Is the pound set to make a comeback against the Euro?

As it says - all of the financial stuff!

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Simonita
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Postby Simonita » Fri Nov 25, 2011 9:17 am

Good article Bigbulg, thanks! In particular I was struck by:

1) Bulgaria has already been through its "default" around 1997, and therefore perhaps has things to teach other countries. Basically this means living within your means!

2) The efficiency with which Bulgaria stuck to IMF rules after 1997 shows that they could get on top of corruption etc - if they really wanted to!

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Postby houseman » Fri Nov 25, 2011 9:36 am

I agree: the house of cards on which the Bulgarian economy is built is rather lower and smaller than their western european equivalents. Now we in the west are beginning to realise that taller and bigger means more likely to fall apart!

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Postby gimlet » Fri Nov 25, 2011 10:21 am

I found it a profoundly depressing article.

Back in the socialist days Bulgaria had preferential access to energy and markets in Russia, while at the same time time borrowing hand over fist from the west.

No wonder it had an economy that provided plenty of work and a good standard of living.

It defaulted on its state debts in 1990 or thereabouts and the Paris and London Clubs (remember them?) eventually restructured them/wrote them off.

Some people would say that IMF rules and conditions are pretty corrupt themselves and some countries have boldly and successfully told the IMF and the World Bank where to shove it.

With its open, shrunken economy vulnerable to bubbles and foreign shocks, impoverished population and indifferent government some people would say that Bulgaria has once again, since 1997, exercised its genius for joining the wrong side.

Interestingly in Romania during the '80s Ceausescu paid off its foreign debts thus removing the possibility of default. Maybe that's why they shot him. Pity, because he made excellent cheap suits for the UK High Street.

Will the Bulgarian Government be up to the task of nationalising/restructuring the banking sector when it fails? Djankov probably knows which levers to pull but in Bulgaria I doubt if you can be sure what is happening at the other end.

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Simonita
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Postby Simonita » Fri Nov 25, 2011 10:35 am

gimlet wrote: some people would say that Bulgaria has once again, since 1997, exercised its genius for joining the wrong side.


What would the right side have been?

I remember the £12 suits - absolutely brilliant!

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Postby gimlet » Fri Nov 25, 2011 7:29 pm

The only time the EU (or EEC as it then was) has delivered impressive growth was the 1950 to 1970 period, known as the period of "catching up".

The European elite thought the A8 and A10 would similarly "catch up". But in 1950 to 1970 there was no single market which by definition destroys many Member States' industries. There was only a Customs Union.

After 1970 worker productivity in the EEC still grew quite rapidly but this was offset by restrictions on hours of work.

In general it is thought that that the existence of the EEC/EU has made growth 0.5%pa higher than it would have been otherwise.

Big deal! And it's at the cost of its interconnected and insolvent banking sector, its vast taxes on energy, the power of the Commission Bureaucrats to demand that Member States shut down parts of their economies, high youth unemployment, common foreign policy, the straitjacket of EMU, the distortions of the CAP, VAT, the list goes on.

Imagine an independent Bulgaria in its traditional role of electricity exporter to the Balkan region, able through its bilateral agreements to profit from its proximity to Russia, Turkey, the 'stans and its traditional friends in the Far East. And a discriminatory 80 leva tax on every non-Bulgarian truck hurtling towards "Europe". Brits not allowed to live there unless they can pass simple tests, pass a means assessment and undertake not to keep dogs. Doesn't sound too bad to me :wink:

But as I say they have a genius for doing the wrong thing. I think they will face the consequences soon. Full speed ahead back to 1943.

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Postby bigbulg » Wed Dec 21, 2011 12:28 pm

http://www.bbc.co.uk/news/business-16282206
Another near 500bn Euro's pumped into the (failing) system. I cant believe it.

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Postby houseman » Wed Dec 21, 2011 12:39 pm

The banks may in part be swapping shorter, dearer debt for a 3-year cheaper fix. Great! It moves the crisis 3 years further down the road! :roll:

Heading for 1.20€ to the £ - next stop 1.25€!

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Postby qwerty » Wed Dec 21, 2011 12:46 pm

We've been in a liquidity trap both sides of the pond for some time due to no confidence and unknown and unquantifiable banking/financial legislation/regulation coming, no option really other than to keep filling the money lakes until the dams burst.

When confidence does return (The now 6T. Dollar question) we shall have a fabulous bull run with many bubbles lasting for many years :D

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Postby gimlet » Wed Dec 21, 2011 2:30 pm

bigbulg wrote:http://www.bbc.co.uk/news/business-16282206
Another near 500bn Euro's pumped into the (failing) system. I cant believe it.


The ECB has a nominal capital of 5 billion Euro. Its balance sheet must have expanded vastly. However it says that it can continue indefinitely with a negative value and it has the printing press at the end of the day. Ignoring its inflation mandate is just another law for it to break.

As it holds all Eurozone Member States' foreign exchange reserves its exuberance is just another way of making the Eurozone system impossible to unwind.

The can has been kicked well into next year now by the look of it. The only imponderable is civil disorder.

I sincerely hope that the Merkel - Sarkozy pact has got some secret Protocols, because the public ones aren't going to do the trick! What could be in there? Zones of influence, perhaps - there is a precedent :evil:

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Postby qwerty » Wed Dec 21, 2011 6:57 pm

The ECB's balance sheet is one of these "It depends how you measure it" things, on one measure its just a couple of hundred billion Euros BUT on another measure the ECB's balance sheet is 3.2 Trillion with a "T" and rising fast. I GBP might be 1.25 EUR soon, crossed 1.20 today :D


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