Europe Continues Down The Tubes
Apparently some kind of deal has been created for Cyprus to prevent French and German banks from being inconvenienced, but the economies of Europe are caught the death spiral of austerity during an economic downturn.
The latest news for the UK: Fitch says UK downgrade more likely. Moody’s downgraded the UK last month, and Fitch is pointing towards an April downgrade from AAA. The S&P, the third of the big rating agencies, has gone negative on the UK, but hasn’t downgraded it yet. The confidence fairies don’t seem very impressed with the policies of George Osbourne, who has vowed to continue his failed policies right over the cliff.
At Naked Capitalism Yanis Varoufakis, an economics professor at the University of Athens, has a post, While Waiting for Cyprus’ Godot…, in which he notes: “Every bailout agreement, beginning with Greece’s in May 2010, seems less logical and more toxic than the previous one.”
The post consists of notes from his interview on BBC-4 which is now available.
This is point at which you should unload your position in the Euro, and move to something safer, like commodity futures. [Note: anyone who makes financial decisions based on my advice, should start checking out the accommodations at the local mental health facilities. I am not now, nor have I ever been a member of the ‘investor class’. Savings bonds are as close as I have come to investments. I have taken stock in payment of debts, but sell it if it ever reaches the value of the debt. Having noted that the value of the stock has next to nothing to do with the value of the company. I don’t waste my time or money gambling on Wall Street.]
2 comments
I’ve been rather too busy to comment on this mess but have definitely been following the econo-blogs on it, and the econo-bloggers are… well, appalled would be an understatement. One says “They’ve basically created a Cyprus Euro that is a euro only in name!” (i.e., currency controls creating a second-class euro).
I would not put money into commodity futures right now. From what I can tell, that’s what everybody else is doing, which is driving commodity futures sky high. The problem is that those futures won’t happen at that price because it simply isn’t going to be feasible, which in turn will cause them to crash in the, uhm, future.
Mattresses are starting to look good right now, but the problem is that coins and dollar bills make for lumpy mattress stuffing, and that of course is all that mattress money is good for, since it is contributing nothing — nada, zero, zilch — to current economic activity. Say, wait, I have an idea for what these people can do with all their mattress money, they can invest it into our startup! 😈 Yeah, if only, heh. Finding angels who don’t want 90% of the company upfront is a decided problem…
People with money have no intention of actually investing it in anything worthwhile, they would rather pay the US Treasury to take it in the form of T-bills. This is the reason the ‘troika’ is now attaching bank deposits – there is now other way of getting it, other than just have the European Central Bank act like a central bank and print some more.
The troika just don’t seem to understand banking, which is rather amazing. This settlement pretty much seals the fate of Cyprus banks, and will certainly cause major problems for other Eurozone countries. If enough people go back to a straight cash system, the Euro is doomed along with its banks.
As Duncan keeps pointing out, a lot of the big depositors are businesses, and they have been severely affected by the ‘bank holiday’. The austerians are doing their best to destroy all of the economies in Europe.
The commodities thing was sarcasm. Commodities are even more obviously gambling than stocks and bonds. The only way to make it more obvious would be to move it from Chicago to New Orleans.
The few people who are willing to invest these days tend to be vulture capitalists, who are more interested it draining every penny out of a company than creating a long term, profitable business.