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Spooky parallels between Great Depression and euro crisis -
(www.telegraph.co.uk) Recent signs of global economic weakness have
caused me to muse on the comparison between the world economy now and during
the 1930s. The similarities are spooky. In regard to the depth of the downturn,
the comparison is very different between countries. In the US and Germany, the
loss of output since 2008 of about 5-7pc hardly registers against the losses
registered during the Great Depression, when output fell by 25pc. But the
recession here in the UK has been greater. Contrary to the folk memory of a
disastrous decade, in the 1930s the UK did relatively well. Of course,
unemployment at first rose alarmingly – and this counted for far more then as
living standards were lower and there was less support for the needy. Yet
output here only fell by about 8pc, and it subsequently recovered rapidly. In
the popular imagination, the slump of the 1930s was set off by the sharp falls
in share prices in the Wall Street Crash of 1929. In fact, the direct effect of
the Crash was probably not that great. More important was the international
banking crisis which followed the collapse of the Austrian bank, Creditanstalt,
in 1931.
Britain and Europe failing to tackle technically insolvent
banks - (www.telegraph.co.uk) Britain and Europe are
failing to tackle the problem of technically insolvent banks and are trying to
buy time with QE, summits, and other can-kicking measures. British banks are
sitting on “£40bn of undeclared losses”. So says Pirc, the UK’s leading
shareholder advisory group. What’s more, Pirc argues, the massive backlog of
undisclosed bad debts is preventing our banking sector from making vital,
growth-boosting loans to creditworthy businesses and households. It doesn’t
surprise me that some of the UK’s leading banks are technically insolvent. What
does surprise me is that it’s taken until last week for a respected
professional body such as Pirc to state the obvious.
Spanish Bonds Drop on Concern Bailout Not Enough - (www.bloomberg.com) Spanish bonds fell, pushing 10-year yields up
by the most in almost a month, on concern the nation’s request for bank aid won’t
be enough to stop Europe’s debt crisis from spreading. Italy’s
securities declined as investors bet the country would become the next focus of
Europe’s financial woes after Spain’s request for as much as 100 billion euros
($125 billion) of support. Spanish securities reversed an earlier gain on
speculation investors holding them will rank behind official creditors in the
queue for payment following the rescue. Portuguese bonds advanced after Prime Minister Pedro Passos Coelho said its bailout conditions may
be relaxed. “This bailout doesn’t solve the euro-region debt crisis,” said
Christian Reicherter, a Frankfurt-based analyst at DZ Bank AG. “There is
skepticism about whether the money is enough for the banks and whether the
nation might also need help, and this will keep Spanish bonds under pressure.”
Italy Moves Into Debt-Crisis Crosshairs After Spain - (www.bloomberg.com) The 100 billion-euro ($126
billion) rescue for Spain’s banks moved Italy to
the front line of Europe’s debt crisis, as the country’s bonds and equities
slumped on concern it may be the next to succumb. Italy’s 10-year bonds
reversed early gains today in the first trading after the Spanish bailout.
Their yield rose by the most in a day since Dec. 8, adding 27 basis points to
6.04 percent. Shares of UniCredit SpA (UCG),
the country’s largest bank, had their steepest decline in five months. “The
scrutiny of Italy is high and certainly will not dissipate after the deal with
Spain,” Nicola Marinelli, who oversees $153 million at Glendevon King Asset
Management in London, said in an interview. “This bailout does not mean that
Italy will be under attack, but it means that investors will pay attention to
every bit of information before deciding to buy or to sell Italian bonds.”
Bank bail-out won't end Spain's property nightmare - (www.telegraph.co.uk) With Spain's property bust
far from bottoming out, any capital injection being discussed by European
leaders for Spain’s banks is merely a sticking plaster. Just over a year ago,
Bob Diamond went to Spain. The chief executive of an international bank
visiting a nearby foreign country in which it has exposure would not normally a
story make. But in this instance, it was no ordinary trip. For in the
penultimate week of May 2011, Diamond, only five months into the top job at
Barclays, went knocking on the door of then Spanish prime minister, Jose Luis
Rodriguez Zapatero.
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