The Financialist:

27th September 2012

Quote of the day

Vince Cable, "For too long the mirage of growth based on property speculation and financial gambling has hidden the harder virtues of making things productively." (New Statesman)

Chart of the day


The search for safe assets has turned out to be very costly – Barclays. (FT Alphaville)


£25billion wiped off the FTSE 100 as Spain edges closer to bailout. (Daily Mail)

Do agriculture subsidies explain the resilient performance of the sterling? (Seeking Alpha)


Policymakers in disarray as world economy dives again. (Fundweb)

And so the search for green shoots of recovery continues into the autumn. (Guardian)

Why it isn't always true to state that an increase in tax rates always increases revenue. (Adam Smith Institute)


Fixed-income investors need the conviction to take contrarian bets ahead of economic turning point. (City Wire)

Has National Grid become the perfect stock? (Motley Fool)

What can teenage behaviour teach us about investing in the stock market? (Mindful Money)

Institutional investors seek alternative investments to improve performance. (Hedge Week)


Previously on The Financialist:

'Emerging market investment: looking beyond the BRICS'

'15 high-risk shares that could rise fast'

'Facebook is at the beginning of what could be a monster comeback'

The Financialist is a curated blog that helps you make sense of the financial news.

The Financialist

21 thoughts on “The Financialist:”

  1. Mike from Enfield says:

    Hi Shaun,
    Another cracker for the lexicon there: “Rome was flattering its accounts”, meaning fraud and theft on a grand scale. Better still, ‘Rome’ did it so nobody was to blame!

    1. Anonymous says:

      Hi Mike

      It read/sounded like something done by one of the past Roman Emperors did it not? Nero might be appropriate…

  2. Anonymous says:

    Hi Shaun,

    The malaise comes from a rotten political system where the politicians simply are not working for the Italian voters. What does a 76 year old oligarch care about a huge national debt bequeathed to Italy’s younger generations ? Given the mediaset mess and Rubygate, I’m surprised that the Italians aren’t forcefully calling for change.

    It can be done and done peacefully. In Sofia they are making their voices heard and I hope they can achieve a meaningful improvement.

    1. forbin says:

      Hello ExpatinBG

      I get the same feeling from the British Politicos ! (not working for us )

      Its the peasant lament – if we change things they will get worse – out of the frying pan into the fire

      but it will get worse either way – corruption rots from the inside


      1. Anonymous says:

        Hi Forbin

        The British first past the post system creates too many safe seats and disenfranchises many voters. British democracy is failing when a party with 35% of the vote can get a commons majority

        Democracy is about people power making the politicians work for the people. If the people are asleep, politicians will abuse their positions. If you want change, you’ve got to vote the crooks out or get the people out on the streets demanding change – and that hasn’t happened since the poll tax riots.

        1. forbin says:

          althought Shaun steers away from politics I would favour a voting system that accounts for those who do not vote – say a “none of the above” box !

          if that gets the majority in any constituency , then the candidates must be replaced with new candidates and the vote retaken until someone is elected

          I’d also loosen the rules for the benchmarks to be a candidates , like reducing the number of signatures needed , although being mad and a convicted criminal I ‘d keep ( although some would argue the current ones are “criminal” ! )

          its a thought


      2. Anonymous says:

        ….or maybe like a fish it rots from the head

  3. Andy Zarse says:

    Hi Shaun, I seem to remember you discussing Banko MPS before and wondering if other Italian banks had other naughty derivative contracts hidden away from prying eyes…

    It might be something to keep an eye on. I have long felt the Euro Crisis will need some sort of external actor to bring about “the end”. IMO it’s likely to be a “shock” such as this, especially when combined with things such as rising Gilt yields etc that lead to ultimate Euro-meltdown…

    1. Anonymous says:

      Hi Andy

      Yes I would not be surprised to discover that other Italian banks have issues in this area. However to be fair I think that such problems are widespread beyond the Italian borders and include the UK too. I simply have no faith in the accounts presented to us.

      Also as the Irish are discovering with the Anglo tapes scandal banking crises are an example of a gift which keeps on giving!

      1. Andy Zarse says:

        Some gift!

  4. pavlaki says:

    Shaun, Why am I not surprised? It is clear now that a number of countries fiddled their accounts so that they could join the Euro and I suspect are still fiddling them yet to avoid the truth coming out. It is why I ultimately believe the Euro is doomed. On one hand you have fiscal criteria that were conveniently achieved (and never audited by the ECB) meaning that the economic fundamentals of the Euro zone are very shaky indeed and on the other hand there is the horrendous suffering of the common folk as attempts are made to try to correct the imbalance. Something has to give. One observation I will make however, is that unlike the economic gloom that pervades Greece, Portugal, Ireland and Spain the impression I get when I visit Italy is that it is a fairly vibrant economy. The numbers don’t appear to support this but I sense that there is a difference.

    1. Rods says:

      The French never seem to learn as the Euro is essentially a repeat of the the 19th century LMU (Latin Monetary Union). This was setup by the French in 1865 after losing European influence due to the defeat of Napoleon and came into being in 1866 to try and gain European currency hegemony. This tied European currencies together by their different units of coinage having the same percentage of gold and silver. The initial countries were France, Belgium, Italy and Switzerland. They were later joined in 1868 by Spain and Greece and in 1869 by Romania, Bulgaria, Venezuela, Serbia and San Marino. The aim was for units of currency to have the same value, so they could be accepted in cross border trading and then converted to the same amount of a local currency.

      There were problems where there was no central controlling body which meant that each currency was run for the benefit of that country and many countries fiddled the system to a lesser or greater extent by putting less gold and silver into the coins than they were officially meant to.

      Italy was the first to do this with coins issued by the Holy See and they were recognised as debased and not accepted by French or Swiss banks and the Papal states were ejected from the union.

      This blatant cheating got so bad with one country that they were expelled. Yes, in 1908, Greece again, nothing seems to change! Although, they were readmitted in 1910!

      In 1927 the system collapsed.

      All of these flaws we can see with the Euro, with the same suspects Italy and Greece having a history of currency cheating!

      What is interesting is the length of time the system ran. With the political will behind the Euro, will it run as long until it collapses? History I think shows that economics always wins over politics. The USSR being a recent example and lets not forget Herbert Stein and his law: “If something isn’t sustainable, it won’t”

      A lesson I think I have learnt from the last few years is that a countries economic momentum and the frantic use by politicians of holed buckets as they try every trick in the book to keep the countries or countries economies from sinking is that the Euro countries and to a lesser extent all of Western Europe are going to get much poorer and indebted before the system eventually collapses.

      Another lesson is that it is very difficult for an impoverished country to claw their way back, without in demand natural resources as many East European former Communist countries have found.

      1. forbin says:

        Hello Rods,

        It always amazes me that no one in main stream “knows” about this little bit of history…..

        or just blatantly ignores it!


      2. pavlaki says:

        Yes we tend to forget about that experiment although it was actually done to facilitate trade which is a better reason than the political rationale of the Euro. At least the LMU had a common foundation in the value of silver and gold without all sorts of joining criteria that can be manipulated. It was however fiddling that caused it’s downfall – which is maybe what will cause the Euro’s demise.

      3. Anonymous says:

        Hi Rods

        Thanks for the history reminder and I have to confess I had a wry smile that the literal debasement was started in the name of the Holy See! Times may change but this principle seems something of a constant as I note that the new Pope has launched an enquiry into the Vatican Bank tonight…..

    2. Anonymous says:

      Italy still seems to have more viable exports more than Portugal and considerably more than Greece. My supermarket is stuffed with Italian foods for example.

  5. Justathought says:

    Hi Shaun,

    Well, well, well… El Senior Draghi again…How clever is he, isn’t it? Involved with Greece, with Italy …Doesn’t it augur greatly for the Eurozone, does it? (Otto Von Bismarck while precursor of the modern wealth fare state, Nazi before time must probably laugh in his grave for seeing the actual state of affairs…). The Italian unfolding, another drop into this vast ocean of corruption, failed policies, lack of visions, lack of political courage, responsibilities and accountabilities…

    Western world, we have been warned since the 1970’s with the first petroleum crisis… As “democratic, free people” what have we done??? (Of course easy to attract bees with honey than vinegar… but there is no free lunch…time to pass at the till…).

  6. James says:

    So, Shaun, let me get this straight:
    1. The Italians lied to get into the Euro
    2. The Greeks lied to get into the Euro
    3. The Irish bankers lied to get their bail-out
    4. No-one is allowed to vote on referendum on the EU
    5. The ECB is now run by the guy in charge of getting Italy into the Euro
    6. The banks have made tons of money over these frauds
    7. Mme Lagarde is an ex-banker now heading the IMF
    8. The new governor of the bank of England was at the vampire squid
    9. meanwhile, Cyprus is bust, youth unemplotment is at extraordinary levels in southern Europe
    And yet:
    1. No-one has gone to gaol
    2. The politicians are determined to keep the Euro at all costs.
    Something has gone badly wrong with democracy and politics…

    1. forbin says:

      who woulda thunk it 😉


    2. Anonymous says:

      Hi James

      I can add one other which is that there are now also allegations that the French used the pension fund of France Telecom to help manipulate its numbers too for Euro entry. Will it soon be everyone?

      Also I am again reminded of that great quote from Matt Taibbi in 2009 one more time.

      “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

      Yet as you say no-one is apparently ever responsible.

    3. Anonymous says:

      As I read it(?) having fixed Italy’s entry with derivatives, the guy concerned moved to Goldman Sachs where he
      similarly fixed Greece’s entry. It is hard to resist the idea that the euro was just seen as a new way to fudge access to long term credit lines by politicians.

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