How they will be able to afford this (g)astronomic libation to the Gods of “Equalité” was not sufficiently discussed other than the mob appeal of taxing the rich bastards, who no doubt will have already arranged their affairs to pay far less than the 75% imposition. It reminds me of Denis Healey, before he himself became part of the landed gentry, saying he would tax the rich “until the pips squeak”; thus begetting the UK’s supremely efficient tax avoidance industry.

 In Greece it was even more divisive. With 32 parties standing they have three days to cobble together the Big Fat Raving Monster Euro Moussaka coalition which will be in charge of ouzo production. Growth in this part of the economy is essential as there won’t be any anywhere else and as it slowly dawns on the rag bag of ultra left and right that there is no more money, “austerity”, as defined by the Bundeskanzlerin, will seem like a golden opportunity missed; so pass the bottle Spyros oblivion beckons…

 All this talk of promoting growth rather than austerity misses the point entirely. Who is going to give the Greeks, or the French for that matter, the amounts of money they would need to fill the almighty hole in which they find themselves along with most of the rest of Europe, the UK and dare I say it the US? If your answer involves a central bank don’t pass Go and head straight for jail which is where the banksters and their politico/media fan club should all be anyway.

 It is quite extraordinary that the propaganda machine allows people to vote against austerity but yet somehow to think that the answer lies within a single currency regime run by a group of deluded politicians who think they understand the laws of economics, which, by the way, aren’t working for anyone right now and arguably never have. It’s not just a “dismal science” it is not even a science at all!

 In the days to come the pressure on the new governments from the axis powers in Brussels, Frankfurt and Berlin to toe the line will be hard for them to resist. The voters may not have understood entirely what they were voting for nor how they would achieve it, but they will be less than happy to find their democratic voice silenced.

 History doesn’t repeat itself but it does rhyme and Harry Truman understood the issues we face when he said, “Experience has shown how deeply the seeds of war are planted by economic rivalry and social injustice.” Be careful what you vote for… www.viewfromthebridge.co.uk

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Talking of whom…the Old Man of Oz and his unspeakable offspring may be coming to the end of their days, but not before they do for the leadership of the Tory party. Cameron should sack Hunt but will he? Because he is as knee deep in lies and hypocrisy as his junior minister the spotlight would then focus even more tightly on the PM. Who can we trust these days to look after our best interests? I ask that question because I really don’t know the answer.

 And I could ask the same question in the US, France, Greece and Ireland where elections or referenda are taking place sooner or later. May 6^th could be the turning point as France and Greece go to the polls. In both countries the stronger challengers are determined to have some say in the renegotiation of the EU austerity fiscal pact despite the Oxymerkel (the EU version of oxymoron suggested by “The Slog” a site well worth a visit) saying, “the discussion is closed.”

 She does hail from what was East Germany and has learnt much from her friends in the Stasi about “negotiating” tactics. The Greeks should be easy to deal with. Threaten to turn off the spigot and a light may come on in Athens. On the other hand it could turn into a riot! So the more subtle approach would be to find a pro-Troika puppet, but with 32 different parties standing it will be the coalition from hell that wins this one; assuming of course that the dirty tricks brigade doesn’t scupper the whole thing. Apparently a relatively small but essential part of the legal process required to hold an election has “gone missing” but this is Greece so nobody is bothered…unless of course the result is not to the liking of Lagarde, Super Mario, Rompuy Pompuy and the OxyM; all sworn upholders of democracy…my foot.

 In France the mood is “anything but Sarkozy” who would be deemed a rabid socialist in the US so quite what they would make of Hollande I shudder to think and so would they! He is however already back tracking on his fiscal pact renegotiation ploy saying that of course there should be austerity measures – a 75% tax rate for the greedy capitalists for starters – but there should also be some expectation of growth, a theme echoed by none other than Herman, the Chief von Muppet in Brussels who has suggested yet another EU summit on the matter, somewhat dangerously overlooking the fact that the Bundeskanzlerin has said, “Ze diskussion iss closst!”. That isn’t the fat lady singing by the way; it sounds more like tanks starting up to me…www.viewfromthebridge.co.uk

 The first subject that is driving me to despair is Japan and I don’t mean the fact that its debt levels make Greece’s look trivial (they are to the Greeks, but not to the rest of Europe) or that its deflationary tendencies are an issue, but that Fukushima is still a nuclear disaster waiting for another earthquake.

 Because radio activity is “invisible” the reporting of it in the press has remarkably similar properties…Just in case you missed it, here is TEPCO’s (Tokyo Electric Power Co) plan for “decommissioning”. Phase 1 – in 2 years, begin the process of fuel removal from the spent fuel pools. Phase 2 – in 10 years, begin removing fuel debris (solidified fuel and melted cladding). Phase 3 – in 30-40 years, complete fuel debris removal and the processing and disposal of radioactive waste. There are over 1600 tons of spent nuclear fuel in the pools, which are in the six reactor buildings or what remains of them. TEPCO admit that “as of the end of February 2012, the full extent of the damage to the RPV (reactor pressure vessel) cores and PCVs (primary containment vessel) was still under investigation”. In other words they don’t know how bad things are, but a modest little earthquake in the 5-6 range (very common in these parts) might just help them find out sometime over the next 40 years….if you haven’t read Neville Shute’s book – On the Beach – I suggest you get a copy and an airline ticket to anywhere in the Southern Hemisphere.

My next potential stressor is listening to those gentle folk who don’t think that the stock market is being manipulated. To move them right out of their “comfort zone” I would suggest that ALL capital markets are currently in that state; stock, bond, currency, commodity, derivatives, property; you name it, someone else is controlling it and for their benefit not yours. Globalisation means that the major manipulators facilitators of global finance are so big that their mere presence moves markets but there are those who believe that they wouldn’t use this to their advantage; oh dear… We are not just talking greedy investment banks here; regulators and governments are even bigger sharks fish in this very murky pond.

 And then we have the MSM. How often do you hear people say that they don’t believe anything they read in the newspapers? So why do they read the wretched things then? And don’t watch the news on TV either; same anaesthetic propaganda. In fact switch the thing off and turn it into a bird table you will be amazed at how much extra productive time that will give you! And by not paying your sub to the “man in the sky” another evil empire will slip back into the ooze.

 While I am in overdrive a mention of the euro, that last lingering but fatally flawed bastion of european union (lower case now obligatory), will not go amiss. It is doomed. Greece will be first out before the year end. The last bailout was a complete farce with the new improved whiter than white debt trading at 20% of par value so yet another default is inevitable…and soon. Who will be next? Quite possibly France. Sarkozy is dead in the water so we face the prospect of Francois Hollande vowing to “dominate the financial bogeyman as soon as the election is won”. Good luck with that one. Right on cue a futures market on French government debt is to be opened which will make it even easier to price OATs (obligations assimilables au Tresor – French gilts) “a la grecque”. Should be an interesting ride for the new government!

 That’s quite enough for this week. In the next edition we will be talking to people who think that we still live in a democracy…aaargh! www.viewfromthebridge.co.uk

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 The ECB is well capitalised”, he told a group of students at George Washington University. Of course it is, if you assume that the odd trillion of toxic collateral that has been passed their way by European banks, in exchange for some real “folding”, is valued at par, sans haircut or any attempt to mark the price to market.

 His biggest whopper, which he made under oath to Congress in 2009, was that “the Federal Reserve will not monetize the debt”. Yet three years later he hasn’t been locked up, but is still in office spouting yet more nonsense. He also told the students, many of whom will have been scarred for life by this experience, that a return to the gold standard was an anachronism that couldn’t, and wouldn’t, happen. You get given a hard time being just plain bullish on precious metals, but mention the “S” word and the men in white suits (sent by the men in the grey ones…) are on their way pdq.

 This is typical of much of what some quaint folk like to call democracy. We are not going to have a debate about this because it’s all far too complicated and you won’t understand and explaining it will eat into the time that you would rather spend watching X Factor…

 The truth about the “failure” of the gold standard in the ‘30s was that governments deliberately meddled with it to disguise their own policy mistakes that led to the Depression. Bernanke, allegedly, is an expert on the history of this time but as Napoleon said “History is a set of lies agreed upon”. (He’s nearly as good as Churchill for a good quote isn’t he?) By denying any debate we are forced into tinkering around with fiat paper and ever increasing debt.

 A full gold standard would indeed be a big ask, but let us at least acknowledge that having some backing to what we now nervously call money might just have some merit. In fact it has a stupendous amount of merit, but sadly very few takers. So please wake up USA and vote Ron Paul or you will all be making history that you will have to lie to your grandchildren about…a lot.   www.viewfromthebridge.co.uk

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 Their meeting went on for quite a lot longer than it takes to answer the question – “Has Greece defaulted? Yes or no.” – so it is quite likely that some on the list felt they were in for more than their fair share. Whilst the net exposure is small the gross tally is $68.9 billion according to Bloomberg so there is a lot of room for “error” here. In fact one Austrian bank, a “bad” bank left holding the baby (Greek CDS amongst other toxic waste) after an earlier reconstruction has owned up to a €1.3 billion hole in its balance sheet as a result. Undoubtedly they will not be the last casualty in this chapter, but it won’t be any of the “big boys” this time around or there wouldn’t have been a “credit event” would there?

 Given the shenanigans in this apology for a currency “union” you really shouldn’t be surprised to discover that there is far more Greek debt around than we thought we had given them “credit” for. On top of the sovereign debt it seems there is another $100 billion or so of paper, issued by the Athens Urban Transportation Co, the Hellenic Railway and assorted Greek banks amongst others, “guaranteed” by the Hellenic republic. Guarantees in financial circles tend to come with a pinch of scepticism, but when combined with Greek mythology they become truly “heroic” assumptions. And no one thought to mention these obligations before putting the taxpayer on the hook for the €130 billion bailout? Heaven forbid that anyone gets to see the full picture…

 And what did the politicos make of this deal of the century? The Greek finance minister, Evangelos Venizelos, said that the deal had helped Greece to avoid a “nightmare scenario” and given it a “new opportunity”. Blah, blah, blah! Have another box of cream donuts before you “waste away” along with your country’s economy. Far more realistically la Merkel admitted to the Bundestag that there were “no guarantees” (there’s that word again…) that the second bailout would work and that “the risks of turning away from Greece now are incalculable. No one can assess what consequences would arise for the German economy, or Italy, Spain, the eurozone as a whole and finally for the whole world.”

 Well Angela, one way or another, I think we are going to find out just what those consequences are going to be sooner than you might think. www.viewfromthebridge.co.uk

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 He reiterated the fact that monetary policy will remain accommodating by maintaining the current low rates of Fed funding until late in 2014. In August last year that target had been moved out to 2013 but he admitted that the FOMC had not foreseen the further weakening in the economy, which required the extension to 2014, at the time of their meeting in January. And now he asks us to believe his forecasts for GDP in 2013.

 Ron Paul asked him if he shopped for his own groceries. After a telling pause a bemused Bernanke said that he did. In that case, “Why do you continue to lie about the rate of inflation?”, asked the inimitable representative for Texas’s 14^th district. I didn’t take in the less than credible response; my attention having been diverted to the contemplation of what Ben might have in his supermarket trolley.

 He was asked about the plight of savers caught in the poverty trap of said accommodating policy. His answer was that savers (a very different breed from investors you will agree; a fact lost on this economically impotent potentate) should have their money in the stock market. His argument being that if the Fed’s policies helped the economy to recover, equity markets would grow too. So far the trillions of bail out dollars and money printing have indeed pushed the markets up from their 2008 lows, but mainly because there was no other place for the money to go, so the housing bubble is replaced by another ramp in asset prices. His silence on the next phase of quantitative easing has, however, derailed that particular ploy for the time being. Another month or so of swooning stock markets and the presses will be back to running at full tilt – it is an election year after all.

 Large corporates don’t need funding because they have got lean and mean, in large part, by cutting their workforces, but entrepreneurial small businesses in the US can’t get the working capital they need even if they are pulling bars of pure gold out of the ground for free. And when he said that the housing market remains weak because borrowers are unable to meet the banks’ borrowing criteria I nearly regurgitated a mug of Starbucks finest into my lap! Has he already forgotten that the failure of the banks to adhere to anything close to sensible lending policies started the financial Armageddon that he is yet to find a way out of?

 And then the quote of all quotes and the double espresso was properly shot gun sprayed across the room…. “The ECB is well capitalised”. I am sure I heard him say it, or am I really the deaf old bastard that everyone tells me I am? Yes! I know the answer to that question, but the sun will rise in the west before he is proved to be right. www.viewfromthebridge.co.uk

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It is abundantly clear that this concert party of central banks (not the collective noun I would normally use…) will do everything it can to keep the global financial system afloat when the inevitable happens in Greece. The ECB are about to go with LTRO 2 which should provide another €½ trillion to Europe’s beleaguered banks. Even the “mighty” HSBC is rumoured to be in the queue; not because they need it, but because it’s a ridiculously cheap form of finance that they can make a turn on and/or support their activities in the gold market…

LTRO is the acronym for Long Term Refinancing Operation. The cash they are providing is for a three year term. Since when did three years become “long term”? This must be the finest example of can kicking yet. Put the banking industry on life support whilst we try and contain the Greek fall out and leave off worrying about the consequences for a year or three!

Although we are being fed a stream of positive economic news, mainly from the US (where it is election year don’t forget…) there is a notable air of caution around and the main factor in the rise of equities so far this year has been the blizzard of cheap cash. What is intriguing is that in large corporate world, earnings are on the up (the new lean and mean machine) which is adding to their own cash piles, but they can’t find anything to spend it on. With the S&P having doubled since 2009 and being not that far short of its all time high that should hardly come as a surprise.

Apple, everyone’s favourite (is there a hedge fund out there that isn’t long?), succumbed to a bout of Newtonian gravity on Wednesday; again not unexpected given the euphoria post the iPhone 4S launch. We may yet see higher prices in equities as the printing presses continue to roll, but as the final act of the Greek farce plays out, it would be wise not to ignore the words of the Bard of Avon to “Beware the Ides of March”. www.viewfromthebridge.co.uk

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 Central banks never utter the words quantitative easing, so the Bank calls it an addition to its “asset purchase programme”, which was only hiked to £275 billion back in October. The accompanying rhetoric states that inflation is on the way back down and may fall below their target of 2%, mainly as a result of the VAT increase last January falling out of the equation and lower energy prices, (despite Brent crude being over 10% higher Y-o-Y in sterling terms..); a convenient excuse perhaps.

 The ECB has been shovelling money out to the European banks with indecent haste and their cunning plan is that those banks will then use that cash to buy junk bonds (Club Med sovereign debt) at much higher yields than the cost of borrowing. So far it hasn’t worked that way as the banks have just parked the money back with the ECB, but it has put a floor under the short end of the bond market.

 This makes the likelihood of successful bond issuances by the PIGS marginally more likely, but left the BoE wondering when the markets will wake up to the fact that our “emperor” is wearing little else than a very ragged pair of shorts. If they can keep up the illusion that the flight to safety “wings” he has tattooed on his chest will keep us airborne, they may postpone the inevitable for a time whilst attention is focussed on the rest of Europe. Technically the UK is part of Europe but then politics has rarely had any truck with mere geography…

 And so to Greece. Like many European nations the Greek government is a coalition party, but with a minority, making national unity on the issue next to impossible. Already a two day strike has been called and frankly the projections for GDP “growth” and debt repayment are utter nonsense; a point not missed by the IMF and the German Finance ministry who, let’s face it, are running the show.

 The markets meanwhile are in a sanguine mood, but why wouldn’t they be with all this central bank money sloshing around the system? If Greece was the only problem in Europe a solution would have been found ages ago, but it isn’t and we are back again to moral hazard, which I banged away about yesterday. If the Greeks get a deal then Portugal et al will be in the queue faster than the central banks can electronically print the money to pay them.

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In the good old days of accrual accounting balance sheets were signed off as showing “true and fair value” and there was an actual number for contingent liabilities. Today “mark to market” has become “mark to unicorn”… Back in a somewhat more realistic world, if a company (even, heaven forbid, a bank!) was insolvent it went bust thereby giving a salutary reminder to investors, depositors and creditors of the maxim of caveat emptor. By creeping paralysis that principal too has been abandoned by governments and regulators who believe they are better equipped to save us from our own mistakes. The consequence (unintended or otherwise) of which is to compound the error.

Once the basic tenet of capitalism, the efficient allocation of capital, is circumvented, the virus spreads. The current wisdom is that when the patient becomes too big to fail more medicine is administered and, “Guess what?”, the patient gets bigger. It then becomes an act of faith to assume that in time the medicine will work. Viruses, like our financial systems, are highly adaptable and become immune to the antidote and ultimately kill their host, as Greece is about to find out.

It seems that economics has become like a religious experience based on superstition and myth and naysayers are tied to the stake and burnt…or worse. Keynesianism may have worked in the past (more by accident than design…) but printing money to infinity no longer does the job because the banks need this medicine – liquidity – to stay alive whilst the host, to whom the money should be flowing – the economy – is dying slowly on its feet.

Maybe Bernanke should set loose his helicopters full of cash. At least this would ensure a fairer distribution of the largesse, although being an avowed student of the Great Depression; he will know that hyperinflation comes next if he does. He will claim to be able to control inflation by employing Volckeresque rates of interest, which reached 20% in the early 80s (to control CPI at a mere 15% – hardly “hyper”) but ask yourself how much that would cost the taxpayer in terms of servicing the unfeasibly larger pile of US and other sovereign debt. Once you have worked that out you will need to break out the malt and have a sizeable dram!

But, and it’s a big but, the central banks and their acolytes have kept this ponzi scheme going for a very long while, and may well succeed to do so for some time, with the rather bizarre consequence that I may still reach a care free dotage reminiscing about the occasions on which I avoided moral hazard in my youth!

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Investing is little different although it is rarely fatal except to your wealth rather than your health; although a shortfall in the former often results in a similar effect on the latter. A high percentage of accidents happen within close proximity to home; familiar territory creates a false sense of security. And so it is in the investment world. We all remember the old adage that property prices never go down, which they didn’t for a long time, until of course they did…

The global financial system is in crisis but it won’t affect me seems to be the current mantra. Debates about the bonus for Stephen Hester, CEO of RBS, and the impending loss of peerage for the former incumbent are merely smoke screens hiding far more important issues that politicians, and those who have elected them, are unwilling or in many cases unable, to contemplate. Better to join the “blame game” rather than have a serious discussion.

We have been living for far too long on a diet of bail outs, money printing and flawed economic policies, which the politicians fervently want us to believe are the solutions that will “see us through”. Issuing more debt to solve the debt problem is just not going to work is it? Ask the Japanese. By 2013 their total government debt is estimated to reach one quadrillion yen – Y1,000,000,000,000,000 – that’s a lot of zeros and just as you were getting used to trillions. Debt to GDP will be close to 250% and yet we hear that Greece will still be struggling at 120% and that is after the heroic assumption that there will be more EU assistance and a further round of debt defaults!

Japan has got away with it for over 20 years by having a very strong export sector and a population of inveterate savers prepared to buy Japanese government bonds (JGBs). However they have just posted their first trade deficit since 1980 and the world is waking up to the fact that the emperor has no clothes. The US obviously thinks it can pull the same trick. Bernanke did not go so far as to announce QE3 last week, but has pushed back the date before he sees any rise in interest rates, by a year, to 2014. Gold rose nearly 5% by the close on Friday on contemplation of more clandestine money printing by the Fed.

But surely the US economy is booming is it not? The Financial Times headlined US GDP for the last quarter of 2011 as “surging” to 2.8%. Buried lower down the column it was mentioned that 1.9% of it came from a rise in inventories (thus far unsold and likely cannon fodder for the spring “sales”) and that analysts were expecting the number to be 3%; although the fact that they got it wrong should surprise no one… For those of you who only ever read the headlines Thomas Jefferson’s quote is as appropriate today as it ever was 200 years ago.

The man who reads nothing at all is better educated than the man who reads nothing but newspapers.

Do your homework, position you portfolio for all likely hazards and please don’t forget to wear your crash helmet.

PS For those of you mystified by the title of this piece I should explain that apart from being an eminence grise in the investment world Jim Rogers is an inspiration to adventure motor bikers. In the 80s and 90s, way before Charlie Boorman and Ewan McGregor set off in 2004 on the “Long Way Round” – London to New York via Siberia – followed by yours truly (sans television crew but with equal trepidation) in 2009, Jim did a little trip of 100,000 miles across six continents on an aging BMW. Whether he wore his bow tie all the way around I don’t know but what I can tell you is that his book – Investment Biker – is worth a read whether you are into two wheels or not.

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