Friday, 29 June 2012

LIBOR goes nuclear

Early days, but there are now suggestions that LIBOR manipulation was orchestrated straight out of Number 10 - by the Brown administration which was desperate around 2008/2009 to get the money market interest rates down.

If governments were actually involved (and the tapes and emails will not have been deleted; nobody discards material that good) then the whole thing moves to another level entirely. Ironically it might give the banks a get-out-of-jail-free card, but it would make phone-hacking, Leveson etc look like small change. Ministers could be doing time before this is over.

Thursday, 28 June 2012

Another bad news week

Just for the record: we seem to have had a bad news week.

The Q4 2011 GDP number has been recalculated and it turns out there was a 0.4% fall rather than the 0.3% fall previously announced. The fall in Q1 2012 is confirmed as 0.3%. We will get the first estimate for the Q2 2012 GDP in a couple of weeks. As has been alluded to in previous posts the politicians seem to be behaving as through this will be a bad number.

House prices have fallen, according to the Nationwide, by 0.6% in a single month. They are not expected to do anything other than keep falling as the Olympics dominates people's thinking, and the economy shrinks. The current annualised rate of house price change is -7.6%.

Also, according to the British Bankers' Association net mortgage lending fell in May by £74m. This is actually a small number but it is the first time ever (or since records began, anyway) that this number has fallen. It means people are repaying more than they are borrowing - which with a base rate at 0.5% is probably a good idea. However this is likely to be indicative of house price falls to come, some say by as much as 15% this year.

The UK, especially the South East of the UK, has escaped a lot of the asset price falls that this financial crisis has inflicted on the rest of the world. For example house prices are down only 5% from the 2007 peak in the home counties compared to over 50% down in Northern Ireland, while in Europe and the USA houses in some areas have lost 80% to 90% of their value. But this local defying of gravity may be about to end.

Fixing LIBOR

Barclays Bank has been fined a total of $450,000,000 (approx) by regulators for "fixing" the LIBOR rate. LIBOR used to be an obscure statistic but these days everyone knows it underpins all unsecured lending, and even spills over into secured loans such as mortgages since banks often borrow unsecured to lend secured.

It seems Barclays has been pushing LIBOR up or down according their needs on the day. Sometimes they felt they should under-report their borrowing costs to make themselves look a safer prospect, able to borrow cheaply, and other times they pushed it up in order to win a market "bet". (And do not forget: for every winner of a bet there is also a loser - a loser who may now wish to revisit the bets in question.)

Their traders openly cooked up LIBOR in emails around the bank. There does not seem to have been much covertness or shame inside the bank. If someone needed LIBOR rigged they just asked the right guy and it happened.

There have been suggestions that LIBOR has been rigged before. Back in 2008 a small number of American banks were investigated for under-reporting their LIBOR to make themselves look healthier than they were. To-date nothing has come of this.

However, just misreporting your borrowing costs does not make a big shift in the LIBOR rate. The reason for this is that to calculate the LIBOR the four highest rates and four lowest rates are disregarded, and the average taken of the rest. If a bank made an extreme report it would be disregarded.

Unless of course, it gets together with four or more other, like-minded, banks and they agree to push the rate up or down. Then they can really have a significant impact. And the more banks joining the conspiracy the bigger the bang.

The regulators, by the way, are still looking at more than twenty other banks. Barclays has merely copped an early plea in order to get off lightly. This story will run and run.

Tuesday, 26 June 2012

Fuel duty rise cancelled

The Chancellor of the Exchequer, George Osborne, has today cancelled the fuel duty hike of 3p that was due in August. That's good news!

It is actually quite surprising. We have been paying up around 145p per litre until recently, and now it is down to 132p approx. The rule with petrol prices is that once the cost of a litre has reached  a new high and the government has seen that the world did not end, then there is no reason for it not to stay that high forever more - so the recent fall caused by the fall in crude prices should have been just the excuse the government needed to slap another tax on.

So why this uncharacteristic generosity?

Osborne is continually tugged in several directions: fear of economic collapse, hence QE; desire to tax more and more; and fear of hyperinflation. It seems this last fear is briefly in the ascendant - he wants to keep inflation down and so has scrapped the tax. Since inflation has actually been coming down in recent months anyway, not as far down as the official target of 2% of course, but down from local peaks, this fear of inflation might seem unwarranted. Most likely Osborne knows something we do not.

Tuesday, 12 June 2012

Emma West, trial postponed

For those of you following the persecution of Emma West (tram lady to her friends) whose trial for objecting to the invasion of our country while travelling on a Croydon tram was due to be taking place this week, please note the trial has been pushed back to the 16th of July.

This is for "psychiatric reports" - ie, to collect evidence that she is mad rather than the instigator of a legitimate complaint.

It is so much cleaner all round if she can be called mad. That way the actual issues do not have to considered at trial.

Spanish bailout, Señor

The Spanish banks are getting a European bailout of €100bn. Whoopee! Bonuses all round, fiesta time in Madrid. (It is not actually enough but the kick has sent the can miles down the road so let us not worry about mañana until mañana actually comes.)

Even better, the IMF is not involved so no British taxpayers will be harmed in the making of this bailout. But there is a sting in the tail though. Let us have a leetul look at the bailout mechanism.

First German taxpayers give billions of the euros to the European Stability Mechanism (ESM). Then the ESM lends the money to the Spanish government; then the Spanish government passes it on to the Spanish banks who say muchas gracias amigo.

And where does the liability lie? It remains with the Spanish government. Yes, if the banks default the Spaniard in the street must pick up the tab. Carlos and Carlota have had a marker thrust upon them for private banks that were nothing to do with them. And worse, borrowings from the ESM count as "senior" debt. That means if the Spanish government defaults then the vulture pecking order is: Germans first, bond holders second.

Not surprisingly the market in Spanish government bonds has spooked and yields are up 50 basis points today. Bond-holders have just realised they have been pushed down the totem pole.

Monday, 11 June 2012

"Rape? Which one?"

When Mahfuzur Rahman was picked up by police for questioning about an allegation of rape his response was not to deny the offence but merely to query, "Rape? Which one?"

He and an accomplice called Abdul Hannan have been convicted at Bolton Crown Court of raping or sexually assaulting four young women in the region after they were picked up and plied with alcohol.

Two of the four victims gave videotaped interviews, in 2009 and 2010 respectively, in which they described being raped by Rahman but criminal investigations were abandoned, leaving the rapist free to strike again.

Bolton Crown Court heard that Rahman went on to prey on a 17-year-old girl living in a children’s home, who he picked up in his car and sexually assaulted in a flat after giving her vodka.

In June 2010 a 19-year-old woman was taken to a flat in Rochdale where she was plied with vodka before Rahman raped her while she pleaded for him to stop.

In September last year, a 20-year-old woman was driven around Rochdale by Rahman and two other men, who got her drunk on vodka before she was raped at a flat by Hannan. (Link).

Even the prosecutor is now referring to this as an "Asian" problem. (Which it isn't - it's a muslim problem. Yes, they are Asian, but that is not the problem.)

However there is new term in circulation: Paedostani. I think we can agree these monsters are Paedostani. (Or "Pedostani" if you're an American.)

Friday, 1 June 2012

Irish say "yes" to fiscal pact

The count is done and the Irish have voted in favour of the fiscal pact which gets them access to euro bail out money.

It was 60/40 in favour of the yes camp, with a turn out slightly less than 50%.

Crisis averted! Until the next one.

Oo-er missus

The former Mrs Chris Huhne, now more generally known as Miss Vicky Pryce although as a Greek her name is not actually Vicky or Pryce, has entered a plea of not guilty to the charge of perverting the course of justice by taking speeding penalty points for her former husband Chris Huhne, MP.

The wronged woman

Her former husband

The lesbian he left her for

Here's the kicker though: Vicky Pryce's reason for saying not guilty is "marital coercion".

This does not look good for Mr Huhne.

Lockerbie conviction falling apart

The recently deceased Abdelbaset al Megrahi, convicted of bombing Pam Am flight 103 which fell on Lockerbie, Scotland, causing the deaths of all 243 passengers and 16 crew and 11 people on the ground, has widely, not least by this blog, been considered to be innocent of all charges.

Now the Scottish Herald has acquired a secret government document which seems to confirm this. The report, shown to the prosecution but not the defence at Megrahi's trail, says that a terrorist organisation called the Popular Front for the Liberation of Palestine – General Command (PFLP-GC) carried out the bombing at the request of the Iranian government.

Flight 103 was bombed in December 1988. It is worth remembering that in April 1988 the US Navy attacked and destroyed two Iranian oil platforms in the Strait of Hormuz (in supposed retaliation for a US warship having been damaged by an Iranian-planted mine - with no loss of life) and in July 1988 the US guided missile destroyer USS Vincennes shot down Iran Air flight 655, a civilian airbus A300 flying from Iran to Dubai, killing all 290 people on board, under the misapprehension that it was actually an Iranian airforce F-14 Tomcat gunning for them. The USS Vincennes was actually in Iranian territorial waters at the time it fired on IAF 655.

Strait of Hormuz: busy old place

The possibility that Lockerbie was not Libyan but Iranian was widely mooted at the time of al-Megrahi's trial (January 2001) and now it seems the government knew this all along.

Many people have questions to answer.