Cyprus — Things Get Worse

The saga of the Cyprus banks does not get any better.  Last night the President, Nicos Anastasiades told us that his country had come "a breath away from economic collapse."  He did not explain exactly how he is defining economic collapse?  But we are told that the banks will remain closed until Thursday — ie for two weeks — unless they extend this again to an even later date.  This should give the government plenty of time to make up their collective mind about how much bail out money they will need to steal from bond holders and those depositors with more than €100,000 sitting in a Cyprus bank.  What condition are a country's finances in when the government needs to close the banks for two weeks or so while plundering the accounts of depositors in order to grab as much money as they need to finance government debts.  Is this but "a breath away from economic collapse"?  They still have not fully detailed what restrictions they will impose to stop everybody moving their money to somewhere safer when the banks are finally allowed to re-open.  Many governments are incompetent, some are corrupt but few take these qualities to the point of a criminal confiscation of their citizens' money.  And it seems that the idiotic incompetents in Brussels seem to think that the Cyprus model is one to be followed in future bail outs — which will come along sooner or later, as sure as eggs are eggs.  

The euro is a currency in a total mess and exists now only to provide Germany — the Euro-Banker — with a cheap currency to subsidize its exports — by some 30% perhaps. 

What next for this sad soap opera?

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When Is A Nation Bankrupt?

What does the world really think about the euro?  This morning it is announced that Cyprus has come to an agreement with the EU, the European Central Bank and the IMF in Brussels that will provide a bail out for that blighted country.  But what has actually happened?  The EU will provide a €10 billion bail out while the Cyprus government contributes €6 biilion by robbing the deposits in the island's banks.  The second largest bank — Laiki Bank — will be progressively shut down and bond holders and those deposit holders with more than €100,000 on deposit will suffer big losses — perhaps 40% or more of their money.  Under the agreement all deposits of less than €100,000  will be secured — which I suppose does at least abide by one fundamental principal of banking; that the deposits of ordinary people are protected.  There is little else of merit in this deal, which is fundamentally wrong.  It seems that the bankers and politicians are determined to destroy the Cyprus banking system and its dodgy off-shore status. Many of the larger deposits are linked to Russia and money laudering.  If this is true the EU, the ECB and the IMF should have instructed the Cyprus government ages ago to divest themselves of these crooked foreign investments.  Cyprus has been running an over-sized banking system — closely tied to Greece — for years and paid high interest rates that ultimately would become unsustainable.

The Laiki Bank will be split into "good" and "bad" banks — where have we seen this before?  The good assets eventually will be merged into Bank of Cyprus.  Presumably the bad bank bits will be written off — the bond holders and the large depositers?  Large depositers in the Bank of Cyprus - the island's biggest bank - will have to contribute a substantial sum — to be resolved in the near future.  

The Chairman of the Cyprus Parliament's Finance Committee, Nicholas Papadopolous, said the agreement made "no economic sense".  Speaking to the BBC, he said, "We are heading for a deep recession, high unemployment. They wanted to send a message that the Cypriot economy ought to be destroyed, and they've succeeded in a large part - they've destroyed our banking sector,"

We are travelling in uncharted waters now.  The politicians and bureaucrats responsible for inventing the euro are prepared to go to any lengths to protect their pet project.  But we have now gone beyond the limits.  No fundamental rule finance and banking is safe any more.  They believe they can do whatever they like to stay afloat.  Significantly, this "deal" will not be put before the Cyprus Parliament.  How can they get away with that?  The first bail out deal was totally rejected by Parliament and there is every reason to expect that the same would happen to this scheme.  How will the government continue?  Will they dismiss Parliament in the manner of a medieval monarch?  Sooner or later they will be removed from office.  The EU [Germany] cannot impose their selected bureaucrats and/or politicians as managers on any soveriegn nation — at least, not without riots in the streets.

Banks in Cyprus have been closed since last Monday and many businesses are only taking payment in cash.  On Sunday, Bank of Cyprus further limited cash machine withdrawals to 120 euros a day.  With queues growing outside cash machines, Laiki also lowered its daily limit to 100 euros.  The details of the reopening of Cyprus' banks has been discussed today and already it is clear that there will be severe limitations on the ability of deposit holders to withdraw their own cash.  If depositors are not allowed free access there will be trouble in some form or another.  Where in any bank's Terms & Conditions does it state that you may not always be allowed to withdraw your own funds?  The only answer to this is never to deposit funds in any such bank.

Cyprus is only a small country and it is absurd that they have been allowed to get into a mess like this.  I still believe that the euro is doomed and that becomes more certain with each ever more absurd bail out package.  This scheme destroys any credibility for a banking system.  And it must be remembered that it is the same people who got us into this mess who are demanding that Europe wide it will be Joe Public who bails them out.
The latest announcement that has spooked the markets is the suggestion from Holland that the Cyprus model could become the norm for future bail outs.  That large depositors and bond holders can be expected to hand over their money to pay for the sins of politicians and investment bankers.  It is wrong and absurd.  Get your money out and into the boxes under the bed as soon as possible.
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Michael Owen

It has been announced this morning that Michael Owen will retire from playing football at the end of this season.  Fundamentally, it is an acceptance of the inevitable.  Stoke City were unlikely to renew his contract for next season and no other Premier League club wants him any more.  He is only 33 years old and it all sounds like a sad end to his career.  But not so.  Judging by what he has written on his website, this is a considered decision and, I think, the right one.  But we should not forget that Michael Owen is one of the greatest footballers to play for England since the Second World War. 

Born in Chester, Michael Owen played for Liverpool for six years and in 2001 helped them to win the League Cup, FA Cup and Uefa Cup, ending a six-year trophy drought. In total, Owen scored 158 goals in 297 appearances for the Merseyside club before moving to Real Madrid for £8m in 2004, where he was part of the "Galacticos", including Zinedine Zidane, Luis Figo, Roberto Carlos and Raul.

Despite scoring 14 goals in 40 games, it seems that he was less than happy here and returned to England one year later to play for Newcastle United — and by now he was worth £16 m. But it was at Newcastle that he became injury prone and he never again achieved the success of his days at Liverpool. Like many great operatic tenors, great football strikers can be very delicate performers and fabulous athleticism in youth can lead to damage in mi-career and a long decline.

During four years at Newcastle, he made only 79 appearances but still managed to score 30 goals.  Newcastle were relegated from the Premier Leagu in 2009 and Michael Owens left on a free transfer to play for Manchester United.  His appearances for his new club were infrequent but when he did play he often impressed.  Nevertheless his career was again blighted by injuries and he moved to Stoke City two years ago. 

But in all the glowing performances when he was at his best, few will compare with that marvelous day of September 1st 2001 when he scored a hat-trick in England's rout of Germany 5 - 1 in Munich.  A football match that we can still remember as thought it were yesterday.  See picture above of him scoring goal number 3

I don't know what he intends to do with the the rest of his life — perhaps he will go horse racing.  But, whatever, I wish him the very best

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Debts Must Be Paid

In these times, every day that passes seems to bring some new reasons to worry about the state of the British economy and particularly the scale of the debts.  Unfortunately, those in power in government and the banks don't seem to worry at all.  Is it because they feel there is no need to worry — like Mr Micawber, they expect something to turn up — or is it that they simply do not understand how serious things are?

The Coalition Government of David Cameron came into power committing itself to tackling the problem of government debt.  A reasonable and essential policy decision when they owed so much.  Cutting the debt is the foundation of their five year programme.  Yet, in spite of all the claims and public speaking and policy programmes, they are achieving nothing.  Just look at the figures.  When they came into office in May of 2010, the government debt was £700,000,000,000 — £700 billion.  If all goes well, when they leave in 2015 that debt will only have increased to £1,400 billion.  Some achievement for a government whose primary policy is to cut their debts.  Such a debt will require interest payments of nearly £100 billion per year — about 15% of total government expenditure.  They will have to cut back on spending on real services and projects in order just to pay the interest on the debts.  It is appalling.  And it is not even complete.  The figures do not take into account an every increasing burden of pay outs to subsidise public sector pensions — already costing £45 billion per year.

In order to eliminate the governments vast debts they must first of all stop spending more than they receive in income.  This is simple domestic economics — I refer to Mr Micawber again.  If expenditure exceeds income, the result is misery.  The government can no longer ring fence any part of the expenditure programme,  The NHS takes 20% of all government spending.  During the Labour years spending on the NHS doubled but 70% of that extra spending went on administration — plus interest payments on PFI deals that leave hospitals with 30 year debts while keeping the numbers hidden from government balance sheets.  Every hospital bed now has its own administrator.  Surely considerable savings could be made here and the service made both more efficient and more effective!  Further, the government via HMRC must try harder to collect all its taxes.  There is far too much avoidance and evasion.  From plumbers and builders to bankers and large corporations, they are all evading their taxes.  Only yesterday, it was revealed that many employees — including teachers and other public servants — are paid via off-shore companies to avoid NI deductions.  It has to be stopped. Osborne cannot continue protecting his mates in the City, allowing them to pay themslevs millions every year in pay, bonuses and perks and then shuffle it all off to the Cayman Isles.  Then in some areas the government needs to increase its tax rates.  They have to get the difference between income and expenditure to zero — and then set about tackling the rest of the debt.  They have to face up to the public sector pension plans.  I have no problem with public sector workers having gold -plated pensions — provided they pay for them.

The present Bank of England programmes of printing money devalues the currency, stokes up inflation and leads us towards bankcruptcy.  Greece, Portugal and Ireland have been bailed out by the ECB — and hence the Germans.  But when we go bust there is no-one to help us.  We have to sort out our own debt problems.
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Oscar Pistorius

The story that has headed the front pages of many newspapers in recent weeks has been that of Oscar Pistorius killing his girl friend Reeva Steenkamp in his house on the night of the 14th February.  The story is well-known but we still do not know the detailed truth of how this terrible tragedy occurred.
Pistorius has claimed that he thought that the noises in the bathroom and toilet were made by a burglar breaking into the house.  Many ask why did he not make absolutely sure who it was before he discharged four bullets?  We can ask this question in the comparative security of a country in Western Europe; it is not so easy in South Africa.  The annual murder rate in the UK is 1.2 per 100,000 or a total in 2012 of 722 people.  In South Africa the rate is 31.8 per 100,000 or 15,940 in 2012.  South Africa is not the worst place on Earth for murders but it is not far off.  The highest rate is in the Ivory Coast with a rate of 56.9 per 100,000.
Crime in South Africa is bad and well-known, rich, white people — as well as black — like Pistorius, are particularly at risk.  His disability makes things marginally worse.  In spite of walled estates and permanent guards, break-ins are not uncommon.  In The Sunday Times last week, Margie Orford, the London born author who attended university in Cape Town and has spent the last ten years living in South Africa, explained the pervasive fear of violence there.  She set out as an investigative journalist to "ascertain the facts about violence in South Africa."   Violence is endemic and she wondered if she — like Pistorius — should sleep with a gun under her pillow.  The police colonel with whom she discussed this asked a simple question, "If you woke up at night and heard a noise or saw someone moving down the passage, what would you do?"  "I would ask who was there," she replied.  The colonel expressed the opinion that if an intruder had got into the house he would already have shot her — so having a gun would make no difference.  "Better not to have a gun and shoot your husband by mistake."
This remark is uncanny in the Pistorius context.  It is exactly what he suggests happened.  In spite of his protected home and life style, like most South Africans he was paranoid about the risks of violent crime.  And the event that happened in Pistorius's home was and is not unique.  Margie Orford reports that only a few months ago a little girl in Johannesburg got out of bed during the night to get some water.  Her father thought she was an intruder and shot her dead.
It seems that in that blighted country, if you are to keep a gun in the house for your own protection then you have to react on the basis of shoot first and ask questions afterwards.  Perhaps the Pestorius version of what happened really is true.  So far the police have admitted that they found nothing at the scene to contradict his story.  Whatever the truth, it is a tragedy for all involved.  Obviously for Reeva Steenkamp but also for a man who, in spite of his disability, achieved so much and raised the status of para-athletes around the world.  He will have to live with this for the rest of his life.  I hope that one day he will succeed.
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