The Euro is a credible currency

Quantitative Easing (which used to be called deficit monetization) is justified – in this clip – by ECB president Jean Claude Trichet. Monetary policy works…. eventually, and when it does it tends to result in high levels of inflation.

Some people said the Euro wouldn’t last a decade, for our part, we hope that they are proven to be wrong, the will of society is a very powerful incentive and can be the difference between what should happen in theory and what actually occurs, for that reason I think the Euro will pull through but there will need to be some serious changes made in the way that the Eurozone manages itself.

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We need to clear our bonds, ensure there are retail offerings.

Ireland has been downgraded by Standard and Poors, we are on a ratings watch with Fitch and Moody’s as well. The last bond issued by the NTMA was not subscribed as widely by the international financial community as they were previously and the Irish stepped up and bought up 55% of the bond, we saved the day ourselves. Now we are at a crossroads, we need to raise money, it will be more expensive given our national outlook and at the same time investors are shying away from our sovereign debt, equally we can’t cut back spending enough to bridge the gap and impressing the international investor market with taxation will hurt our national economy.

There is enough money in this country to clear all of the bonds required, and it is held in ready cash format. …

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How you are already paying for nationalization

With one bank totally nationalised and others due to get recapitalised any day now it is time to ask ‘Who is paying, or going to pay for all of this?’. And the answer is in short – the tax payer, it’s just a matter of when and how.

One interesting conversation I had today was with a banking colleague (and I don’t have many friends in the bank system!) who asked me this ‘How can some banks offer deposit rates that are so far above the money market?!’. I told him that this offer existed because of the margins being charged on their lending.

His belief was that they are effectively selling government bonds via their deposit function, the state can either capitalise them -and doing so goes on the official record- or they can be propped up with deposits paid in by the public for high returns, however those returns may eventually have to be paid for by the state and thus, ultimately, by the taxpayer.

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Where will the rent takers hide next?

Taking rent is perhaps the best and yet most unproductive part of an economy, in the past we have spoken about the concept of ‘rent taking’ regarding economic bubbles and the effects of same. The last few years have seen rent takers jumping from one resource to the next in search of a good place to rest.

In the dotcom boom the rent taking was in the real estate of cyberspace, buying ‘probable’ names and sitting on them was popular until it proved to be a pointless exercise as companies found other ways around the problem, in some cases (such as 20th Century Fox re-branding because somebody bought 21stCenturyFox.com etc.).

After that the low rates and capital gains to be found in housing caused the next boom bust, it is fair to say that it was the land owners (the original rent takers) who did the best in this scenario. In any case the money left housing from 2005 onwards (for instance Berkely group sold off half of their 26,000 land …

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Best mortgage interest rates for first time buyers

The current market is heavily weighted in favour of the buyer and for that reason we have seen more first time buyers interested in finding out how much they may qualify for, albeit that they may not plan to buy any time soon, many people still seem to be holding out for the ‘market bottom’, and naturally we don’t know when that time is, will be, or was (because it could have been last week, only time will tell), it is only with hindsight that the actual bottom can ever be accurately identified.

Another reason is that there are expected rate cuts coming, the next will be delivered at the 4th of December meeting of the ECB next Thursday. Many potential buyers are thus going to wait to see what kind of drop is delivered, if Trichet indicates that another may be in the pipeline it will have a strange effect of causing the inverse of what monetary policy is intended for.

The question we are getting recently is ‘what …

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Mark to Market valuations.

This is an exerpt of Steve Forbes talking about mark to market valuations and some of his feelings on the markets as well as where we are set to go from here. He makes the argument that mark to market is a bad idea and that we should use traditional methods of cost & depreciation because the market skews valuations to strongly at a time like this.

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ECB announce €200 Billion injection

The ECB have just announced a €200 billion plan designed to stimulate eurozone economies, it is unlikely though that Ireland will take part in any of the plan. It was unveiled earlier today by Jose Manuel Barroso, €170 billion will come from member states and the remainder will come from the European Budget and the European Investment Bank.

Ireland has no room for further fiscal stimulus at present according to the Department of Finance, the foremost issue with Ireland is (according to Europe and our own government) is to get our spiralling deficit under control. One aspect of the stimulus is that €5 Billion will be going towards building greener cars (maybe this is the big break the AirCar has needed!).

The EU are taking these measures to avoid further downturn and to do so with coordinated policy responses. In the USA they announced an $800 billion Dollar stimulus plan. Both LIBOR and Euribor rates fell which will …

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