Eurobonds

Arnaud Mares of Morgan Stanley has written a good piece on fiscal federalism in Europe. By "fiscal federalism" he means a true lender of the last resort ie a mechanism to ensure that solvent govts will never become illiquid. Who could do be such a lender? The ECB. Mathematically a government is solvent if its debt doesn’t exceed the net present value of all future primary surpluses. However, as an assessment of the size of future primary surpluses is subjective, so is the assessment of solvency. The only situation where a central bank or an independent institution can assess a government’s solvency with confidence is when there are binding and persistent constraints on the course of fiscal policy. The limits to ECB intervention are political: it has no control over the fiscal stance of member states. The constraints embedded in the Maastricht Treaty and the Stability and Growth Pact have proved neither binding nor permanent. Fiscal federalism would mean full and permanent control from the union of governments at the federal level over the fiscal stance of each member state plus a permanent mechanism to ensure that all governments which submit to this federal control are fully funded on fair and equal terms. What matters to ensure government solvency is not who gets taxed and where public spending is allocated but the size of the deficit and the trend in the debt level. Is it possible to ensure full federal control over members’ fiscal deficits? Real control will never be achieved by a backward looking penalty system eg ex-post sanctions. There must be ex-ante control by a judicial or a funding route. Under a judicial route, budgets could be submitted to the European Court of Justice for validation. If the budget were rejected, that government would not be allowed to borrow. Under a funding route, governments could borrow from a central pool of resources with joint and several guarantees from all member states under 2 conditions: 1. The amount borrowed in one year never exceeds an amount compliant with federal law (the sum of redemptions plus the budget deficit, or minus the surplus), implied by full adherence to their Stability Programme. 2. The liability so incurred is super senior to all govt expenditure including any outstanding debts, current expenditure & capital expenditure. Bonds should be issued jointly and severally by the union of governments.
Do you think this is feasible or do you think countries will bust out of the Euro?

Newspaper archive

You can now see many historical newspapers online at www.britishnewspaperarchive.co.uk. Scanning through what is freely available, I came across this half sentence from the Newcastle Courant of Thursday 26 November 1711: "Upoircertain advice that tile Swedes ate embarieinf a good Body of Troops under the -Command of Count Stcinbock, the Danes have been fomcwhat uneafic at Co- penlugen, " The Geordie accent comes through, don't you think?

Poem of the day

When the bus stopped suddenly to avoid
damaging a mother and child in the road,
the young lady in the green hat sitting opposite
was thrown across me, and not being one to
miss an opportunity I started to make love
with all my body.

At first she resisted saying that it was too early in the morning
and too soon after breakfast and that anyway she found
me repulsive. But when I explained that
this being a nuclear age, the world was going
to end at lunchtime, she took off her green hat,
put her bus ticket in her pocket
and joined in the exercise.

The bus people, and there were many of them,
were shocked and surprised and amused and annoyed, but when the
word got around that the world was coming to an end at
lunchtime, they put their pride in their pockets with their bus tickets and
made love one with the other. And even the bus conductor,
feeling left out, climbed into the cab and struck up some sort of
relationship with the driver.

That night, on the bus coming home,
we were all a little embarrassed, especially me and the young lady
in the green hat, and we all started to say in different ways how hasty
and foolish we had been. But then, always having been a bit of a lad,

I stood up and said it was a pity that the world didn’t nearly end every lunchtime

And that we could always pretend. And then it happened…….

Quick as a crash we all changed partners
and soon the bus was a quiver with white
moth ball bodies doing naughty things.

And the next day
And everyday
In every bus
In every street
In every town
In every country

people pretended that the world was coming
to an end at lunchtime. It still hasn’t
Although in a way it has.

” At Lunchtime – A story of Love” - Roger McGough 1967

Italian austerity

Private Eye

Dress of the day

It was 50 years ago today that Marilyn Monroe wore That Dress which had to be sewn on.

Poem of the day

The things that have been and shall be no more,
The things that are, and that hereafter shall be,
The things that might have been, and yet were not,
The fading twilight of great joys departed,
The daybreak of great truths as yet unrisen,
The intuition and the expectation
Of something, which, when come, is not the same,
But only like its forecast in men's dreams,
The longing, the delay, and the delight,
Sweeter for the delay; youth, hope, love, death,
And disappointment which is also death,
All these make up the sum of human life;
A dream within a dream, a wind at night
Howling across the desert in despair,
Seeking for something lost, it cannot find.
Fate or foreseeing, or whatever name
Men call it, matters not; what is to be
Hath been fore-written in the thought divine
From the beginning. None can hide from it,
But it will find him out; nor run from it,
But it o'ertaketh him! The Lord hath said it.

Excerpt from Longfellow's Divine Tragedy (1871)

St Cecilia

Today is the day of St Cecilia, patron saint of music. She was a Christian, the daughter of a Roman senator and married a noble pagan called Valerianus. On the wedding night, Cecilia told her husband that she was in fact already betrothed to an angel who fiercely guarded her body so he should not violate her virginity. Sceptical, Valerianus demanded to see the angel and Cecilia sent him to the third milestone on the Appian Way where he should meet Pope Urbanus. Valerianus did this. was baptised by the Pope and returned to his wife. An angel then appeared to them both and crowned them with roses and lilies.
They then converted Valerianus' brother Tiburtius and the three went on to lead a Christian life, giving alms and burying the bodies of Christian martyrs. They were all condemned to death by the prefect Turcius Almachius. The two brothers were sought out by the officer Maximus but they succeeded in converting him. Turcius Almachius was so infuriated that he had all three men executed and Cecilia buried them in a single tomb.
Cecilia herself was then captured and condemned to death by suffocating in her bath. She survived that, however, and so they decided to behead her, which they managed after three attempts. As she was dying, she sang to God.

Salop

I spent a very enjoyable weekend in Shropshire. Did you know that Much Wenlock is the birthplace of the modern Olympic Games? A resident of that town, Dr William Penny Brookes (1809-1895), led a campaign to put Physical Education into the school curriculum and this cause brought him into contact with Baron Pierre de Coubertin. In 1890 de Coubertin came to stay with Dr Brookes in Much Wenlock and the town staged a mock Olympic Games in his honour. This inspired the Baron to set up the International Olympic Committee in 1894 which was followed by the Athens Olympic Games in 1896.

Nostalgia

My aunt who will be 90 next year ("April the 2nd, not the 1st!") was lamenting to me how much England has changed during her lifetime. When she was 4 she used to go and play in the local park on her own and talk to all the old men who were sitting on the benches. One day, one of them asked her, "Could you do something for me?" "Yes!" she replied confidently. "I know you come to this park everyday and I'm going to be away next week." He rummaged in his pocket and produced a clean, empty bottle. "Could you ask your Mummy to put some milk in this bottle and could you put a little in the bowl for the stray cat everyday. You know where his bowl is." "Oh yes!" my aunt replied, feeling 10 feet tall.

Vienna - Birmingham for £20,000

The story of the 180 air passengers en route from Amritsar to Birmingham may be an omen of things to come. They were on a stopover in Vienna when the cabin crew announced that the Austrian carrier, Comtel Air, had run out of money and the only way to continue to Birmingham was for the passengers to pay £20,000 to refuel the plane. Otherwise they and their luggage would be removed from the plane. Passengers were escorted to cashpoint machines amidst uproar and the sum was eventually raised through IOUs.

Russia: Vlad's Army

If you didn't see Peter Oborne's documentary about the Putin Youth, it's definitely worth watching. Here's the link:

http://www.channel4.com/programmes/unreported-world/articles/the-making-of-russia-vlads-army

Brainwashing, hysteria or simply a genuine belief that Putin has made and will continue to make Russia great?

Quotation of the day

"As I sat in the bathtub, soaping a meditative foot and singing, if I remember correctly, 'Pale Hands I Loved Beside the Shalimar', it would be deceiving my public to say that I was feeling boomps-a-daisy."

P.G.Woodhouse Jeeves and the Feudal Spirit

Bad joke of the day

Why don't worms have balls?

Because they can't find gowns to fit them.

Moral hazard

When HSBC reported its results yesterday, it revealed that there has been a $1bn increase in bad debt at its legacy US mortgage business. They have complained in the past how costly and cumbersome it is to maintain homes of customers who've simply posted the house keys back to the bank and cleared out. Grass needs mowing, gardens watering and weeding etc. Yesterday they said that they have more problems because customers are deciding unilaterally to take mortgage holidays, believing that their homes will not be repossessed. The political difficulty of seizing defaulted customers' homes has become a moral hazard which will encourage others to default.

Greek bailout plan

Times are tough, everybody is in debt and everybody is living on credit.

On this particular day a rich German tourist is driving through a town in Greece , stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub.

The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit.

The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.

At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

And that is how the bailout package works.

The Other Place

I was invited to a graduation ceremony at The Sheldonian Theatre in Oxford on Saturday which was great fun. The Sheldonian is so-called because it was funded, in 1664, by Gilbert Sheldon, Archbishop of Canterbury and a former Warden of All Souls. It was designed by a young Christopher Wren, then Professor of Astronomy at Oxford and with little practical experience of building. He wanted to base the design on that of a Roman theatre. Roman theatres were, of course, open air and so the problem was how build the same structure in Oxford with a roof but without any load-bearing columns in the central space. Wren designed a roof truss spanning seventy feet, a technical achievement which gained him enormous credit in scientific and architectural circles.
The truss is concealed by a ceiling painted by Robert Streater. The theme is the triumph of the Arts and Sciences over Envy, Rapine and "brutish scoffing ignorance".

St Mark

The speaker at yesterday's annual Friends of Winchester Cathedral lecture was John Julius Norwich and he entertained us for an hour, talking about the history of Venice. He reminded us of the story of how St Mark's body came to that city.
Venice had no Roman history, having been settled in the 400-600s by Italians fleeing barbarian assaults. It became wealthy through trade and was considered "nouveau riche" by other cities in Italy. It therefore decided to get some history of its own in the form of a relic and an important relic was what it really wanted ie one of the four apostles.
It set its sights on the body of St Mark which was housed in a tomb in Alexandria and in 828 sent two merchants to steal it, on the justification that Alexandria was at that time a Muslim city so St Mark was not receiving his due reverence. The merchants bribed the Arab officials, snatched the body and got it through the Alexandrian customs by covering it with pork. On the voyage back to Venice, the ship was struggling in a storm and St Mark leapt out of his relics and steered it back to safety.

Franglais of the week

Monsieur Cameron: (Pour c'est lui). Bonjour Sarko. Comment ca va avec votre new bebe?
Sarko: Que'st-ce que vous care, rosbif? Vous n'etes-pas welcome ici! Vous n'etes-pas dans l'Euro Zone!
Cameron: Thankez God! Vous et votre amie Frau Merkel must faire quelque chose et pretty damm rapidement!!! Comme nous dites en Angleterre, "Nous Somme tout dans it, ensemble!"
Sarko: Taisez-vous up Monsieur Bullingdon! Je suis sick de vous et votre bum-chum Osborne telling moi que faire!!
Cameron: Ooh la la! Je pense que vous avez un tres SHORT temper, comme everything else!!
Tout le monde: Ha, ha, ha, Sarko est court comme un hobbit!!
Frau Merkel: Achtung! Schweinhund! Das ist serious!
Berlo: Mamma Mia! Quelle vache horride!! Je ne veux pas shagger her n'est-ce pas?!
Cameron: Mais qu'est que nous allons faire?
Sarko: Nous allons faire quelque chose tres complex et tres effective, marquez mes mots. Mais nous ne vous tellerons pas parce que vous n'etes pas One de Nous!
Cameron: Typiques Grenouilles!

Private Eye 50th Anniversary Issue

Back to basics

My friend's daughter is working with elderly people. She was gazing out of the window of the residential home where she works and remarked, "Look at the sky: it's a beautiful blue!" An elderly lady replied, "But has it a hood?" I had to admit to my friend that this remark meant nothing to me. Her clever daughter, however, knew exactly was she was referring to: A.A.Milne's poem Vespers.

'Little Boy kneels at the foot of the bed,
Droops on the little hands little gold head.
Hush! Hush! Whisper who dares!
Christopher Robin is saying his prayers...

If I open my fingers a little bit more,
I can see Nanny's dressing-gown on the door.
It's a beautiful blue, but it hasn't a hood.
Oh! God bless Nanny and make her good.