More Tea, Wolfgang?

The "Tea Party" may be getting it in the neck for its bumbling brand of brinkmanship over the US debt ceiling, but, as Schumpeter points out, it's the European finance leaders who seem not to realise the gravity of the current financial situation:

"Italy sold €8 billion ($11.4 billion) of ten-year bonds on July 28th but had to pay a yield of 5.77% to do so, the highest level at auction for 11 years. Making matters worse, European politicans have gone back to making unsettling comments after their brief show of discipline at the summit: Wolfgang Schäuble, Germany’s finance minister, said this week that he would not be writing any blank cheques to the euro area’s bail-out fund, the size of which is inadequate to ringfence Spain and Italy."

High Street 2.0: The Mutual Village Shop

Now this is more like it. When the Sarratt Village Shop was put up for sale, the community campaigned to raise enough money to buy it from local family who owned it, "so that it can be run and developed over the long term for the benefit of the wider community." Eighty five households invested in a community interest company - along with the existing owners, who were persuaded to stay on as managers.

David Alexander, who led the campaign, first wrote to the community in February 2010, suggesting they needed to raise £183,000 - an average of £116 for each person in the village. The deal completed on 4 July 2011. Additional working capital will mean a new stock management system and the chance to develop a broader post office offering. There are further opportunities for investment, ideas and other involvement. And clearly it's in the interests of everyone in the village that the shop is supported.

As David's note explained, there are over 150 such shops in the UK. Surely such community initiatives must be high on the list for Mary Queen of Shops?

Looks like a nice spot. I might drop in.

Fair Energy?

What is it about the UK's institutions that makes them think it's okay to drag consumer champions through the courts?

The banks have been tireless in their battles with consumers and regulators across numerous products.

Now Scottish and Southern Energy is appealing its losses on doorstep mis-selling cases brought by Surrey County Council's Trading Standards unit, while MoneySavingExpert reports:

"Some 73% of Scottish Power's pre-payment customers in 2010 came from the doorstep while SSE, which has just announced price increases of 18% for gas and 11% for electricity, says 45% of the new customers gained in the UK came from door-step selling."

As Mike O'Connor, chief executive of Consumer Focus, says:

"Organised confusion, pressured selling, misleading information - no market should be able to operate like that, and especially not one that provides an essential product that is getting more and more expensive."

Today, MPs reported that "four of the Big Six [consumer energy suppliers] were under investigation by Ofgem for mis-selling" and that:

"On 7 July SSE announced that it was suspending all door-step sales activity with immediate effect. Its press notice stated that it had taken this action for four reasons:

1. There was low confidence in the way companies sold energy on the doorstep, and the way in which salespeople were remunerated;
2. Energy was a significant purchase, and the sales process rightly required increasingly significant customer safeguards;
3. Customers have a growing need for objective information and help to enable them to use efficiently the energy they buy, especially in an environment of rising unit prices; and
4. The energy supply market was evolving from the simple retailing of electricity and gas to providing a bigger range of smarter energy products and services, and engagement with customers needed to reflect this."

So why are they appealing the Surrey mis-selling findings?

Because our energy providers are not in the business of solving their customers' problems, but their own. They are institutions, not facilitators. Which, as they may be starting to gather by now, exposes them to the downside, not the upside, of social media.

CDSs on Financial Crime?

Insurers emboldened by the bail-out of AIG and a rock-solid culture of greed and stupidity, Schumpeter warns us, are boldly venturing into the directors and officers insurance marketplace with a great little product that will cover “damages established by FDIC due to non-intentional wrongful acts or omissions by the executive or director.”

I love these guys.

Love them!

Talk about the "The Big Short". These guys are short of just about everything.

I mean, how is this a good idea for anyone but criminals and the criminally insane?

WHERE ARE THE REGULATORS???!!!

Well, Schumpeter tells us, "The FDIC, and three financial-industry lobby groups we also approached, declined to comment."

F*cking asleep.

I despair. Really, I do.

Might even rush out and buy a KickOut Bond.

Or Greek debt.

Finish up on a park bench under old PPI policies outside the FSA.

Wasted Talent?

Biding my time in our smallest room recently, I was confronted by Iman's revelation [The Week, 9.7.11] that, instead of "a dirt-poor goatherd who couldn't speak a word of English" - as American modelling agencies were apparently led to believe when she first came to their attention - she was actually "fluent in five languages and studying political science at university in Nairobi."

Well, what can I say? I guess I'm as surprised by this as Iman's first modelling agent, but it has little to do with her job description. And it's a bit rich now for her to expect us to be impressed by her deep knowledge of languages and political science, having preferred to present herself to the world as a human coathanger.

But, hey, I guess it's never too late.

I don't mean to 'pick on' Iman, but her story presents an interesting illustration of a theme. As Lord Turner pointed out, much activity in the City, for example, is ‘socially useless' and 'of no real use to humanity’. And, I've suggested before, if we are going reverse an ugly trend in our society, we must agree on at least one higher ambition than the accumulation of wealth (or fame, or celebrity).

Perhaps the fact that, notwithstanding fortune and fame, Iman now wishes to flaunt her academic credentials suggests that attaining a decent education is that higher ideal.

Any Similarity?

U-turn On Horse-drawn Carriage Ban A Victory For Common Sense

The decision of the Transport Secretary not to phase out horse-drawn vehicles in the UK over the next 7 years has been hailed as a "victory for common sense" by consumer groups.

A spokesperson for Charioteer.org said, "Seven out of ten people born before the horseless carriage was invented still enjoy the ceremony of parading through the streets in their horse-drawn vehicle. Transport in the modern era is easy-come-easy-go; the ceremony of carriage-riding gives importance to a journey, and reminds people of an era when the ability to travel was a great deal more scarce, and a great deal more valued."

"In this time of great austerity it is important that we continue to support expensive, outdated travel methods abandoned virtually everywhere else," she added. "Otherwise, we'd have no jobs for stable boys and nothing to put on the roses."

A spokesperson for FaceBoogle said, "What's a carriage?"

Sunlight Fades From EU Summer, Hairy Bankers To Holiday In Caves

Well, that's it folks. It's mid-July, and we can all head for the beach, the hills or the village boules court, secure in the knowledge that only 8 banks failed European Stress Tests with a total shortfall of €2.5bn.

Everything will be here when we get back.

Right?

I mean, it's not like Italy's predicament is putting any strain on the zerozone, or the US is in the process of bursting it's 'debt ceiling' and teetering on the edge of a downgrade by those ever-reliable ratings agencies, is it?

And even if the bigger picture does take a turn for the worse, surely the hacks will finally stop hacking celebrity voice mails and warn us?

Wrong.

If we're lucky there might be some hand-wringing and dithering over uncertainty about what's to be done; before a staccato burst of post-Lehman style, over-the-weekend bail-outs, bail-ins sales and mergers involving banks, insurers, pension funds and even whole countries. Greece will become an EU-protectorate - no sovereignty, but a great place to go sailing.

But what's really so uncertain?

When a borrower - be it a country, a bank or anyone else - is insolvent, there's a stark choice for lenders to make. That choice is not between a higher and lower rate of interest or return on your principal. It's about how much of your principal you are prepared to lose. All, or some? A 'haircut' you must have. Like the one Nicholas Brady arranged for lenders to Latin America in the '80s. Louis Gargour of LNG Capital (with whom I found myself chatting about Brady Bonds and short-selling on Thursday night) explains this nicely in the clip below.

In Europe we lack leadership. We lack decisiveness in the face of uncertainty. And, without either, there's little official appetite for sunlight - for hard facts. Officials who are supposed to be 'in charge' placate each other with 'stress tests' and other PR puffery. In effect, they would rather live in the dark and let their hair grow, than lead the way to the barber.

I presume they will holiday in caves.

Cut Greece Loose

Cutting the Gordian knot

Talk about Zeitgeist - last Saturday morning I was in Porto, reading about the Greek crisis in The Economist. It was my first trip to Portugal, which I guess was good timing for them, economically speaking. Next month, Spain receives some of the Pragmatic Pound. And I'd like to think I'm doing my bit for Ireland, albeit on the meter, by assisting a financial start-up there (sorry, still in stealth).

But I won't be bailing out Greece.

Tax-dodging, low productivity and overly generous pensions aside, The Economist reckons the key to that country's dismal plight is political patronage. "Greece needs transparent and impartial rules, but politicians are not keen to limit the scope for dishing out favours." Everything from railways to medical budgets leaks cash to powerful lobby groups.

And, reading on, it seemed to me that in this sense the Greek rioters have more in common with the proponents of the "Arab Spring" than their EU colleagues. As the ebbing economic tide exposes the littered wrecks of corrupt schemes and relationships, the have-nots are descending in droves on the survivors and what's left of their loot. In Syria, the crowds are putting the "squeeze on Assad" by demanding a "civil democracy" that comprises free elections, freedom of speech and assembly, protection of minorities and an end to repression. The longer the government resists, the more citizens withhold labour, and capital flees. In return, the regime dishes out more favours, stokes inflation and the country edges further toward meltdown. Egypt is clearly further along. Libya perhaps further still.

This chaos is vital for renewal - though bloodshed is not essential. Back in June '09 I suggested that the UK's constitutional reform must be a messy process, and it's proving just that, but riot-free (you can ignore the photo calls). A dynamic, open, democratic process that encourages broad engagement by all stakeholders cannot realistically be neat and linear.

Though in May 2010 I also suggested going short EU banks and long riot shields. And if things do turn nasty it's perhaps worth bearing in mind Mathias Koenig-Archibugi's reminder to The Economist of the lines from "The Third Man":

“In Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland they had brotherly love, they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.”

The point is, we do the Greeks no favours by bailing out their system of political patronage. The bureaucratic emperors must be shown to have no clothes.

So cut Greece loose, I say. Only then will the Greeks have their Renaissance.

So Many Targets, So Few Bullets

Okay, it's been a looong week, it's 2:20am, my cab leaves for the airport at 4:00 and I haven't packed yet. So there are two chances of a decent post this week...

In all fairness, the dazzling array of targets hasn't exactly allowed one to focus one's thoughts - I mean, I've been hammering away on the Tweet button like a chimp on speed. So all I can usefully do is commend that frenetic feed to you, as a parting gift.

But if I had to choose, these would be my top 8:

1. Zero Hedge: on whether the US and Europe will track Japan's 21 year slide (and counting);
   
2. Spectator: that Rebekah Brooks statement on phone-hacking in full;
   
3. Naked Capitalism: Partying on the Edge of the Eurozone Volcano - I love that title;
   
4. Naked Capitalism: Fukushima Cover Up Unravels;
   
5. Guardian: What Twitter thinks of the News of the World, visualised;
   
6. P2P Banking: The US Government Accountability Office's Guide to US Regulation on P2P Lending;
   
7. Schumpeter: On being sacked for telling tales 'through' the media; and
   
8. Chris Marsden's observations on what the Dead Parrot Sketch and UK Media regulation have in common.

And, hey, I have a whole hour left to pack. So time for a little light entertainment: