As Peter Lilley said, "There is a thing called a telephone which has been recently invented....

... and most foreigners speak English."

From The Daily Mail:

A massive earthquake off Portugal could trigger a tsunami which would wipe out the Isles of Scilly and lay waste to the Cornish coast, scientists said today.

Experts say that much of the south-western British coast including outlying islands would be destroyed by a 10ft wall of water within four to six hours if there were to be a repeat of the Great Lisbon Earthquake of 1755.

Fears of the natural disaster have been raised by the Devon and Cornwall Local Resilience Forum (LRF), which wants an early warning system like those used across Asia and America* to avoid a British version of the devastating 2004 Boxing Day tsunami.

Unless of course the members of the LRF think that the Portuguese are so spiteful they wouldn't ring up and tip us off.

* The early warning buoys are of course NOT "used across Asia and America", they are floating about in the Pacific Ocean. How they tether them to the ocean floor is another question..?

Fun Online Polls: Bank Holidays and Bail-outs

The results to last week's Fun Online Poll were as follows:

What do you call a week day on which most people don't go to work?

A Bank Holiday - 33%
A General Strike - 8%
Depends on the context - 18%
Comes to much the same thing, really - 34%
Other, please specify - 8%

So that was a pretty close result, but "Comes to much the same thing, really" just scraped through to the finish line. Which is my own view, as it happens. I mean - what would happen if the unions declared a General Strike for a certain day and the government then declared that day to be a Bank Holiday?

Pedant points to Bruce: "As the working population is less than half the population, that's every day of the week that most people don't go to work."
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What is most alarming about the Spanish bank bail out is that nobody is in the slightest bit surprised, they were hotly denying it until the end of last week and they hey presto, come Monday morning it was a done deal and the Spanish PM was hailing it a success for the Euro-zone. So the bankers get away with it yet again and are now presumably limbering up for the next bail out, I guess they'll "do" Italy next, seeing as they/the EU have already got one of their place men in charge.

For the record, following the Irish bail out, in a November 2010 poll our view was that Portugal would be next, followed by Spain. Portugal was duly bailed out five months later but Spain managed to hang on until now.

I (quite wrongly) didn't consider Greece to be a bail out candidate - in November 2011, I asked how long they'd manage to keep Greece in the Euro-zone. Only 18% thought longer than the end of 2011, so a retrospective 'well done' to them.

So who's next?

Cast your vote here or use the widget in the sidebar.

That multi-billion Chinese investment in Thames Water was no such thing.

I think The Telegraph had the most accurate summary of what has actually happened. The BBC's version is also reasonably good. To cut a long story:

1. Thames Water was privatised donkeys years ago, and all those little UK popular capitalists did the decent thing and sold all their shares to German utility concern RWE in 2001.

2. Various pension, investment and sovereign wealth funds set up a company called Kemble Water which bought Thames Water for £8 billion [gross] from RWE in 2006.

3. Stakes in Kemble Water change hands occasionally, for example "In December [2011], the Abu Dhabi Investment Authority, another sovereign wealth fund, bought 9.9pc of Kemble for an undisclosed price. Macquarie European Infrastructure Fund was the majority seller in that deal."

4. The Chinese sovereign wealth fund (China Investment Corporation, CIC) has now bought 8.68% of Kemble Water "for an undisclosed sum which analysts believe is at least £500m [from] Santander Private Equity, part of Spanish banking group Santander's asset management arm, and Finpro, a Portuguese investment vehicle..."

5. So big deal really, legal ownership* of Thames Water has been in foreign hands since 2001 (and chunks of it before then), it is merely that Juan Foreigner has now sold a bit of it to Johnny Foleigner. Not a single penny has been invested in the UK as a result of this, and it's not even as if we have reduced our net indebtedness to the Chinese. George Osborne is making an idiot of himself by prancing round and pretending otherwise.

* Of course, in practice, the UK government, OFWAT and so on still have reasonable day-to-day control over Thames Water. That's the nice thing about selling off stuff to foreigners, instead of them having you over a barrel, you have them over a barrel.

"BES plans debt-to-equity swap"

Since the 'financial crisis' of 2008, loads and loads of non-financial companies have carried out debt-for-equity swaps, most noteably the Big Three car manufacturers in the USA (Ford $10 billion; Chrysler $2.5 billion; General Motors $27 billion, possibly a bit less than that), but because banks knew that they could con governments into using taxpayers' money to bail them out*, very few banks have done so.

Reuters give us a good recent example of a bank doing a debt-for-equity swap, albeit in a very small way:

Banco Espirito Santo, Portugal's second-largest bank by assets, wants to raise up to 791 million euros ($1.08 billion) capital through an offer to swap debt for stock that could lift its core tier 1 capital ratio close to a 10 percent target...

So you see, it can be done, it's nothing dramatic or anything.

* For sure, the US government also lent/invested $80 billion, but they look set to recover over 80% of that, which by government standards was a stupendously good investment.

And the audience said...

Last November 79% of us said that Portugal would be next for an EU-bail out.

The only thing that surprises me is that they managed to drag it out for another four months before it actually happened.

Fun Online Polls: The Euro-zone and The Big Freeze

On a very good turnout in last week's Fun Online Poll (thanks to all 131 people who cast a vote), the result was:

Which country will the EU 'bail out' next?
Portugal - 78%
Spain - 11%
Italy - 2%
Other, please specify -3% (Belgium, Greece and the UK were suggested).
None. Financial stability in the Euro-zone has now been guaranteed - 6%

I use the term 'bail out' loosely of course, Ireland appears to be even more firmly under the EU cosh than before. It's a bit like taking a loan from a 'doorstep lender' or paying the Mafia for 'protection'. Suffice to say, the whole Euro-experiment is crumbling at such a rate that Angela Merkel has already started denying that 'they' will double the size of the nominal amount available to the EFSF (currently €440 billion) to be able to 'bail out' Spain if needs be.
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Much hilarity ensued last February when local councils ran out of salt, grit etc after it had been snowing for a couple of days. They've been forecasting snow for the whole of the UK for over a week and it's already hit large parts of the country (even though I've only seen a few flakes fall in London so far).

So that's this week's Fun Online Poll: "When do you think your local council will run out of salt and grit?"

Vote here or use the widget in the sidebar.

Fun Online Polls: Wills and Kate; EU-bailouts

With a very good turnout (thanks to everybody who took part), the response to last week's Fun Online Poll Wills and Kate have decided to get married: what do you think? was as follows:

So what? 67%
Who are "Wills and Kate"? 21%
It is a great moment for national celebration! 12%

It seems that we're swimming against the tide on this one, as most of the newspapers devote at least a page every day to the topic, which usually include a brief explanation of who "Wills and Kate" actually are, to wit, a celebrity jobless couple from the South of England.
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The EU 'bailed out' Greece in February of this year, which was supposed to sort out 'financial instability in the Euro-zone' once and for all. It didn't of course, because the banks then go hunting for the next easy target, do a bit of rumour-mongering and short-selling, make a nice profit on the way down and then go running to the EU or the IMF for a bail out.

So next on the list was Ireland/Irish banks (the two are now more or less synonymous), who were successfully cajoled into accepting a bail out at the weekend.

These patterns tend to repeat themselves, I just wonder how good are we at recognising them? So that's the topic for this week's Fun Online Poll: "Which country will the EU 'bail out' next?"

FWIW, my money is on Portugal, as it is easier to bully small countries, even though logic says that Spain are in a bigger mess, relatively, having had a far larger land price bubble. If they try this with Italy, the banks might find that they have bitten off more than they can chew, and there must come a stage where we realise that the European Central Bank emperor is not wearing any clothes.

Vote here or use the widget in the sidebar.

Greek Bail Out Fun

The British voter had long been led to believe that as we kept sterling and did not join the Euro, we would not have to bail out members of the Euro-zone.

Ho hum, that didn't last long. Of course we will end up footing part of the bill, as follows:

1. Even if we completely ignore the EU aspects, UK banks have lent vast sums of money to the PIIGS, included $193 billion to Ireland, but they remain 'tight-lipped' on how much they have lent to the the others, according to the Wall Street Journal. As we know, the UK government has so far always bailed out UK banks, so whether the UK government
a) gives the banks money to compensate them for losses on those loans, or
b) underwrites future losses on those loans, or
c) gives or lends the Greek government money to enable the Greek government to repay those loans,
it all comes to much the same thing.

UPDATE: Justin Credible has posted a link to this handy table in the New York Times, which shows that the PIIGS owe 'Britain' (as defined) over $400 billion. It looks me to as if the figures quoted relate to government or 'sovereign' debt for all countries, apart from Ireland - presumably Ireland's figure of $867 billion includes gross liabilities of banks under government control/ownership?

2. Again, ignoring the EU aspect, when Icelandic banks went *pop*, the UK government used up to £4 billion of taxpayers' money to compensate the savers. How much of that the UK government will ever recoup, e.g. from a sale of UK situs assets held by the Icelandic banks as security, is another topic.

UPDATE; Anon in the comments reminds me that, with or without the EU, the UK also has to chip in 4.94% of the IMF's total contribution.

3. Turning to the EU aspects, the key Article in the Lisbon Treaty is Article 122.2 (pdf):

"Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under cer tain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken."

We can only assume that the EU is relying on the bit in bold, which is a bit rich. How on earth in Greek public spending and borrowing 'beyond their control', but hey. So that gets us as far as 'Union financial assistance'.

Particularly galling about this is that the overall tenor is, other EU countries have to bail out Greece to 'protect the Euro', and not because they particularly care about Greece's debt problems. As the UK is not in the Euro, they'd leave us to fend for ourselves, and quite rightly too IMHO.

4. According to The Telegraph, 'Union financial assistance' is decided by qualified majority voting; the qualified majority have decided and the decision will be rubber-stamped today.

5. Quite how the EU forces the UK to pay up its share of the cost is unclear to me right now, but no doubt they'll sort something out.

6. Quite how much UK taxpayers and banks will lose on this (and how much of the banks losses will be fobbed off onto the taxpayer) is also unclear. A week ago, the potential cost of the Greek bail out was given as a rather staggering €120 billion over three years. Staggering, because Greek's entire government debt is only about €216 billion. Could investors in Greek bonds really lose half their money? I suppose it's just about plausible if Greece leaves the Euro zone and devalues; and if Greek interest rates stay at 9% or 10%.

7. So the UK's share of that loss would be in the order of £10 billion (plus or minus £5 billion), not the scariest sum of money of all time, but you can multiply this up for Spain, Portugal, Ireland and possibly Italy, and then it gets worrying.

8. Hey... here's a thought, maybe a political party, perhaps one of the smaller ones could capitalise on this at the next election and suggest that we leave the EU? If we did it in time and with a bit of cunning manoeuvring, we might even get the EU to bail out our banks :-)

Oh, so they've noticed ...

From The FT:

Mr Barroso points to the anomaly that countries such as Greece, Ireland and Portugal, which have benefited in the past 20 years from tens of billions of euros in EU regional aid, are in a worse situation than ever in terms of relative competitiveness.

"It's very important to address this. We have to concentrate on the quality of public expenditure," he said.

"How Portugal treats drug addicts"

There's a mildly interesting post on Mark Easton's blog, in which he concludes "what Portugal's controversial experiment has demonstrated is that, if you take the crime out of drug use, the sky doesn't fall in."

I'm with Milton Friedman, the Adam Smith Institute & The Economist, as well as the more liberal wing of the Labour, Lib Dem and Green parties (and maybe a few Tories, who keep very quiet about it) on this, i.e. what we need is legalisation, regulation (over 18s only, for example), taxation, education and, where necessary, treatment. Provided the tax receipts cover the costs of education and treatment, what's the problem?

Then you can bung in the notional savings, i.e. reduced cost of crime (tens of billions a year) and the fact that we could source a lot of the stuff from Afghanistan (trade is better than aid, and certainly a lot better that occupation). All we'd have to do is wriggle our way out of an oppressive treaty or two ...