Is the Euro dead in the water?

[larus]

You said: "What's happened to sorting out the "Too Big To Fail" banks? Yep, sweet FA..", so I gave some relevant counterexamples...

If you want to separate retail and investment banks then that's a much more specific issue! I'm not trying to deceive you... such a separation does not exist in our current world. But it doesn't mean nothing has been dine.

Actually, no it's not. The problems with the banking system were caused by the investment arms being able to "gamble" with the backing of the deposit arms of their institutions. This is what was regularly discussed as being the root cause of the TBTF banks as was the premise of the bank bail-outs. "This will never be allowed to happen again" - yeah, right.

Too many politicians want their cushty number from the financial institutions when the leave politics.

 

[Baldseagull]

Check our government debt/GDP ratio and that of Italy. Once a debt/GDP gets to a level where markets lose confidence, then bond rates ratchet up. Theirs is about 130%. Ours is about 86% roughly (from memory).

You are correct, but in Italys favour, they are not on the brink of cutting their largest sector. In a few months time, if UK based Banks don't get some good news in the negotiations, ours will look worse.

 

[yxee]

Actually, no it's not. The problems with the banking system were caused by the investment arms being able to "gamble" with the backing of the deposit arms of their institutions. This is what was regularly discussed as being the root cause of the TBTF banks as was the premise of the bank bail-outs. "This will never be allowed to happen again" - yeah, right.

Too many politicians want their cushty number from the financial institutions when the leave politics.

I do agree, but banks are still useful entities. When you say "gambling" you mean lending, really, and a bank that does not lend out its retail deposits is fundamentally unprofitable. Banks may rely on "trust/faith" in your words but we also rely on banks to offer mortgages, business loans and pay savers interest. Retail banking is still a useful thing! The problem wasn't that they lent the money. The problem was that they lent it without much idea of what the risks were. And I think they're much more constrained nowadays as to how much (and to whom) they can lend.

Agree wholeheartedly on the revolving door comment.

 

[jakarta]

Wouldn't the best solution to this be to rename the Euro as the Deutsche Mark and just let the Germans run things, which after all has been their aspiration for the last 100 years or so? Saves them parking the Panzers on the Lawn after all...

 

[Half Time Pies]

Quite a lot? Capital requirements are higher, leverages are down, banks now have to publish resolution plans...

A bailout isn't bailing out the banking elite. It's wiping out the shareholders to save the depositors from losing all their money. The banking elite are the shareholders. The average man on the street is the depositor.

The thing is you don't have to bail out a bank to guarantee the average man on the streets deposits. The UK financial compensation scheme guarantees £75k of deposits per person per firm if a financial institution goes bust.

 

[Half Time Pies]

I do agree, but banks are still useful entities. When you say "gambling" you mean lending, really, and a bank that does not lend out its retail deposits is fundamentally unprofitable. Banks may rely on "trust/faith" in your words but we also rely on banks to offer mortgages, business loans and pay savers interest. Retail banking is still a useful thing! The problem wasn't that they lent the money. The problem was that they lent it without much idea of what the risks were. And I think they're much more constrained nowadays as to how much (and to whom) they can lend.

Agree wholeheartedly on the revolving door comment.

If banks just took deposits and lent them out then that would be OK but the majority of what a bank lends out is money created as debt from thin air. The bank then charges interest on the freshly created money and then uses the proceeds to speculate in the financial markets, raising asset prices and creating bubbles that eventually burst and lead to recession.

 

[nicko31]

The Euro hasn't had a great year, but sterling has only held its own against the Argie peso, Turkish Lira, though we didn't at least outperform the Venezuelan Bolivar.

If the Euro goes down its bad news for us Brexit or not

 

[larus]

The Euro hasn't had a great year, but sterling has only held its own against the Argie peso, Turkish Lira, though we didn't at least outperform the Venezuelan Bolivar.

If the Euro goes down its bad news for us Brexit or not

Here they come. The sobbing Remainers. Currencies fluctuate, so look at the chart which I posted on page 1 which shows the fluctuations of the Euro/£ rate over the last 10 years. It's been as high 1.52 and as low as 1.02. That's wither a 50% or 33% swing depending what your starting position is. So please don't keep whining on about Brexit and Sterling. Markets hate uncertainty hence the impact to Sterling, but this doesn't mean that the UK economy is weak. In fact, nearly all statistics since Brexit have exceeded expectations and these 'esteemed' forecasters are looking very foolish.

It's also widely accepted that the rate cut by Carney was not needed but was more likely a "political" action.

 

[beorhthelm]

Actually, no it's not. The problems with the banking system were caused by the investment arms being able to "gamble" with the backing of the deposit arms of their institutions. This is what was regularly discussed as being the root cause of the TBTF banks as was the premise of the bank bail-outs. "This will never be allowed to happen again" - yeah, right.

thats a simple, popularist view of what happened. ignores that Lehman didnt have a retail, deposit arm, or that banks most impacted in the UK, North Rock, HBOS and others that didnt have "investment" arms. RBS was about the only mixed operation bank requiring a bailout, all the others sorted themselfs out. across europe their problems lie with bank's massive bond holdings, the opposite end of risk from investment banking. the rules around bail ins are now in place, capital buffers increased, so we cant say "nothings been done", just that its behind the scenes measures. which is precisly why its a problem for the Italian banks, because they have a tradition of selling senior bonds to the retail market, so if they are forced to bail-in, take a hair cut on bond values or swap debt for equity, it will hit the general the public.

 

[nicko31]

Here they come. The sobbing Remainers. Currencies fluctuate, so look at the chart which I posted on page 1 which shows the fluctuations of the Euro/£ rate over the last 10 years. It's been as high 1.52 and as low as 1.02. That's wither a 50% or 33% swing depending what your starting position is. So please don't keep whining on about Brexit and Sterling. Markets hate uncertainty hence the impact to Sterling, but this doesn't mean that the UK economy is weak. In fact, nearly all statistics since Brexit have exceeded expectations and these 'esteemed' forecasters are looking very foolish.

It's also widely accepted that the rate cut by Carney was not needed but was more likely a "political" action.

Looks like the extra debt in this parliament from Brexit will be equivalent to 20 years of EU contributions, there is nothing to celebrate in not being in such a poor state as Italy or Greece

 

[larus]

Looks like the extra debt in this parliament from Brexit will be equivalent to 20 years of EU contributions, there is nothing to celebrate in not being in such a poor state as Italy or Greece

WTF has that got to to with either Euro/£ rate or Brexit?

The banking crisis is still being played out so if you want to discuss Debt/GDP then that's fine. But you mentioned the Eruo/£ rate, got proved to be wrong, so now jumped to debt. What next? Immigration policy?

 

[Brighton Mod]

Yep.

We haven't finished with the last 'Financial Crisis' yet. We're still in the middle of it (or maybe still at the start of it). The question that we should be asking is "If we are now nearing the end of the current expansionary period since the last crash in 2007/8, why are so many countries running with record low/negative interest rates?".

QE (Monry printing/devaluation) is going on all over the world. The banking system, which relies upon trust/faith, is still weak, and this is after the taxpayers have bailed out the banking elite with public money. What's happened to sorting out the "Too Big To Fail" banks? Yep, sweet FA.

Don't get me wrong, I am far from a left-wing fanatic. I'm a natural conservative (free enterprise etc.) guy, but the current fractional reserve banking model feels like it must fail. The requires growth to pay the interest on loans.

Something I read recently is it's time to invest in G. Not gold but guns. Maybe extreme, but if the system does collapse (and I sincerely hope it doesn't), then it will collapse quick. Once the banks go, everything fails.

Despite the spin, we have not recovered from the last crash. WE hear nothing in the news about the Irish, Greek, Portuguese and Spannish bailouts that are clearly not paid down and never will be. Not being attached to the euro will be a godsend.

 

[Baldseagull]

Here they come. The sobbing Remainers. Currencies fluctuate, so look at the chart which I posted on page 1 which shows the fluctuations of the Euro/£ rate over the last 10 years. It's been as high 1.52 and as low as 1.02. That's wither a 50% or 33% swing depending what your starting position is. So please don't keep whining on about Brexit and Sterling. Markets hate uncertainty hence the impact to Sterling, but this doesn't mean that the UK economy is weak. In fact, nearly all statistics since Brexit have exceeded expectations and these 'esteemed' forecasters are looking very foolish.

It's also widely accepted that the rate cut by Carney was not needed but was more likely a "political" action.

You are correct that we are within normal ranges against the Euro, albeit towards the bottom of the range, but in the context of the Euro being talked about on this thread, as a currency about to implode, being at a low but normal historic level against it, is not all that reassuring.

 

[larus]

You are correct that we are within normal ranges against the Euro, albeit towards the bottom of the range, but in the context of the Euro being talked about on this thread, as a currency about to implode, being at a low but normal historic level against it, is not all that reassuring.

Actually it's probably around a mid-point, as the 1.52 peak was 2007/8.

What's keeping the Euro relatively strong is :
1. The strength of the German economy,.
2. The uncertainty regarding BREXIT.

Yes, I accept that the vote has had an impact on the exchange rate, but this is not to say that the exchange rate is reflecting the fundamentals of the economy. nor, is it to say that markets are correct in the relative valuation they attribute to sterling. If markets were sensible and rational, we would never get crashes, as there would be no need for blind panic as everything should already be priced in. So, Remainers can't have it both ways and say that markets are right.

 

[warmleyseagull]

Add to this the stagnant/shrinking economy (due to the deficit/surplus rule of 3% of GDP) which means hat the debt/GDP ratio increases if the economy shrinks slightly. The government are aiming to add about 30Bln Euros (from memory) to the national debt to bail out the banks. Italy is screwed - sadly.

Ironically, it has just started: http://www.telegraph.co.uk/business...-italys-third-biggest-bank-cathartic-release/. 20bn Euro fund to rescue banks set up, with Monte Dei Paschi the first to receive bail out funds. As the article implies, there is no definitive amount that a wholesale bail out would cost, because it depends on future economic scenarios.

It is typical of the eurozone that this is viewed as cathartic release rather than the latest chapter in a tale that will end in collapse of the Euro. As can be seen from Italy's debt clock - http://www.nationaldebtclocks.org/debtclock/italy - the amount to bail out the banks is actually not that big compared to 2.4 trilliion euros of overall debt. It is just that this is symptomatic of the wider problem of Italy's sclerotic economy.

 

[warmleyseagull]

BoE created £70Bn to dump into the economy after the Brexit vote, but apparently we are fine. I am sure Italy can handle doing just over a third of that.

Made a similar point just now. It is actually not that big an amount compared to overall debt, but it is politically toxic given that Brussels decreed bond holders must in future take a haircut if banks need bail out but Italy faces having to ruin many private investors if it complies, so won't and Brussels will once again have to wave through a breaking of its rules.

 

[Herr Tubthumper]

Wouldn't the best solution to this be to rename the Euro as the Deutsche Mark and just let the Germans run things, which after all has been their aspiration for the last 100 years or so? Saves them parking the Panzers on the Lawn after all...

When I look at Southern Rail and the England national team I sincerely hope so

 

[KingKev]

Actually, no it's not. The problems with the banking system were caused by the investment arms being able to "gamble" with the backing of the deposit arms of their institutions. This is what was regularly discussed as being the root cause of the TBTF banks as was the premise of the bank bail-outs. "This will never be allowed to happen again" - yeah, right.

Too many politicians want their cushty number from the financial institutions when the leave politics.

Ring-fencing regulations come in 2018/19 and it's costing the banks a fortune to implement, even ones that really don't have an "investment arm" of any scale as they have to separate things like insurance companies and overseas offices from Uk retail business and have in place resolution plans to prove that a problem in ano part of the business will not endanger the core ring-fenced bank.
Banking is now one of the most highly regulated industries ever seen, and the regulation increases at a rapid pace. Banks now have to spend a fortune every day in an attempt to show that they haven't done anything wrong; effectively post-ppi and financial crisis if a bank can't prove it / its employees didn't do wrong then it s f@cked by the regulators, treasury and competition commission...

So lots of change has happened and more fundamental stuff is on the way....your 'cushty' line doesn't line up with the mass of expensive regulation heaped on banks. If there's a cozy revolving door relationship between politics and business it's into "consultancy" and defence industry more than banking.

 

[nicko31]

Yeah. I read one of the posts (when comparing to the pound) as being a dig about Brexit/Remain. We had all the crap about the pound would trash and look how bad it was etc. The facts don't back this. Maybe my tone was a little harsh I accept

Sounds like you will be delighted with the rising prices and declining living standards that are coming in 2017, a weak sterling is effectively a decline in the nations share price and that's what we've seen.

If you are affluent enough to ride it out and not one of the 16m with less than £100 in the bank good on you

 

[Bob'n'weave]

Sounds like you will be delighted with the rising prices and declining living standards that are coming in 2017, a weak sterling is effectively a decline in the nations share price and that's what we've seen.

If you are affluent enough to ride it out and not one of the 16m with less than £100 in the bank good on you

Swings and roundabouts. More investment for business in the UK on the back of a value for money pound and UK rates means more jobs. No one knows 'what is coming' in 2017. Whatever it is, we are going to be better off with our pound, not the Deutsche Mark, sorry, Euro. You sound like a doom laden remainer. Haven't we heard the 'we're doomed I tell ye, doomed!' routine before??