Latvia: protestors have smashed the treasury and stormed parliament

beaujolais-nouveau

From John Mauldin's Thoughts From The Front Line: While Rome Burns, 20 February 2009

http://www.2000wave.com/article.asp?id=mwo022009

this more sobering note from Strategic Energy was sent to me by a reader. It nicely sums up my concerns:"It is East Europe that is blowing up right now. Erik Berglof, EBRD's chief economist, told me the region may need e400bn in help to cover loans and prop up the credit system. Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans.

"The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan -- and Turkey next -- and is fast exhausting its own $200bn (e155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights. Its $16bn rescue of Ukraine has unravelled. The country -- facing a 12% contraction in GDP after the collapse of steel prices -- is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5% in the fourth quarter. Protesters have smashed the treasury and stormed parliament.

"'This is much worse than the East Asia crisis in the 1990s,' said Lars Christensen, at Danske Bank. 'There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU.' Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4% in the fourth quarter. If Deutsche Bank is correct, the economy will have shrunk by nearly 9% before the end of this year. This is the sort of level that stokes popular revolt.

"The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc -- big change), or rescue Austria from its Habsburg adventurism. So we watch and wait as the lethal brush fires move closer. If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready?"

Graph showing countries' Aggregate Sovereign Credit Risk:

http://www.investorsinsight.com/cfs-file.ashx/__key/CommunityServer.Blogs.Components.WeblogFiles/thoughts_5F00_from_5F00_the_5F00_frontline/jm022009image001_5F00_54BB48CD.jpg

You will not be surprised to see that only Iceland, Ireland, Portugal, Spain and Italy are worse off than the UK. And we don't have fish stocks or natural geothermal springs to fall back on.

Wookster

The UK is actually fairly high risk compared to other European countries according tot he graph.

Rochdale - where are you come come and sprout that all this talk of default & massively unsustaainable government spending is !!!!!!!! and that I am doom- mongering?

zedyy

I predict Ireland will default on its payments by this summer.

zappahey

beaujolais-nouveau wrote: »

Graph showing countries' Aggregate Sovereign Credit Risk:



You will not be surprised to see that only Iceland, Ireland, Portugal, Spain and Italy are worse off than the UK. And we don't have fish stocks or natural geothermal springs to fall back on.

While it's a lovely graph, it's a bit useless with no scale nor context.

Andrew64

An interesting statistic that points to how badly a country's economy is doing is car sales. The 3 worst in Europe are:

Iceland - down 88%
Latvia - down 77.5%
Ireland - down 66%

http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article5728873.ece

Reaper

Why the title for this thread? It seems to have little relation to the contents and I assume refers to the 3 hour riot on 13th January when they didn't storm the Parliament.

Rochdale_Pioneers

Wookster wrote: »

The UK is actually fairly high risk compared to other European countries according tot he graph.

Rochdale - where are you come come and sprout that all this talk of default & massively unsustaainable government spending is !!!!!!!! and that I am doom- mongering?

Yes you are. So what you would like is that I set aside the facts - all of the foreign assets owned by UK banks (which are increasing in value) which offset against their debts (which are decreasing in value - all thanks to how currency moves), and of the credit agencies who see us not as a problem, and the EU who haven't put us on a list of countries crashing over their safe levels of debt, and comparisons with whole swathes of the world where investors are losing their shirts (Eastern Europe et al).

What you would then like me to do is to drop all of that as factual evidence in return for a bar chart which measures "Risk" (value? assets? over which period? in which currency? compared to what?) on a sliding scale of "More Risk".

Or as an alternative I could give my 14 month old son a crayon and a piece of paper - he will produce a scatter chart showing the UK's risk vs other countries. Would you like me to post it for you? Then perhaps it could be posted online on an economics blog as the smoking gun - "proof" that the UK actually is bankrupt after all!

beaujolais-nouveau

Reaper wrote: »

Why the title for this thread?

The answer is in the quote which, I take it, you have not bothered to read.

Wookster

Rochdale_Pioneers wrote: »

Yes you are. So what you would like is that I set aside the facts - all of the foreign assets owned by UK banks (which are increasing in value) which offset against their debts (which are decreasing in value - all thanks to how currency moves), and of the credit agencies who see us not as a problem, and the EU who haven't put us on a list of countries crashing over their safe levels of debt, and comparisons with whole swathes of the world where investors are losing their shirts (Eastern Europe et al).

What you would then like me to do is to drop all of that as factual evidence in return for a bar chart which measures "Risk" (value? assets? over which period? in which currency? compared to what?) on a sliding scale of "More Risk".

Or as an alternative I could give my 14 month old son a crayon and a piece of paper - he will produce a scatter chart showing the UK's risk vs other countries. Would you like me to post it for you? Then perhaps it could be posted online on an economics blog as the smoking gun - "proof" that the UK actually is bankrupt after all!

Just how long do you think Crash can sustain a 10% budget deficit?

MrFonzerelli

Wookster wrote: »

Just how long do you think Crash can sustain a 10% budget deficit?

You can technically sustain a 10% budget deficit forever.
The pound might not be worth much though.

MrFonzerelli

Rochdale_Pioneers wrote: »

Yes you are. So what you would like is that I set aside the facts - all of the foreign assets owned by UK banks (which are increasing in value) which offset against their debts (which are decreasing in value - all thanks to how currency moves), and of the credit agencies who see us not as a problem, and the EU who haven't put us on a list of countries crashing over their safe levels of debt, and comparisons with whole swathes of the world where investors are losing their shirts (Eastern Europe et al).

What you would then like me to do is to drop all of that as factual evidence in return for a bar chart which measures "Risk" (value? assets? over which period? in which currency? compared to what?) on a sliding scale of "More Risk".

Or as an alternative I could give my 14 month old son a crayon and a piece of paper - he will produce a scatter chart showing the UK's risk vs other countries. Would you like me to post it for you? Then perhaps it could be posted online on an economics blog as the smoking gun - "proof" that the UK actually is bankrupt after all!

Yep, as long as other countries accept pieces of paper with ink on, in exchange for goods we're 'sorted' (i.e. unless we run out of either paper or ink:eek:). Unlike eastern Europe much of our debt is in our own currency, so the UK can devalue it.

Pensioners, Savers and Sovereign wealth funds might not be too happy though.