Hi Everybody

I have just got back from an extended holiday in Europe convinced that the Euro is a dead duck – or should be. There are two “zones” in Europe: the north and the toxic south where the socialist experiments have gone horribly wrong. Portugal, Spain, Italy, Greece are cot cases being supported by the bigger northern economies of Germany and France in the vain hope that the Eurozone will survive.

The ever-astute Swiss saw the problems coming decades ago: they refused to use the currency, staying with the Swiss franc. It’s now worth 1.5 Euro, not because the Swiss economy is fired up but because the Euro is overvalued because of their immediate neighbours’ toxic economies. Much the same picture as with our dollar and the USD!

This view from Peter Switzer is worth a read…………………..

Cheers
Bob Lamont
Corporate Accountants

The Experts

Beware well-meaning pollies

by Peter Switzer

The greatest lesson from the turmoil on global stock markets is don’t believe short-sighted, vested interest driven politicians can ever deliver.

Sure they are great at fooling voters but those damn markets with those discerning bears will make money out of these political second-raters every time.

The failed Paris summit last week between France’s Nicolas Sarkozy and Germany’s Angela Merkel was a case in point. The resultant weak agreement and proposal for a financial transaction tax has not helped to raise the confidence levels of investors about European banks.

Right now there are a lot of punters thinking that the sovereign debt problems of the likes of Portugal, Ireland, Italy, Greece and Spain or the PIIGS, will end up infecting the banks of Europe. One contagion could lead to another — this is starting to look like a new financial version of ‘swine flu’.

By the way, the nincompoops masquerading as European politicians have been aided and abetted by a prize struggler called Jean-Claude Trichet. As the European Central Bank boss, he underestimated the negative potential of the GFC, has raised interest rates this year, mismanaged the Italian bond threat and generally has demonstrated he is past it.

If he was an AFL or NRL coach, he would have been shown the door years ago.

In the USA, the Congress have kicked around their stupid ideological football until Standard & Poor’s decided to blow the whistle on their boring, immature game.

Meanwhile the spectators — the stock market — voted with their dollars, in part explaining why we are seeing the bears back in control of equity markets. Of course, the European contribution to the sell-off gives us a new meaning to the old insult — Eurotrash.

And into this environment we learn this week that the Gillard Government has thought it a great idea to wheel out the fiscal hardheads called the razor gang. Why? They want to rescue the budget surplus.

Now it’s great when politicians want to look like responsible economic managers and promise to return the budget to surplus by 2013, but it always makes a lot more sense when the global economy, in the wake of a worldwide recession is powering back towards a solid recovery.

However, the stock market’s recent convulsions are screaming out the message that the recovery is in jeopardy and tightening up on demand via razor gangs might mean one cut too far.

I am now hearing so-called experts talking about an Aussie recession and I think they are wrong — big time — but if a Treasury-inspired torture treatment adds to the excessiveness of the Reserve Bank, then we could end up seeing my media colleagues pull out the despised R-word headlines.

In official terms, the razor gang is an euphemism for the Cabinet’s expenditure review committee. So this decision to cut now is coming from the same team who came up with the idea of carbon taxes, mining taxes and a whole lot of other ideas but have been tried in the wrong place and the wrong time. I call them Hugh Grant decisions.

This is the time when wisdom says — do nothing and hope the Reserve Bank cuts interest rates.
Published: Monday, August 22, 2011