Wednesday, 5 October 2011

Black is white and up is down

So hang on how does that work then - so Italy has just been downgraded, the most recent British economic growth figure was just revised down from no much to hee haw, a well chunky continental European bank (Dexia) is about to be broken up, part-nationalised and recapitalised and what no, its no looking like Greece will get the latest tranche of the bail out cash it needs to meet its immediate bills (meaning it default time bucko), big French banks appear to be selling off some of the good shit on their balance sheets on the QT to reduce their funding needs/get some cash pronto and there’s now scarey chat about Morgan Stanley, that US investment bank monster – like that’s a few of the things that appear to be happening right now and yet the FTSE 100 share price index ended today on a relative high - Whit?

Ahhh, hang on I think I’ve got it - so yeah, sure, whereas just one or two of the above occurring between 2001 and 2007 would have prompted all sorts of shit, now (a) the global (ahem, the Western) economy has been staggering from one fuck up to the next on a daily basis for years now, who gives a “shock fatigue”. Plus, (b) shit has finally got so fucked up the Euro-zone leaders will have to sort it out in a the more bad news the better type style.

Which is cool I guess and explains the uptick in share prices except for a few very obvious points:

1) Dexia passed the recent European bank stress tests e.g. there is no methodology in place at the moment for identifying in advance if a bank is a potential basket case – so by definition then, every bank could be a basket case ………aarrrrgggggghhhhhh!!!!!!!
2) EU Bureaucrats live a life of splendid isolation from reality. There is not that much pressure on them to sort shit out.
3) The Euro-zone is a big sack of cats and as such an utter nightmare to sort out. Read something today about how Malta’s approval was still needed for something and yer like Malta? Aw piss fucking off. And yet by the power of Castle Greyskull (and EU legislation), that’s exactly the kind of rigmarole that needs to be gone through before anything gets settled. And sorting it will take months as opposed to teh seconsd it can take for confidence in specific instutitions to evaporate.
4) The private sector, well actually the financial sector is essentially vaguely more positive because its now assuming the public sector is going to sort shit out – except hang on a mo, like how dat work? So we need private sector this, that and the other in the good times, but when it comes down to it, its government (well Germany really) that’s needed to sort shit out when the private sector fucks up? Hmm, there’s a cheeky wee double standard there.

The other thing of course is that the now hoped for Eurozone response is essentially that the great and the good will finally cotton on, cave in and accept that there needs to be a big, new means of putting taxpayers on the hook for life for bank debts/mistakes/fuck-ups so the financiers will stay happy. Yeah, ordinary, tax paying punters Nil, bankers 14 (at the very least).

Sorry, did I say that? What I meant to say is we can expect to see a co-ordinated round of bank recapitalisations with this strategy a sensible means of resolving the current volatility and shoring up confidence. More importantly, the instigation of a programme of targetted public sector investments in the stability and credibility of specific, national financial systems and banks will pay real dividends to taxpayers in the medium to long term.