the norm now, it doesn’t seem worth mentioning. read article

In the US, most expected Occupy protests were peaceful, except for an “anarchist faction.” (Also, great picture, Reuters…)

A very fitting comment from an FT reporter on the interweb:

A thought: shouldn’t the “austerity vs growth” debate in Europe have been settled before austerity was hardwired into EU law?

In the NetherlandsGeert Wilders, leader of the far-right freedom party, has announced that his campaign for the general elections in September will advocate a Dutch exit from the EU. In an interview with new broadcaster NOS, he said

“We can be a member of the European Economic Area just as Norwayor of the European Free Trade Association, as Switzerland.”

This is really upsetting for a whole truckload of reasons. First and foremost, the only thing that keeps Europe from [continuously] falling into pieces is the interconnectedness of its countries. Arguably, a contract that forces nations into a union is worth more than alliances of independent parties. What is more, it’s like we’ve left the peak of globalization and the appreciation thereof far behind us and all that’s left is Occupy, a broken EU and protectionist policies.

On Project Syndicate, former LSE director Howard Davies, argues why protectionism is bad.

Tonight will see the last stand [off] between Nicolas Sarkozy and Francois Hollande. The 2.5hr debate, which I expect to be filled with contradictions and anti-European statements and which the French expect to be watched by 20 million people.

Otherwise, Germany has added a bureaucratic layer for oil companies by forcing operators Germany’s 14,700 gas stations to register their purchases and prices to harmonize [consumer] prices across the country. Needless to say, the industry is little amused. Also, now that it’s May, it’s time to have a look at how the world was doing in April. The answer is pretty consistently ‘shit’… read article

So long.

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Right-wing Europe is getting scary

What you might have missed on Friday:

Christine Lagarde sat around with the Bloomberg crew proclaiming that Spain, indeed, does not need a bailout and that everybody should stop making fun of Rajoy for saying so. Morgan Stanley, more or less simultaneously, said Portugal would need a second bailout in September. Potentially confusing. Bloomberg marked Earth Day (22 April) with a tutorial in How To Destroy The Planet 101, accounting for everything from space viruses to a death star to supervolcanos. read article

Over the weekend, Europe went crazy [and it’s not over yet] and the IMF agreed to boost its funds to $430bnread article

The first round of French elections happened on Sunday, with Hollande winning 28.63% of the votes and far-right daddy’s girl Marine LePen securing a scary 18.5%. Round number two will be held on 6 May; Hollande is still expected to win. Across the border in Germany, voices are getting loud that France could face deep painful cuts of EU funds if it doesn’t stay committed to the necessary budget cuts. But more importantly, what’s the next Merkozy? More than direction or leadership (or money), this continent needs a new acronym! read article

Otherwise, the Netherlands saw some significant cracks running through its current administration on Saturday, which broke up the government officially this morning – Prime Minister Mark Rutte is expected to hand in his resignation to the queen at a meeting later today. He has been in office since October 2010. New elections will probably be scheduled for September. This will be the 5th time the country holds general elections since 2002.

The background story: Rutte’s party (VVD) needed the support of Geert Wilders’ freedom party (PVV) to push budget cuts worth around €15bn through parliament to make the budget target. Well, it didn’t happen and thus the dominoes started falling. read article

And while all that is going down, the Czech Republic will see some political changes as well, with the coalition government decided to split up, effective from this week Friday. Either, there will be a new coalitionor elections will have to be held in June. Over the weekend, the country saw the largest protest since the late 80saimed against fiscal austerity and budget cutsread article

Overall, it’s a lovely day to be European…

So long.

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