A Spanish protester burns a euro note
El Mundo reports that the country can no longer resist the bond markets as 10-year yields flirt with 6.5pc again, and the spread over Bunds – or `prima de riesgo' — hits a fresh record each day.
Premier Mariano Rajoy and his inner circle have allegedly accepted that Spain will have to call on Europe's EFSF bail-out fund to rescue the banking system, even though this means subjecting his country to foreign suzerainty.
Mr Rajoy denies the story, not surprisingly since it would be a devastating climb-down, and not all options are yet exhausted.
"There will not be any (outside) rescue for the Spanish banking system," he said.
Fine, so where is the €23.5bn for the Bankia rescue going to come from? The state's Fund for Orderly Bank Restructuring (FROB) is down to €5.3bn, and there are many other candidates for that soup kitchen.
Spain must somehow rustle up €20bn or more on the debt markets. This will push the budget deficit back into the danger zone, though Madrid will no doubt try to keep it off books – or seek backdoor funds from the ECB to cap borrowing costs. Nobody will be fooled.
Meanwhile, Bankia's shares crashed 30pc this morning. JP Morgan and Nomura expect a near total wipeout. Investors who bought the new shares at flotation last year may lose almost everything.
This all has a very Irish feel to me, without Irish speed and transparency. Spanish taxpayers are swallowing the losses of the banking elites, sparing creditors their haircuts.
Barclays Capital says Spain's housing crash is only half way through. Home prices will have to fall at least 20pc more to clear the 1m overhang of excess properties. If so, the banking costs for the Spanish state are going to be huge.
The Centre for European Policy Studies in Brussels puts likely write-offs at €270bn. We could see Spain's public debt surge into triple digits in short order.
As I wrote in my column this morning, the Spanish economy is spiralling into debt-deflation. Monetary and fiscal policy are both excruciatingly tight for a country in this condition. The plan to slash the budget deficit from 8.9pc to 5.3pc this year in the middle of an accelerating contraction borders on lunacy.
You cannot do this to a society where unemployment is already running at 24.4pc. Either Europe puts a stop to this very quickly by mobilising the ECB to take all risk of a Spanish (or Italian) sovereign default off the table – and this requires fiscal union to back it up – or it must expect Spanish patriots to take matters into their own hands and start to restore national self-control outside EMU.
Just to be clear to new readers, I am not "calling for" a German bail-out of Spain or any such thing. My view has always been that EMU is a dysfunctional and destructive misadventure – for reasons that have been well-rehearsed for 20 years on these pages.
My point is that if THEY want to save THEIR project and avoid a very nasty denouement, such drastic action is what THEY must do.
If Germany cannot accept the implications of this – and I entirely sympathise with German citizens who balk at these demands, since such an outcome alienates the tax and spending powers of the Bundestag to an EU body and means the evisceration of their democracy – then Germany must leave EMU. It is the least traumatic way to break up the currency bloc (though still traumatic, of course).
My criticism of Germany is the refusal to face up to either of these choices, clinging instead to a ruinous status quo.
The result of Europe's policy paralysis is more likely to be a disorderly break-up as Spain – and others – act desperately in their own national interest. Se salve quien pueda.
I fail to see how Spain gains anything durable from an EFSF loan package. The underlying crisis will grind on. Yes, the current account deficit has dropped from 10pc to 3.5pc of GDP, but chiefly by crushing internal demand and pushing the jobless toll to 5.6 million. The "unemployment adjusted current account equilibrium" — to coin a concept – is frankly frightening.
The FT's Wolfgang Munchau suggested otherwise last week, saying Spain's competitiveness gap has been exaggerated. I can see what he means since Spain's exports are growing even faster than German exports. But this is from a low base. It is not enough to plug the gap.
Spain is quite simply in the wrong currency. That is the root of the crisis. Loan packages merely drag out the agony.
A Spanish economist sent me an email over the weekend after the Bankia details came out saying:
"It looks like game over for the sovereign and the financial sector at the same time. Unless we get a Deus ex Machina, we'll be discussing much more seriously the benefits of a return to the peseta in no time."
It begins.
My speech to the finance graduates of this world - Times of Malta
At this time of year, at graduation ceremonies in America and elsewhere, those about to leave university often hear some final words of advice before receiving their diplomas. To those interested in pursuing careers in finance – or related careers in insurance, accounting, auditing, law or corporate management – I submit the following address:
Best of luck to you as you leave the academy for your chosen professions in finance. Over the course of your careers, Wall Street and its kindred institutions will need you. Your training in financial theory, economics, mathematics and statistics will serve you well. But your lessons in history, philosophy, and literature will be just as important, because it is vital not only that you have the right tools, but also that you never lose sight of the purposes and overriding social goals of finance.
Unless you have been studying at the bottom of the ocean, you know that the financial sector has come under severe criticism – much of it justified – for thrusting the world economy into its worst crisis since the Great Depression. And you need only check in with some of your classmates who have populated the Occupy movements around the world to sense the widespread resentment of financiers and the top one per cent of income earners to whom they largely cater (and often belong).
While some of this criticism may be over-stated or misplaced, it nonetheless underscores the need to reform financial institutions and practices. Finance has long been central to thriving market democracies, which is why its current problems need to be addressed. With your improved sense of our interconnectedness and diverse needs, you can do that. Indeed, it is the real professional challenge ahead of you, and you should embrace it as an opportunity.
Young finance professionals need to familiarise themselves with the history of banking, and recognise that it is at its best when it serves ever-broadening spheres of society. Here, the savings-bank movement in the United Kingdom and Europe in the 19th century, and the microfinance movement pioneered by the Grameen Bank in Bangladesh in the 20th century, comes to mind. Today, the best way forward is to update financial and communications technology to offer a full array of enlightened banking services to the lower middle class and the poor.
Graduates going into mortgage banking are faced with a different, but equally vital, challenge: to design new, more flexible loans that will better help homeowners to weather the kind of economic turbulence that has buried millions of people today in debt.
Young investment bankers, for their part, have a great opportunity to devise more participatory forms of venture capital – embodied in the new crowd-funding websites – to spur the growth of innovative new small businesses. Meanwhile, opportunities will abound for rookie insurance professionals to devise new ways to hedge risks that real people worry about, and that really matter – those involving their jobs, livelihoods, and home values.
Beyond investment banks and brokerage houses, modern finance has a public and governmental dimension, which clearly needs reinventing in the wake of the recent financial crisis. Setting the rules of the game for a robust, socially useful financial sector has never been more important. Recent graduates are needed in legislative and administrative agencies to analyse the legal infrastructure of finance, and regulate it so that it produces the greatest results for society.
A new generation of political leaders needs to understand the importance of financial literacy and find ways to supply citizens with the legal and financial advice that they need. Meanwhile, economic policymakers face the great challenge of designing new financial institutions, such as pension systems and public entitlements based on the solid grounding of intergenerational risk-sharing.
Those of you deciding to pursue careers as economists and finance scholars need to develop a better understanding of asset bubbles – and better ways to communicate this understanding to the finance profession and to the public. As much as Wall Street had a hand in the current crisis, it began as a broadly held belief that housing prices could not fall – a belief that fuelled a full-blown social contagion. Learning how to spot such bubbles and deal with them before they infect entire economies will be a major challenge for the next generation of finance scholars.
Equipped with sophisticated financial ideas ranging from the capital asset pricing model to intricate options-pricing formulas, you are certainly and justifiably interested in building materially rewarding careers. There is no shame in this, and your financial success will reflect to a large degree your effectiveness in producing strong results for the firms that employ you.
But, however imperceptibly, the rewards for success on Wall Street, and in finance more generally, are changing, just as the definition of finance must change if is to reclaim its stature in society and the trust of citizens and leaders.
Finance, at its best, does not merely manage risk, but also acts as the steward of society’s assets and an advocate of its deepest goals. Beyond compensation, the next generation of finance professionals will be paid its truest rewards in the satisfaction that comes with the gains made in democratising finance – extending its benefits into corners of society where they are most needed.
This is a new challenge for a new generation, and will require all of the imagination and skill that you can bring to bear.
Good luck in reinventing finance. The world needs you to succeed.
© Project Syndicate, 2012, www.project-syndicate.org.
The author is professor of economics and finance at Yale University. His new book is Finance and the Good Society.
Money Wisdom for Women book tour is coming to Charlotte North Carolina - Examiner
Anita Renee Johnson, a native of Oakdale, Louisiana, has been passionate about finance for many years. She received her Bachelor of Business Science in Financial Accounting from National University in Sacramento, California, she then continued on to obtain her Masters of Science in Taxation. Currently she is enrolled in a Doctoral program with Walden University, in Minneapolis Minnesota, studying for her degree in Applied Management and Decision Sciences, specializing in Finance.
Ms. Johnson has extensive experience in teaching throughout the Sacramento area. She was a facilitator for the Elk Grove School District Adult Education Always Learning program, faculty member at Heald Business College, math tutor for Genesis High School, and Adjunct Assistant Professor at Cosumnes River College. The coursework ranged from preparing high school students for the mathematics exit exam, basic bookkeeping, business management, and how to be a successful entrepreneur.
Currently, Ms. Johnson is part of the faculty for Brandman University, in Sacramento, California. Here she instructs graduate students in financial statement analysis through online coursework. In addition, she is a faculty member at University of Phoenix also in Sacramento, California, where she provides instruction to adult students in such course topics as accounting, finance, writing, American Psychological Association (APA) Citation, conflict management, and how to conduct research.
In 2010, Ms. Johnson was awarded the Success Story Blog, from Walden University. She received the Business of the Year, Northern California, from the California State Black Chamber of Commerce, award in 1999, as well being recognized as Business of the Year, Sacramento, California in 1999.
Her professional affiliations are numerous, they include: Chairperson for the Small Business Development & Employment Advisory Board for the City of Sacramento, National Associates of Women Business Owners, Member of the Public Policy Committee, National Association of Black Accountants, to name a few.
During her career, Ms. Johnson has developed and instructed numerous courses designed to assist all ages in making sound financial decisions. These courses include: “Big Girls Don’t Cry – Taking the Emotion Out of Finances”, “Emotional & Financial Freedom”, “Entrepreneur Planning”, and “The Game of Life-Foster Youth”.
The most current project for Ms. Johnson is AR Johnson & Associates- “Money Wisdom for Women”. Established in 1998, her goal is to provide sound financial advice to her clients. This information is offered either in one-on-one consulting sessions, workshops, seminars, or conferences. Through ARJ & Associates, Ms. Johnson and her team have counseled over two thousand businesses and individuals in personal and business finance. Their topics include: tax preparation and planning, estate planning, Money Wisdom – the Board Game, Money Wisdom for Small Businesses, pre-retirement for Federal Employees, specifically the Environmental Protection Agency, and Race to Retirement.
I had the opportunity to interview Ms. Johnson and ask her some additional questions about her career and upcoming book signing event.
Who or what sparked your interest in finance?
I have been around money for over 30 years. I enjoy finances. It is interesting.
Why did Financial Advisor become a career path for you?
I have been in business since 1998, first with taxes and accounting. Now I am helping women realize their true worth when it comes to their finances. Women are emotional and do things that put their finances at risk.
I see that you are the CEO of your own company called Money Wisdom for Women; what made you decide to focus on women and their financial wellbeing?
For years I have been servicing women with their finances, there are some who have no clue.
Tell me a little about your book ‘Big Girls Don’t Cry: Taking the Emotion out of Finance’. How did you come up with the title of the book and briefly what is the book about?
This is not a novel about finances, but a book that you need a pencil or pen. When you finish you will have an idea of how your finances work and what you want to do about it.
It is estimated that 80% of women live in poverty after they retire. Women are care givers, always taking care of others and not ourselves.
The title is saying it is time we take care of ourselves, be selfish, don't cry about it, and stop being emotional.
For women we need to know we can control our finances.
Where is the location of the book signing?
Springhill Suites
12325 Johnston Road, Charlotte, NC 28777
What is the time range that you will be present?
6:00pm until 8:00pm
Ms. Johnson says: “my commitment is to inform and educate my clients so that they can make sound financial decisions” and “my job, purpose, mission is to equip women with wealth building skills”.
Anita Renee Johnson and associates website is www.moneywisdomforwomen.net
More Australians can't access money: report - Sydney Morning Herald
More Australians are having difficulty accessing emergency funds through mainstream financial services.
More than 300,000 West Australians do not have adequate access to day-to-day financial products such as a basic banking account, car insurance or even a credit card, a landmark study has revealed.
The research by the Centre for Social Impact - backed by the University of Western Australia - shows the ability to secure as much as $3000 in funds for an emergency through the mainstream financial system is becoming increasingly out-of-reach for Australians.
Instead, more people are relying on family or friends or turning to fringe credit products, such as payday lenders, who regularly charge substantially higher interest rates than banks.
Such products have seen a surge in uptake in recent years.
The report, to be released today, and partly funded by National Australia Bank, found even a moderate amount of credit was crucial to accessing key household goods that go beyond a monthly budget, such as a washing machine.
The lack of access to banking services impacted on people's ability to pay for basic household items such as electricity, telephone, food, clothing, car-related expenses, repairs, rent, education, health and repayment of other debts.
The report reveals 12,500 West Australians have no financial service products and an additional 293,000 are severely excluded, with only one service.
Residents in south east Perth are among the nation's top regions for financial exclusion, with more than one in five without access to basic banking services. That was 33 per cent more than the national average.
Regional West Australians also rated highly, with 20 per cent unable to access appropriate and affordable financial services.
South western Perth (18.7 per cent) and central Perth (18 per cent) also were below the national average.
Eastern Perth (11.9 per cent) was among the nation's most well-off areas, followed by northern Perth (13.3 per cent) and south western Perth (15 per cent).
Wollongong in NSW tops the nation with almost 7 per cent of adults without access to basic banking services.
The cost of basic financial services was the prime cause of financial exclusion, according to the research. The average annual combined cost of banking, credit card and either car or home insurance is $1794 annually.
A survey of financially excluded people also found the level of official identification needed to establish an account was often a hurdle, while many banks denied personal loans of less than $5000 as a personal loan, instead steering customers to credit cards that they were unable to access.
The distance to a bank branch, language and literacy challenges and poor credit records also were hurdles.
The report found capital city areas tended to have higher levels of access to credit, but lower levels of access to insurance, while country areas have lower access to credit, but very high levels of access to insurance, particularly car insurance because public transport is limited.
Many financially excluded people were reliant on government services such as Centrelink and also used fringe credit providers, such as payday lenders.
NAB chief executive Cameron Clyne accepted the banking industry was partly to blame, conceding it needed to lift its game by providing affordable products to more people.
''The absence of access to mainstream financial services does preclude people from advancing socially and economically,'' he said.
''Often it's the unexpected expenses [such as] if the car breaks down or someone needs to get to a job interview.
"There's an obligation for the banking system to improve financial inclusion."
The report comes just days after the federal Treasurer Wayne Swan brokered an agreement with the banking industry to provide free ATM transactions for Indigenous people in remote communities.
The study found the number of Aboriginals and Torres Strait Islanders severely excluded from access to day-to-day financial services is more than double the national average, with 43 per cent operating outside the mainstream banking system.
While there are efforts to improve access to basic bank accounts and efforts to promote low cost credit products, there is a substantial gap in general insurance where there is little movement about delivering affordable insurance products.
- with Eric Johnston
Column: Damn the money, Olympics renew east London - US News and World Report
By JOHN LEICESTER, Associated Press
LONDON (AP) — In August of 1944, when the tough east London neighborhoods of his childhood lay smoking in bombed-out ruins, a Nazi German V1 rocket packed with one ton of high explosives "fell just where you're sitting," David Gold says.
Comfortably seated in the bar of the 117-year-old east London soccer club, West Ham, which he now co-owns, Gold is not trying to be melodramatic.
He is simply making a point: This part of London has long had more than its share of foul luck, and it was high time that changed. The 2012 Summer Games are helping do that.
The Olympics are focusing the world's eyes on what used to be a derelict, polluted patch of industrial land near Gold's childhood home but which now is a shining advertisement for east London: the immaculate, landscaped Olympic Park with purpose-built sports venues that smell like a new car. So damn the expense.
"What is happening is immense for east London," Gold says. The Olympics are "bringing the pride back to this part of the world."
Those London Mayor Boris Johnson once described as "Olympo-skeptics" have beaten a steady rhythm of complaint about the $14 billion Britain is spending in an economic recession on games many people couldn't get or afford tickets for. And Britain being a vociferous democracy, critics aren't locked up and shut up as they were in Beijing in 2008.
The Big Brotheresque Olympic security — up to 13,500 soldiers, plus police, security guards, fighter jets, helicopters, warships, surface-to-air missiles and even a "sonic weapon" crowd-control device that emits a dissuasive, ear-piercing beam of sound — also doesn't come cheap and, to some, is a scary reminder that Britain is a target for terrorists.
Street graffiti artists complain their work has been painted over in London's Olympic beautification. Police around the Olympic Park have been given powers to disperse "anti-social" teenage loiterers. Oficers have clamped down on prostitutes and cleaned out their calling cards from London's famous red telephone boxes. And plans to whisk Olympic VIPs and athletes through London traffic on reserved lanes sit uncomfortably in a class-conscious city where opponents dismiss the games as a corporate-sponsored shindig for the rich.
"The Olympics are being used to beat people over the head with," says Joe Alex, who owns a small house next to the Olympic Park and claims that games-related property development, "like social cleansing," is squeezing and pricing modest families out of the area.
"There's a real seedy underbelly. Corporate Olympics have taken over the whole thing," he says. "I don't know anyone who knows anyone who has a ticket."
But finding east Londoners who are thrilled is easy, too. When you look at east London's history, it is not hard to understand why.
The British capital has, in some ways, long been a city divided. Wealth, political power, bridges over the Thames, posh shops and night life were concentrated in its west. The east was where the city sent its filth — in engineer Joseph Bazalgette's sewage network — and crammed in its poor.
It was home to the massive shipping docks that Adolf Hitler's Luftwaffe bombed ferociously because they handled one-third of Britain's imports. When Buckingham Palace in the west was bombed in 1940, Queen Elizabeth II's mother, the late Queen mother, was famously said to have been almost glad that she could now "look the East End in the eye" and share its suffering.
East London was where stinking industries clustered and where Jack the Ripper slashed and horrified, where Stalin, Lenin and Trotsky visited and where India independence leader Mohandas Gandhi stayed in 1931, preferring to live among the working people and smoke stacks than in a West End hotel.
For those in the west, "the old saying was that you never went east of the Aldgate Pump," a public fountain marking a rough boundary between the city proper and its East End, says Brian Grover, an east Londoner who works at the Museum of London Docklands.
His childhood memories are of swims in the Thames so polluted "we all had boils, ear aches," and of recovering cans of fruit discarded by cargo ships in the flotsam and jetsam of the river.
Finance sector prepares for Greek exit - just in case - New Statesman
No matter how unlikely the financial sector thinks Greece exiting the euro will be, it is taking every precaution possibile to make sure it doesn't get hurt by the process.
Lloyd's of London is preparing for a collapse of the single currency, and has reduced its exposure to the continent "as much as possible", according to a report in the Sunday Telegraph. Despite that, Europe still accounts for 18 per cent of Lloyd's £23.5bn of gross written premiums, with much of that concentrated in Spain and Italy, as well as the safer markets of France and Germany.
Richard Ward, the chief executive of Lloyd's, said:
I'm quite worried about Europe. With all the concerns around the eurozone at the moment, we've got to be careful doing business in Europe and there are a lot of question marks over writing business in the future in euros. I don't think that if Greece exited the euro it would lead to the collapse of the eurozone, but what we need to do is prepare for that eventuality. . .
We've got multi-currency functionality and we would switch to multi-currency settlement if the Greeks abandoned the euro and started using the drachma again.
Other institutions are putting their own houses in order. Two weeks ago, ITV's Laura Kuenssberg tweeted from a trading floor where the drachma had already been installed into the systems, and Reuters reported that a number of banks were quietly preparing for the exit, in which case those problems would be the least of their worries:
Some banks never erased the drachma from their systems after Greece adopted the euro more than a decade ago and would be ready at the flick of a switch if its debt problems forced it to bring back national banknotes and coins. . .
A Greek departure from the euro would create legal and practical problems for the banks which would dwarf the relatively straightforward technical job of dealing in a new currency.
But how unlikely does everyone think exit actually is? Are they covering for an extreme black swan event, or is it something which they are all expecting? Joe Weisenthal at Business Insider provides this chart, from Credit Suisse:
For those of you without the maths skills, that's a roughly 15 per cent total chance of a Greek exit, and another 20 per cent chance of a third round of elections (which, of course, takes us right back where we are already). Not definitely going to happen, but worth preparing for in case. No one wants to shout "fire" and spark a run, but no one wants to be the last one in the burning room either.
Banks told to display 'your money is protected' notices - Daily Telegraph
The notices will also have to state whether banking licences are shared with another brand, as in this case customers who have money in both are still subject to an overall compensation limit of £85,000.
For example, Halifax and Bank of Scotland – which also own BM Savings – count as one group, whereas NatWest and Royal Bank of Scotland are treated as separate entities by the FSCS.
Andrew Bailey, the FSA's director of UK banks and building societies, said: "Customers need to feel confident about their money and to do this they need to know what the compensation limits are and which scheme would provide cover in the event of a bank, building society or credit union failure.
"Too many people assume that because their branch is located on a local high street in the UK, they are covered by the FSCS. This is not true for UK branches of EEA [European Economic Area ] banks where the home country's deposit guarantee scheme applies."
He added: "Banks, building societies and credit unions will have to display these compensation stickers or posters in the branch window along with a sticker at the cashier's window or desk and a further poster in a prominent position inside."
Similar stickers must also be displayed on websites. The rules will take effect on August 31.
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