Okay, So How About A Mutual Europe?

Putting harsh economic reality aside for a minute, those who've always suspected that the Euro was a political Trojan horse for full fiscal European union must be highly amused by the current rhetoric.

The self-congratulatory political engineers of the European Union, like Jacques Delors, are lambasting their successors for ruining the grand plan. In their minds, monetary union and the Euro should have naturally led to complete union by now. That having failed, suddenly an enormous shared debt is suggested as the new political vehicle for the single market vision:

"To avoid falling, the choice looks straightforward to me: either member states accept the robust economic partnership I always demanded, or they transfer more powers to the Union."

Delors said Merkel and Sarkozy were playing games by arguing for "a minimum amount of cooperation designed to limit any transfer of sovereignty" to Brussels.

Taken on that basis, the ideas for eurozone reform they put forward on Wednesday after a head-to-head in Paris "won't amount to a hill of beans...

[Delors] instead called for a part-mutualisation of eurozone member states' debts, "up to 60 percent of GDP," saying the pooling of guarantees on that basis would "put out the fire" on money markets." 

Or, as Hunter S. Thompson once put it: 

"when the going gets tough, the weird turn pro."

"Fear and Loathing at the Super Bowl" 
(Rolling Stone #155, Feb. 28, 1974)

All very reminiscent of the following scene:

Wither The Zerozone?

I'm no Eurosceptic, but after all the dithering over the options open to the Eurozone it seems only the default option, as it were, will transpire: break-up. 

It remains to be seen whether we need to go through the farce of country-by-country downgrades and bank-by-bank recapitalisation. I guess we do, since avoiding or pre-empting that would take some kind of decision which the Zerozone politicians are incapable of making and for which they probably have no electoral mandate anyway.

But why stop there? I wouldn't weep for all those European Commission officials having to lodge their final excessive expenses claim and head home to defend their huge pensions from rioting neighbours. 

Flowers will grow through the cracks in Brussels' streets, and we can forget Strasbourg again.

We could certainly use the money more wisely.

Image from Crisisboom.

Toshiba: You've Lost A Customer For Life

In March 2011, I bought a Toshiba laptop after reading a glowing review on Which? (for which I'd had to subscribe). 

Nineteen days ago, my 6 month old Toshiba laptop died. 

I was on holiday overseas at the time. It was Friday evening. The Toshiba web site wasn't helpful and I couldn't reach anyone at Toshiba Support. Monday was a holiday in the UK, so it was Tuesday before I could report a critical problem: Day 4. The support person I spoke to said it couldn't possibly be a hard drive failure, as I'd have different error messages, so I should order a recovery disk on the web site - about £20 worth. Delivery was promised within fourteen days.

So, Toshiba think it's okay for a customer to wait at least fourteen days to get access to his laptop. So I went down to the basement and rescuscitated my old Dell laptop.

I began tweeting, using #ToshibaFail.

Toshiba's recovery disk arrived on Day 11. It didn't work. The only option available on the web site and via the telephone was to pay £30 for third party support. I spent over an hour on the phone before the support person said I should call a special number at Toshiba for a hard drive diagnosis. I did, and after trying to suggest my warranty details on the web site weren't valid, they said I should take the machine to a support centre in London, which I did, same day. 

On Day 13, the Toshiba service centre told me the hard drive had failed. They said they'd ordered a new one on the warranty. Estimated delivery time: another 5 business days.

Day 17, the lap top still hadn't surfaced, so I ordered a new Dell - estimated delivery: two days.

Today, Day 19, the new Dell arrived. I also got a call to say the Toshiba was ready, but I don't care. This is being posted via the Dell. I still haven't collected the Toshiba, which I might do tomorrow if I have time.

Toshiba, you've lost a customer for life.

Institutions Don't Need Our Money

Forget the credit crisis, we're in the midst of a deposit crisis. 

In a series of excellent posts citing the NY Feds' work on shadow banking, FT Alphaville explains there are too few of these safe harbours for all the institutional cash that needs them. This is different from the mistaken investments made in toxic "AAA" sub-prime mortgage debt. This is about a shortage of the highest grade bank deposits and government bonds. In fact, the NY Fed reports "that 90 per cent of instutional cash pools are subject to management policies where safety [rather than yield] is the primary objective."

This can turn government bonds and other high grade debt into kind of Giffen Good, which people paradoxically consume more of as the price rises. This can continue to the point that the bond rate becomes negative (as has happened with Swiss debt) and some banks may even charge depositors for depositing cash on which it can no longer make a return.

In turn, this awakens the so-called "Triffin Dilemma", whereby a country that has a reserve currency (like the US) runs a large current account deficit to fuel consumption and provide the rest of the world with liquidity, yet suffers "from the declining value and credibility of any currency which runs a persistent trade deficit - eventually leading to a reluctance of creditors to hold the reserve currency."

All of which suggests that institutions don't need our cash - that perhaps we're better off allocating it directly to those who do need it, like people and SMEs, through 'horizontal credit intermediaries' that don't add unnecessary cost or contribute to the deposit crisis.

Image from CurtisMorley.

Let's Be Unreasonable

"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man."
George Bernard Shaw.