EYE-BALL’s Herman on: 2012 Overture – The Northern Summer Arrives
– 2012 Overture –
– The Northern Summer Arrives –
| By: Herman O’Hermitage | 4th July 2012 |
|During my post of September 13th, 2011 [use link hereto read] – regarding the Societe Generale lack of provisioning against GIIPS (PIGS) sovereign debt exposure and resultant credit meltdown being fully in the financial market focus, and in response to the attitudes, of the Euro leaders I wrote; “Who is Angela Merkel?Where is this over belief stemming from?
Where are our leaders?
If you think negatively, death be upon you!
Who is this Angela Merkel?”
Delete those words above ‘Angela Merkel’ and insert many other leaders who are failing, like the Australian PM or Treasurer, or The Leader of the Opposition and we might achieve introspection!
Chancellor Merkel has now caved into pressure of imploding Greek, Spanish, and Italian Banks, amongst others and agreed to new rescue, recapitalisation or economic stimulus package. World stock indices have responded positively.
Add to this the Chinese PMI has marginally risen above 50, to 50.2 and the world can breathe more freely (slightly). It troubles me actions are reactive rather than proactive.
The simple truth is we have absolutely no idea of what the meaning of last Friday’s package will really do, the likely timing or the scope, but we can truly expect there is intention towards a real economic union with a centralised government, centralised oversight and compliance, and true commitment towards group goals. Germany or any other of the 17 member nations will not be dictating terms, and prevented from only enjoying the benefits without the associated risks and costs. Or could it be, now Germany perceives new competitive advantage?
What really has me excited is the potential of the Andrew Tyrie (Conservative MP for Chichester) led investigation into professional standards of Britain’s banking industry. This comes immediately after the Sir John Vickers report on capital adequacy and provisioning by the British banking sector. It is in the wake of the Barclays LIBOR skimming racket, for which they were fined GBP290mio.
There is speculation that the terms of reference could include the concept that through managed fund granted proxy votes, banks senior managers exercise shareholder control of themselves and therefore unethically abuse that position to endow themselves and corruptly disadvantage other relevant stakeholders.
The full story on Barclays alleged rorting of LIBOR continues to unfold.
Chairman Marcus Agius has been reinstated now that CEO Bob Diamond has resigned. Far too much of the scuttlebutt is simply superfluous. Speculation regarding Diamond’s severance entitlement of GBP22mio is pointless when the nature of the crime is so poorly understood.
Within all of this is amazing possibility. Potential micro economic reform that will shape industry and commerce for decades to come. Maybe I shouldn’t believe it. Maybe I need to analyse from a far more sceptical perspective.
Britain is already undertaking it’s Leveson enquiry. Now it is mandating a Tyrie enquiry. Where does this David Cameron led conservative coalition get such courage and morality from?
I was extremely sceptical towards David Cameron’s motives when the News of the World scandal first broke. Through Andy Coulson, David Cameron appeared to be in it, up to his ear lobes. Then never forget the British riots of only 10 months ago.
Since last August little has been mentioned of the UK riots. Starting in Brixton over an injustice, rioting spread to streets all over Britain with the Met totally overwhelmed and under resourced, the new coalition government was tested absolutely. The medium term solutions were multi-faceted. Swift but fair justice for simply taking pleasure in the violence. Long gaol terms for the most obvious despots. But after that reform that would break the cycle of long term poverty for those born into a class society without hope. True social economic reform. This was a real test of the new conservative coalition government’s mettle.
Banks and finance have been front and central to so much of what has occurred since the dawn of GFC (maybe the dawn of all history). In the USA after a range of bailouts specifically executives of AIG chose to endow themselves with performance based bonuses. Bonuses for seeing their employer on the brink of collapse from trading in Collateralised Debt Swaps, debt insurance. What was the outcome? AIG agreed to give part of bailout money back and some executive’s were to show philanthropy.
In France, Soc Gen were up to their ear lobes in sub prime trading, and then they had the Jerome Kerviel rogue trading scandal. A double whammy.
Then there is UBS (Used to Be Strong). UBS relied upon rating agencies to buy or hold AAA rated CDO’s (Collateralised Debt Obligations) to find when they did independent review of value, too often the securities were AA minus or maybe even non investment grade rated at best. UBS too required a recapitalisation. A truly sad fact, is that too often UBS’s investment banking arm was creating those CDO’s from loans sourced from American mortgage brokers. Brokers paid large success fees for volume rather than capacity to repay the loans and credit quality. In the case of UBS it’s left hand had little understanding of what it’s right hand was up to. Therefore the heart and the brain had no idea and were confused.
The big picture is so massive, that I don’t know where Jerome Kerviel’s appeal and therefore suspended sentence currently stands.
I could list far too many bank related spot fires.
What is most poignant is the USA needs the like of a Tyrie enquiry, into professional standards of their banking industry. So do many others. I am coming to Australia at the end. The terms of reference are everything. The allegations against Goldman Sachs simply do not go away. Anger simply manifests.
With the USA race for the White House now less than 5 months away, an Obama second term looks less likely by the day. Speculation regarding the Supreme Court ruling on private electioneering [link below] is that Mitt Romney might well outspend Barak Obama by a factor of five, should certain lobby groups fund their own independent campaigns against the incumbent president.
What might then occur when mainstream America finds their precepts of democracy absolutely debased? Will American’s too rise with civil anarchy and disobedience akin to last August’s British riots?
Returning to the Hague, since the election of Francois Hollande to French President we have observed little. There have been many meetings with Chancellor Merkel, regarding stimulating growth. The Banking system is in melt down hence last Friday’s announcements, to channel fresh capital to the sickest banks. Stabilising the existing economy is paramount. Then there in the notion of directing taxes on the rich to economic stimulus of the marginalised. On that too we need to wait. The notion of working towards common goals is a great start.
This is also a blue print for the Western world including Australia. At the June 13th Australian Economic Forum, the PM allowed herself once again to be duped into business leaders want for lower corporate tax. The PM came away from the conference stating she had a renewed commitment to corporate tax reform. Please save us. Do the exact opposite. Take some pressure of the household sector. In her words the little Aussie battler. The ones who determine the next federal government.
Announce some real micro economic reform. Announce an inquiry into the banks claims of international funding costs causing them to not pass on interest rate cuts in full. Widen the scope of enquiry to include why the Banks retained capital and dividends paid to shareholders is over 7.5% of per capita GDP. Include questions of Banks voting managed funds equity interests to entrench banking excesses. Do similar to the mining industry. Launch an inquiry to how miners are not paying their fair share of corporate taxes through bloating domestic operations costs. Tackle Hancock Mining head on and challenge why Gina Rinehart (Australia’s richest woman, possibly the richest woman in the world), feels she does not need to embrace more humanitarian goals towards the endowment inherited from her father. This list has only just started.
Who has the courage? Who wants the high moral ground?
Believing in sanity is in itself insanity.
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