Ireland is still in denial over the true state of their finances. It appears the Irish government is the only one on the planet who believes they don’t need assistance. Like a bald man with a “comb-over” their obstinacy needs to end if the euro is to stop falling.
The EU will help insolvent Ireland in an emergency but first Ireland needs to swallow their pride and accept the fact that they are bust. You can understand the Irish government's reluctance. They know that a bail-out will probably close their access to the bond markets and that the stigma of being bailed-out will remain for many years to come.
It is like watching a great big soap opera unfold. Austria has indicated that they will cooperate only if Ireland were to raise their low 12.5% corporate tax rate. Ireland’s Finance Minister has said that this is not negotiable as it is crucial for economic growth. They will lose many jobs if Intel, Google and others were to leave.
Germany has indicated they will cooperate if the private sector were to take a “hair-cut” (receive less than they loaned i.e 50 cents in the dollar) on the amount of repayment they receive if Ireland was to be bailed-out. You can understand Chancellor Merkel protecting German taxpayers by insisting that others should also share the burden of Ireland’s financial mess.
The minutes from the Bank of England’s November meeting were released yesterday and as expected showed a 3-way split between “The Hawk” Andrew Sentence who typically votes for interest rate hikes, “The Dove” Andrew Posen who typically votes for more QE, and “The Rest” who think the status quo is best. There won’t therefore be a change in UK interest rates or QE for many moons so get used to seeing the figures 0.50% and £200bn quoted in the news.
The New Zealand dollar got a boost over night after Q3 producer price index and November consumer confidence data both exceeded analyst’s forecasts. GBPNZD has fallen 4-cents from the highs.
The Aussie dollar is also firmer even though August average weekly wage data disappointed. The Euro is 2 cents higher against the greenback and as the Euro is joined at the hip to AUD this will override most economic releases. The Reserve Bank of Australia Deputy Governor did say that “the high AUD is a normal reaction to resource boom and that this has been helpful overall”.
There was a very good article in the Telegraph this morning about the nonsense surrounding the currency spat between China and the US. The Chinese are complaining that their soaring inflation is the fault of the US who is printing more money through their QE program. The solution is simple. Allow the yuan to trade freely like most currencies on the planet by removing the peg with the USD and the stronger Yuan will counter rising inflation. This would however send their export competiveness crashing and result in mass unemployment. The Chinese will therefore continue to cry foul and point the finger at the US when in fact the difficult choice lies at their own feet.
UK October retail sales data this morning was mixed. Month-on-month sales rose +0.5% against an expectation of +0.2%, while year-on-year sales rose +1.2% against an expectation of +1.5%. The net effect was sterling rose the best part of a cent against the US dollar but is still coming under pressure from the ailing Euro.
This has happened to me before so I can empathise with the judge in question. A woman mistaken as pregnant has had her jail term cut by two weeks by an embarrassed judge. As Tierra Ngeru was being sentenced in a New Zealand court, the judge said he’d take her pregnancy into account. "I'm not pregnant," Ngeru replied. "I'm just fat."