Carbon Trading - bureaucratic nightmare and fraudster's paradise

Whoever thought up the crazy idea of carbon trading is a card-carrying member of the bureaucratic, undemocratic and technocratic 'elite' that rules over us. Some 'academics' are always happy to support new schemes (think Tobin Tax) and cosy up to their political paymasters. A naive press also toes the official line in most instances.
But we have a long-established 'Carbon Tax' - it is levied in nearly all countries on the use of petrol and could easily extended to any oil and coal use. And it is not obvious why air transport, shipping and agriculture should be treated leniently. Or the heavy industry which gets also treated with kid's gloves in many countries.
Carbon tax an unwanted gift?

SURVEY: 82% of investors think more firms will set up in Europe because of Brexit

Nothing to worry about, if anything positive for UK as its firms will have to set their eyes on export markets in a more pro-active manner. Free of the cost of EU membership (mostly socialist redistribution to the unworthy) and regulation Britain should do well. Being ruled by one government rather than a committee of 27 should speed up decision making.
SURVEY: 82% of investors think more firms will set up in Europe because of Brexit

Currency Union CAN work without Fiscal Union

Academics, assorted Analysts and Media Commentators regurgitate ad nauseam that Currency Union without Fiscal Union cannot work. Sorry but repeating this does not make it a truth. Admittedly a Fiscal Union would make things easier but the Euro-zone could function quite well without establishing a (technocratic) Super-Government far removed from any democratic control.
The Gold Standard - and the post-Bretton Wood system of fixed exchange rates - worked quite well without Fiscal Union. All it took was discipline on the part of the participating governments. This is what is missing - in most aspects of policy making - these days. The Currency Union is doomed if the member states do not adjust their internal economic and fiscal policies and disregard market signals.
Excessive speculation - magnified by leverage and uncontrolled capital flows - pose a risk as they turbo-charge price signals (falling sovereign bond prices in particular). This is akin to some panicky bodies in a small rowing boat. But decisive changes to policy measures should be able bring markets under control - fiscal adjustment, penal interest rates should quickly give the markets the right signal.
Do not blame lack of Fiscal Union for the problems of the Euro-zone. These have been left to accumulate in a reckless fashion over many years if not decades. Introducing Fiscal Union may douse the smoldering fire - for a while. But if there is no proper fundamental adjustment - remember the Mezzogiorno - patience in some member states that are paying high transfers will run out. In addition even bigger waves of speculation will set in when Fiscal Union looks frayed, funds will pour into the stronger member states until the pressure point is reached and the Currency Union can no longer be maintained. George Soros would relish this Mega-Tsunami if he would still be around at that time.

'Sanctions': a shot in the arm for Russian Economy?

UPDATE
Since I posted the comment the Rouble has taken a beating but this only supports my argument that Russia will be forced to produce more of the goods that its citizens desire. In addition countries like Turkey, India and China are more than capable to supply imports that the Sanctions bloc refuses to supply. Shooting oneself in the foot is the appropriate word for what the 'Elites' in Nato, EU etc are pursuing.

Comment 25 July 2014
Contrary to ill-informed media speculation the proposed 'Western' sanctions (imposed in an undemocratic knee-jerk reaction, like a toddler throwing his toys out of a pram) may well do a lot of good for the Russian economy.
Trade is always based on exchange. So the Daimlers, Apples, Burberrys of the West will lose a customer as it would not make sense for Russia to accept sanctions that hit their industries while selected and favored Western exporters are supposed to carry on as if nothing had happened.
But a reduced level of the Rouble and imports of Western capital and consumer goods may be a spur to develop domestic substitutes. No one can deny that Russia has a lot of qualified and highly educated engineers and with the targeted hiring of Western experts any number of industries could be made highly competitive. Levels of income tax are attractive and engineers in the West that live in the shadow of overrated financial experts would jump at the opportunity to double their after-tax pay, especially if they are young or have already grown-up children.

The European Central Bank’s House of Cards

"Europe is a runaway train with a certain crash in its future." (Frank Hollenbeck, Mises Daily)

Letta's demeaning trip to Berlin

The absurd reality of the Euro-Zone is revealed by the report that the new head of Italy's government is hurrying to make a trip to Berlin (to have his plans approved by Merkel?). Mussolini in his declining years was reduced to a similar humiliation. In the meantime German industry kills off the competition that is locked into the Euro straight-jacket.

Euro-Bonds, Sinn and Soros - the overlooked danger

Always interesting when some heavyweights are fighting it out. My main answer to the problems with the Euro is simple: one should never have embarked on this half-baked - and undemocratic - experiment. But to advocate Euro-Bonds as the solution is overlooking one important risk: what would happen if one of the member countries would want to leave the Eurozone after a large volume of these bonds has been created? Would we see the equivalent of the American Civil War in order to bring a recalcitrant nation to heel if the citizens are unwilling to continue to shoulder the burden created by profligate states?

Spanish Debt - an alternative solution

Given the overwhelming consensus view that Spain will have to go cap-in-hand to the ECB/EU/Troika and ask for a bailout one has to ask if there really is no alternative for EU member states that find themselves in a tight spot. Is it really necessary to impose the costs of any restructuring on the weakest members of society? Why not just impose a unilateral debt restructuring and let the creditors - domestic and foreign - carry a much larger burden of any restructuring? There is no reason why a country choosing to go down that route could not remain in the Eurozone, if anything such a radical measure would make it easier to remain in the Eurozone. Capital flight would be reduced as there would be less fear that an exit from the Eurozone would be imposed in order to solve the debt crisis.

Speculators attacking the Euro?

Most sensible observers - apart from the europhile 'Elite' behind the Brussels-Consensus - would agree that the way the Euro was constructed was - apart from being anti-democratic - deeply flawed from the onset. But we are where we are and cannot argue over spilt milk. That the governance of the Euro zone will have to be changed in a major way becomes clearer by the day.
But the discourse in the media - and above all in the blogosphere - is not really focusing at the relatively simple way the crisis can be ended. Too many commentators have a vested interest in seeing the demise of the Euro, be it for ideological reasons, be it out of a sense of 'Schadenfreude' or pure sensationalism (only bad news is news seems to be the motive, just read Zerohedge where is is difficult to find ANY constructive criticism). We do not even want to consider all those great thinkers that have positioned themselves for a collapse of the Euro or some of its member states and want to make hay out of any subsequent turmoil in the markets. Worst of all are 'investment' banks that play all sides - as speculators, doomsayers and 'advisors' to governments and banks that are victim of speculative attacks.
Because speculation is a key contributor to the growing crisis in the Euro zone. Not just in the guise of a hard-nosed hedge fund manager or prop trader but also in the shape of all major investment institutions. They may not be short-term oriented and probably have no axe to grind regarding the survival of the Euro but nevertheless they are knowingly or unknowingly contributing to the destabilisation of country after country by simply taking steps that are beneficial to their own self-interest.
Countries such as the USA and Britain have only survived with an intact (?) financial system because their Central Banks pumped money into the economy at rates that would have been called lunatic before the onset of the Credit Crisis. There is no such tool to stem bank runs on countries that are members of the Euro zone. Greece may have an economy that has been managed abysmally but no one in his right mind can expect a country to survive when speculation pushes interest rates to astronomical levels. A similar mechanism was at the heart of the credit crisis 2008-09 when speculation in relatively illiquid derivatives (mostly linked to ABS and MBS products) created a 'death spiral' in the credit markets that was largely divorced from the underlying reality in these markets.
Stopping the rot at the core of the Euro Crisis would require only the full commitment of the European Central Bank to an all-out effort to push interest rates in ALL member countries to acceptable levels and fulfil its role as lender of last resort to all banks that are threatened by a bank run.

How difficult is it for a country to leave the Euro?

Learned Minds can recite catalogues full of reasons why it is very difficult, even impossible, for a member state of the Euro Zone to abandon the Euro. But all the legal niceties will count for little if the decision is made to cut the Gordian Knot. While to Euro as a practical instrument is quite useful for tourists as well as businesses the boost to the economies to the member states was at best marginal during the past ten years. These days the exchange of currencies is nearly frictionless and very cheap in the day of the Internet - for private people and even more so for business purposes. But the argument that the exit from the Euro Zone would be extremely difficult and take a long time to prepare is difficult to swallow. It should be possible to declare on any weekend that the exit has been decided and that all bank accounts, financial assets and liabilities will be frozen and converted into the new currency from that moment on. Unfortunately, this analysis makes it even more likely that the Euro Zone will lose one of its members at some point in the future because any sane investor or business manager will henceforth take this possibility into account when making decisions.

Euro Summit - what they did not tell you

Scholastic scholars would have felt perfectly at home in the discussions about the Euro and the Euro Crisis. What ALL experts seem to be forgetting is the poor taxpayer and citizen who has no say at all in this. The major contributing factor to the current situation in Euroland has been totally wrong (one might even say foolhardy and/or idiotic) decision making by the 'fathers' of the Euro (who by now all enjoy their pampered life paid out of generous pension the bill for which is picked up by their hapless victims). Without the strainghtjacket of the Euro individual countries or banks would have gone bankrupt by now and life would go on without creating too much systemic danger for all industrial countries.

Fiscal Union - only precursor to an even bigger crisis

We want to keep this post short and to the point: those members of the Commentariat who think that Fiscal Union will solve the current Euro Crisis will be in for a rude awakening - in a few years time, but maybe much earlier. A chain is only as strong as its weakest link, and there are quite a few weak links in the Euro-Chain. Even mighty Germany (as those on One Euro jobs there know already) is not as strong as it might appear. Its performance is strong only because the other countries are weak, bit like the conundrum in the currency markets where a strong currency means that the other side of the trade is by definition weak). Debts in Germany are also sky-high, especially if you include all private and bank debt and - most importantly - unfunded pension promises etc. How the poor German taxpayer, squeezed that he is by a relatively efficient (and merciless) tax collecting system, is supposed to carry the burden of all the freeloaders in the Euro Gravy train remains to be seen. I would not put my money on it except in very short term trades.

Sarkozy: a flawed mind?

Anyone who can endure a certain amount of (intellectual) pain would do well to have a close look at the French President's speech to party loyalists held in Toulon on December 1st. While the French are often said to be particularly rational followers of the 'Cartesian' tradition we were aghast at the incoherent reasoning cobbled together in this effort to explain and possibly solve the current crisis in the EU. If the analysis is wrong the solutions cannot be the right ones and while a temporary patching up of the Euro structure might well work it gives little cause for longer-term optimism.

Greek Debt Crisis: Lunatics at the controls - sauve qui peut!

The headline that another Euro 100 billion (!!) might be spent by (mainly unaccountable) politicians and (international) bureaucrats on behalf of the citizen-slaves staggers the mind. In terms that can be understood by the man on the street that means that an average family of three Greek citizens indirectly benefits from a windfall of nearly 30,000 Euro. We have watched with alarm as the political class all over the 'Western Democracies' has allocated an ever-increasing amount of the national wealth creation towards the pursuit of the pet projects that benefit their client lobbies. The spending for the Greek bailout reaches new peaks of irresponsibility and is a blatant attack on all honest and parsimonious savers and investors. Those readers not only interested in protecting their wealth from predatory politicians but also looking for ways to stop misgovernment in its tracks should look at supporting Dirdem as more direct democratic control of decision making offers the only hope of turning things around.

No Euro without fiscal union? - more muddled thinking by 'expert'

Another economics professor and former IMF economist, Harvard University's Ken Rogoff, adds his voice to the chorus of those who perpetuate the false thesis that only a closer (full?) fiscal (and therefore political) union of the EU member states can save the Euro. As we have explained in another post, this theory confounds the problems of individual states' reckless fiscal and economic policies with the problem of the global banking system.