Tuesday, 13 March 2012

08:27 – I’m cranking away on the QC1 galleys of the biology book. I hope to finish that job tomorrow, although it may slide into Thursday.

Things are getting a bit tense in the EU, with Portugal likely to need a bailout soon and Spain announcing that it’s not going to comply with the austerity measures recently agreed. Here’s an image that sums things up pretty well. That’s Spain’s economy minister on the left and the president of the Euro Group on the right.


14 thoughts on “Tuesday, 13 March 2012”

  1. The US Federal Reserve is going to stress test the banks against a worst-case scenario.

    Now, correct me if I’m wrong, but didn’t the European central bank test their banks last year? Against a “worst-case” scenario? And didn’t the “worst case” turn out to be laughably understated? And didn’t a bunch of the banks fail anyway?

    Anyone want to place any bets on how well the US banks will do in this test?

    Me, I’m betting that in the public report, nearly all will pass with flying colors, with just a few needing a slight change in the way they do business. Given that all of the economic data coming from the US government is obviously made up, the only real requirement for a report of this type is to decide what your conclusion will be before you write it. After that, the data just make themselves up.

  2. Europe has had 2 stress tests, and are about to do yet another. The officials in charge say this is a “learning experience” for them, and they admit that the first test was not very realistic.

    There are way too many variables to do an imaginary stress test. It’s not like you can put a bank in a wind tunnel and test the wings until they fall off. So these stress tests are worthless, IMO.

  3. Of course the banks will pass. It is an election year and none of his minions will let any thing as trivial as the truth stand in the way of the anointed one’s predetermined reelection.

  4. Not worthless. They have negative worth. Their purpose is to deceive people. The truth is that every eurozone bank is already bankrupt, and was bankrupt even before they collectively accepted a trillion euros from Draghi. Nearly all of what the EU has been doing for the last two years has actually been an attempt to conceal the real status of EU banks. If they were all required to mark-to-market their so-called “assets”, it’d immediately become obvious that they were all bankrupt. I mean, until the Greek debt deal last week, most of these banks were carrying huge amounts of Greek bonds on their asset sheets at face value. The same is true for their “assets” in bonds of Ireland, Portugal, Spain, Italy, and so on. Ultimately, most or all of those will default, wiping out those assets. But even ignoring that, if the banks would just carry those bonds at their current market values, the banks would all have negative net worth.

  5. But it gets better. You know about the PRC’s booming economy, the economy with a new city built every week and power plants going up and supplying the world with consumer goods? Well, they’re heading for a splat. This has been known for years, and also ignored or actively hushed up for years.

    What tipped me off first, close to ten years ago, was the closed-book accounting they use. Companies and banks simply told investors and depositors that things are juuuust fine, going great, and no you can’t see any records to prove it. In the US, companies with open records and audited books play lots of games with the numbers*. How much worse must the fraud be when the records are closed? If a system can be easily abused for someone’s profit, the shallowest knowledge of human nature suggests that it will be abused.

    The second tip-off about the PRC’s banks was learning that, in the command economy of tyrannical China, banks were required to give loans to family and friends of powerful officials. These loans, of course, will never be repaid, and are viewed as a cost of doing business. The problem is that the amount of these loans is greater than the nominal value of the banks’ assets. Even if every other loan is repaid, even if every investment returns a profit, the banks are still bankrupt.

    * I’m not an accountant, but I’ve done a lot of work with customizing accounting software or fixing accounting databases and have noticed a few things over the years. And in addition the occasional head of a not for profit has asked me to help move things or make a “customized” report before a board meeting.

  6. Yeah, a year or two ago when I commented about how bad things were with China, I got a lot of emails ridiculing me. My batting average on predictions has been one hell of a lot better than most so-called analysts’, but being proven right is a small comfort when what I’m right about is the economy collapsing.

  7. Yah. It’s one of those “I’d love to be shown wrong” evaluations.

    But it’s best to prepare for being right.

  8. I have no fear of US spiders, but Aussie spiders scare me silly.

  9. Citi just “failed” their “stress test…” LOL.

    O what fools these mortals be, indeed…

  10. RBT wrote:

    “I have no fear of US spiders, but Aussie spiders scare me silly.”

    Ha! What a wuss! I haven’t seen a spider worth avoiding for many years. The Redback and funnel-web are well worth avoiding but I haven’t seen any of them for ages.

    I well remember when I was a kid hearing a blood curdling scream from my sister’s room. We rushed to see what was wrong, there was a largish huntsman spider on the wall. Geez, even I’m not afraid of them. Dad dispatched it with a broom.

  11. I don’t kill spiders but I really dislike their cobwebs, which is the situation here at an old farmhouse. Constant battle. And some of them we can only see during certain times of the day, when the light changes.

  12. That’s why I hate going for walks at night in summer. Always walking into their webs. Winter’s colder (like a Maine summer) but at least you don’t walk into cobwebs.

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