Funds flee Greece as Germany warns of "fatal" eurozone crisis

[OwlHoot]

It all started under the Clinton regime with there policy of home ownership for all even if they could not afford it. The UK has a high owner-occupier rate and Brown encouraged, through lax monetary policy, to create high inflation in asset classes to fool the electorate by exploiting the wealth effect.

It's true that Bush went along with it and it is doubtful if the Conservatives would have done anything different either. Doesn't make it right.

The snag is, all things being equal, one country can't offer lower returns than the rashest, or else investors would desert it like a flock of starlings. So in that sense the UK and other countries did have to follow the Yanks' lead, and venture into more and more leveraged debts.

I suppose it isn't quite as simple as that, because investors assess risk against the returns, and future potential and so on. But broadly speaking it seems analogous to Gresham's Law

[AtW]

So in that sense the UK and other countries did have to follow the Yanks' lead, and venture into more and more leveraged debts.

Not all countries - they still create a lot of real things in Germany that are bought all around the world. Their banks may have gotten into leveraged junk, but the country as a whole is sound and solvent. On the other hand the UK destroyed it's industry and started getting disproportinate amount of revenues from speculative hot air.

Short term investors who can easily bail out shouldn't be welcome in the first place - that's where tax system should do its role and penalise short term gains, especially if they come from creating feck all.

Thing is, when the last Premiership Football club is sold to yet another foreigners, what's will be left in the UK desireable to buy? It's symptomatic that this last desireable asset is based on tulipe economic model with ridiculous out of control salaries of primadonna players who can bugger off to another country very quickly if they don't get their huge chunk of the money.

[MrMark]

How is Santander still safe?

http://www.spectator.co.uk/business/...t-crunch.thtml

But Santander just keeps getting bigger and bigger, coping with a few losses and minting a fortune from its core businesses. Some City analysts wonder whether it can really have ridden the credit crunch with such consummate ease — or has it, along with the rest of the Spanish banking industry, just managed to hide its true losses in a deep cellar somewhere?
This is far from an academic argument. Santander is now the biggest bank in the eurozone (France’s BNP Paribas is second), measured by market value. With operations in more than 40 countries, it is the sixth biggest bank in the world and, by its own reckoning, the third most profitable.
...
No one disputes that Santander has handled the credit crunch with skill. Its clients lost more than E2 billion with Bernie Madoff, but it doesn’t do much investment banking and made only modest losses on subprime lending. In its latest quarterly results, it reported profits of more than E2 billion. Even its British interests managed to increase profits and market share: Abbey’s profits were up by more than 30 per cent in the first nine months of this year. With chunks of Northern Rock, RBS and Lloyds coming up for sale, don’t be surprised to see the Santander logo on a lot more British mortgages over the next few years. In the City, there is speculation that Botín may buy NatWest out of the train-wreck of RBS.
But there is still a fierce debate about how the Spanish banks have survived the collapse of their domestic economy so well. As a rule, when property markets collapse, they take a few banks with them. Property is the collateral for most loans, commercial and personal, and when the collateral becomes worthless, so do the banks who have lent most, or least wisely.
As in Britain, Spain’s property-led boom has turned to bust, dragging the economy down with it. The Spanish economy shrank by 4 per cent last year, and is still getting smaller even as the rest of the eurozone grows again. Unemployment is at 20 per cent and youth unemployment at 40 per cent.

So how can any bank avoid huge losses in that toxic environment? Supporters of Spanish banking point to a technique called ‘dynamic provisioning’. In short, the Bank of Spain required the banks to put aside a lot more cash in the boom years — fixing the roof while the sun was shining, as George Osborne might put it. Likewise, the tight control of the Botín family, and the concentration on traditional retail banking, kept it away from the dangerous stuff.

[AtW]

How is Santander still safe?

I don't know if it's still safe but I note that when they bought UK banks they kept the savers part (the cash) and left the rest to UK Govt. This is very much unlike Lloyds TSB which, to my great displeasure, bought tulip of a bank full of tulip.

[HairyArsedBloke]

Euro is a reserve currency now - something that escapes many people, it's completely different status than what they had 10 years ago and what GBP has now.

Bloomberg: Euro Proving No Reserve Asset as Central Banks Shift

[sasguru]

Bloomberg: Euro Proving No Reserve Asset as Central Banks Shift

You mean AtW is complete wrong about an economic issue?
Who'd have thunk it?

[DiscoStu]

You mean AtW is complete wrong about an economic issue?
Who'd have thunk it?

I'd never have believed it either

[AtW]

Bloomberg: Euro Proving No Reserve Asset as Central Banks Shift

And they pour all those money into GBP? The house is burning here in the UK and you are picking on minor smoke somewhere where they got far more fundamentally sound system.

Dollars is getting stronger, USA seem to be recovering - this is good and it leads to readjustment of portfolios. If anything cheaper euro is better for europe (especially German) as it makes exports more competitive.

[HairyArsedBloke]

You mean AtW is complete wrong about an economic issue?
Who'd have thunk it?

He's not completely wrong this time. I saw it on Bloomberg and thought it was funny given his rant from the other day.

[AtW]

He's not completely wrong this time. I saw it on Bloomberg and thought it was funny given his rant from the other day.

They should not have put photo of Soros on a currency related article there