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Ronnie sure sounds like a troubled man!
Ronnie sure sounds like a troubled man!
7 November 2011 Last updated at 09:37Is the euro about to capsize?
By Laurence Knight Business reporter, BBC NewsCould the euro be sinking?
In seafaring, there is a concept called the "free-surface effect".
It happens when a surprisingly small amount of fluid can move freely inside a boat.
It is an accident waiting to happen.
As the boat tilts in the waves, the water starts to flood across the floor, pushing up against the boat's lower side.
Instead of righting itself again, the boat begins to list more and more as the water moves inside it, until the boat capsizes.
Something similar is happening to the euro.
When it was created in 1999, there was a fatal flaw. While governments shared a single currency, they continued to have their own separate bond markets.
It was an accident waiting to happen.
Bonds are IOUs that governments issue in their hundreds of billions when they want to borrow money.
Continue reading the main story“Start Quote
End QuoteThe real problem is that what is true of tiny Greece can equally be true of much bigger Spain and Italy”
Just like shares on the stock market, they can be traded by investors.
If investors don't like a government's bonds, they can sell them.
That sends their price down, which by implication means the interest rate the government would have to pay if it wants to borrow more money goes up.
Currency masterInvestors might sell bonds if they are afraid that a government cannot repay its debts.
Normally this is not a problem. Because normally, a government is the master of its own currency.
It can order its central bank - the currency's guardian - to print as much money as is needed to repay its debts.
ECB boss Mario Draghi has ruled out the central bank printing money to buy up bonds indefinitely
This makes the debts of governments like the US, Japan or UK the safest investment in their respective currencies.
Moreover, if a foreign investor doesn't like the British government's debts, not only does it sell government bonds.
It also sells the pound.
That pushes the pound's value down, which helps make the UK economy more competitive, which helps the UK grow, which helps the government raise taxes.
What's more, when one investor sells pounds, another must buy them.
And where will that buyer invest those pounds? Back into UK government bonds.
So by having its own currency, the UK government is pretty much guaranteed its own pool of sterling cash to finance its borrowing.
Now consider the euro.
Continue reading the main story“Start Quote
End QuoteThere is a common misperception that the eurozone crisis is all about debt - it isn't, it is also about growth”
Investors believe that Greece cannot possibly repay its debts.
Unlike the UK, Greece does not have its own central bank that it can rely on to print money and buy its debts. And a 50% write-off of its private sector debts is already agreed in principle.
So many investors have sold Greek bonds. But they could not sell the drachma. There is no drachma to sell.
Instead they could freely move their cash into safer government bonds - German government bonds.
Just like the seawater inside a boat, liquidity - investor's cash - can move freely within the euro from one government's bond market to another's.
And that made the value of Greece's bonds plummet.
Greek demonstrationsBut despite all the noise, Greece is only a sideshow.
Could a form of the drachma make a return in Greece?
Greece is a small country. And if it stopped repaying its debts and/or left the euro, re-denominating its debts into devalued drachmas, the losses to its bond investors would be manageable.
The danger posed by Greece is rather the power to demonstrate.
It demonstrates how damaging it is to a eurozone economy when its workers' wages rise to uncompetitive levels during the boom years, leaving its economy high and dry, unable to compete and unable to devalue its currency during the bust.
It demonstrates how self-defeating it can be for a eurozone government to try to reduce its borrowing, by raising taxes and cutting spending, when this merely drives its economy into recession, meaning fewer incomes to tax and more unemployment benefits to pay.
And as of this week, it demonstrates that there is a very real possibility that a eurozone member could leave the single currency altogether.
But most important of all, it demonstrates what happens when investors lose confidence in a eurozone government's debts.
No return?The real problem is that what is true of tiny Greece can equally be true of much bigger Spain and Italy.
Continue reading the main story“Start Quote
End QuoteThe best solution would be to have created a single eurozone government bond market in the first place. Too late for that”
And it is in Italy where the real damage is happening.
Investors are afraid Italy might go the same way as Greece. So their cash is beginning to flood out of Italian government bonds, and into German government bonds.
If Greece is the rising flank of the boat, Italy is the midship, and it is listing badly.
It now costs Rome an unprecedented 6.1% to borrow money for just one year. By contrast, Germany pays a mere 0.25%.
Italy has a lot of debt. It has had for years. But this has only become a problem now, because if Italy has to pay 6% interest on its debt, then its debts will grow more quickly than its economy's capacity to service them.
That is unsustainable, and investors know it. Which is why Italy may be about to cross a point of no return.
Once Italy's cost of borrowing rises above this level, it becomes very difficult to bring it down again.
Because at that point, investors know that Italy cannot repay its debts, which means they won't lend to Italy.
But once investors stop lending, then Italy cannot possibly meet the hundreds of billions of euros of debts that are coming up for repayment in the next few months.
So it becomes a self-fulfilling panic, just like a bank run.
Which is to say that, once Italy's cost of borrowing rises above, say, 7%, the chances are that it will just keep on rising as investors desert its bonds in their droves.
The boat will capsize.
Misplaced prideMeanwhile, Berlin's cost of borrowing has gone down and down as nervous investors have flooded into German government bonds.
The size of the eurozone bailout fund has been increased, but it remains to be seen if this will work
Some Germans may take pride in this as a sign of strength, a vote of confidence.
In fact quite the opposite is true, because Germany is also part of the boat that is capsizing.
There is a common misperception that the eurozone crisis is all about debt.
It isn't. It is also about growth.
Any government can repay its debts, if its economy grows fast enough to generate the tax revenues needed.
But the current crisis is killing growth in Italy and Germany alike.
Businesses and consumers are nervous, and are cutting back their spending.
Europe's banks are finding it hard to borrow, and are being told to meet higher capital ratios - a measure of their financial prudence - so they are cutting back their lending.
Meanwhile, half the governments in Europe are finding it harder and harder to borrow, and in any case are being ordered by Brussels to cut back their spending to get their finances in order.
All of which is tipping the eurozone into a recession.
But a recession just makes debts even harder to repay - as has been amply demonstrated by Greece over the last four years.
Keep pumpingWhat can be done?
Continue reading the main story“Start Quote
End QuoteIn effect, panicky markets are offering to lend Germany money for free”
The best solution would be to have created a single eurozone government bond market in the first place. Too late for that, even if the Germans hadn't ruled it out anyway.
The eurozone instead hopes that its soon-to-be-1tn-euro bailout fund will do the job.
The fund is like a pump that will try to shift liquidity away from the dipping side of the boat (Germany) back towards the rising side (Italy and Spain).
But even if the pump is ready in time, most economists say it is not big enough to do the job.
Moreover, the eurozone already has a big pump in place, called the European Central Bank.
The ECB can print its own money, so there is theoretically no limit to how much Italian or Spanish government debt it could buy up.
But the central bank's new Italian head, Mario Draghi - perhaps under the influence of his more hawkish German colleagues - has ruled this option out.
Old hatThe authorities could at least do more to head off the recession.
Depression-era economist John Maynard Keynes said there were two options - cutting interest rates and increasing government spending.
The ECB did indeed cut rates at its meeting on Thursday, but only by a quarter-point to 1.25%. It is an encouraging start.
And perhaps if interest rates reach zero, Mr Draghi can argue that the ECB must then follow its US and UK counterparts in resorting to quantitative easing - buying up government debt (including Italian debt) in order to help the eurozone economy (and not just to rescue his home country).
The problem is that lending more money only helps if the money gets spent. So ideally governments should also be spending more.
But only one government is able to borrow and spend on the scale needed - Germany.
Thanks to the crisis, Berlin can borrow so cheaply that the interest it pays would probably be less than the inflation rate.
In effect, panicky markets are offering to lend Germany money for free.
But Germany does not believe in Keynesian economics. It does not believe in borrowing and spending.
And this is what may ultimately sink the euro boat.
Brilliant explanation.
The press really does need a check on it in this country!
-- Danny
BY ETHAN SMITH AND AMIR EFRATI
Google Inc. on Wednesday is expected to unveil an online music-download store featuring songs from three of the world's four biggest music companies, according to people familiar with the matter.
Sony Corp.'s Sony Music Entertainment, Vivendi SA's Universal Music Group, and EMI Music are expected to have deals in place to let Google sell their music in time for an announcement Wednesday afternoon in Los Angeles, these ...
10 November 2011 Last updated at 01:37Spitfire redux: The WWII guns firing after 70 years buried in peat
An excavation at the site of a 1941 Spitfire crash in a bog in the Irish Republic uncovered huge, remarkably preserved chunks of plane and six Browning machine guns. After 70 years buried in peat could they be made to fire? They certainly could, writes Dan Snow.
It was June in Donegal, when we stood on a windswept hillside in hard hats and high-vis surrounded by a crowd of locals and watched by an Irish army unit while we filmed an archaeological excavation.
This was the place where, in 1941, Roland "Bud" Wolfe, an American pilot flying a British RAF Spitfire, paid for by a wealthy Canadian industrialist, had experienced engine failure while flying over the neutral Republic of Ireland.
After flying a sortie over the Atlantic, Wolfe was on his way back to his base in Northern Ireland when he was forced to bail out. He parachuted safely to the ground - his plane smashed into the boggy hillside.
Fast-forwarding 70 years and local aviation expert Johnny McNee was able to identify the wreck site. The ensuing dig was accompanied by intense anticipation.
Rolls Royce Merlin engine: One careful owner, slightly worn
We did not have to wait long for results. Suddenly the fresh Donegal air was tainted with the tang of aviation fuel.
Minutes later the mechanical digger's bucket struck metal. We leapt into the pit to continue by hand. One by one the Spitfire's Browning machine guns were hauled out.
We had hoped for one in reasonable condition - we got six, in great shape, with belts containing hundreds of gleaming .303 rounds. The Irish soldiers then stepped in. This was a cache of heavy weapons, however historic they might be.
Next came fuselage, twisted but in huge pieces, over a metre across, still painted in wartime colours, with neat stencils of the plane's ID and the iconic RAF bullseye-style roundel.
Despite hitting the ground at well over 300mph the artefacts were incredibly well-preserved. The wheel under the Spitfire's tail emerged fully inflated, the paper service manual, a first aid kit with bandages and dressings, the instrument panel, the harness that Wolfe had torn off as he hurled himself out of the cockpit and my highlight - Wolfe's leather flying helmet.
Perhaps 20m down was the magnificent Rolls Royce Merlin engine, which the digger raised to a cheer from the crowd.
Thanks to the soft peat, the inaccessibility of the crash site and the crater rapidly filling with water, a huge number of artefacts had survived the crash with the authorities unable to clear them up.
But Wolfe's Spitfire had more surprises for us.
Thanks to a "wild idea" from Lt Colonel Dave Sexton, ordnance technical officer in the Irish army, it was decided an attempt would be made to fire one of the Browning guns that had spent 70 years in the bog.
His team painstakingly cleaned the weapons and straightened pieces bent by the impact. Finally, on Tuesday we were able to stand on an old British Army range just north of Athlone for the big day.
The machine guns looked as good as new. Soil conditions were perfect for preservation. Beneath the peat there had been a layer of clay. Clay is anaerobic, it forms an airtight seal around all the parts, so there is no oxygen, which limits corrosion.
Had they been in sandy soil, which lets in water and air, the metal would have been heavily corroded.
The Irish specialists had chosen the best preserved body and added parts from all six guns, like the breech block and the spring, to assemble one that they thought would fire. They made the decision to use modern bullets, to reduce the risk of jamming.
Wearing helmet, ear protection and body armour I crouched in a trench a metre away from the Browning, which I would operate remotely.
Every part of the gun, to the tiniest pin, had been under a peat bog for 70 years, to the month.
This Spitfire had seen service during Britain's darkest days and is reliably credited with shooting down a German bomber off the Norfolk coast in early 1941. The Irish had found large amounts of carbon inside the weapon, evidence of heavy use.
I turned the handle of the remote firing mechanism. The Browning roared, the belt of ammunition disappeared, the spent shell cases were spat out and the muzzle flash stood out sharply against a grey sky. It was elating.
That was the noise that filled the air during the Battle of Britain.
Continue reading the main storySupermarine Spitfire
- British single-seat fighter plane used by RAF and many Allied countries during WWII
- Its thin, elliptical wing allowed a higher top speed than similar fighters
- Speed was seen as essential to defend against enemy bombers
- Continued to be used into the 1950s as a front line fighter and in secondary roles
The gun fired without a hitch. There can be no greater testament to the machinists and engineers in UK factories in the 1940s who, despite churning out guns at the rate of thousands per month, made each one of such high quality that they could survive a plane crash and 70 years underground and still fire like the day they were made.
During the course of the war, one firm, Birmingham Small Arms (BSA), produced nearly 500,000 Browning guns. All this was despite being targeted by the Luftwaffe. In November 1940, 53 employees were killed and 89 injured.
The firing was yet more evidence that the Spitfire, with its elliptical wing shape, engine and machine guns, is one of the crowning achievements in the history of British manufacturing.
The machine guns will now be made safe and join the rest of the aircraft on permanent display in Derry, where Wolfe was based, a city on the edge of Europe that played a pivotal role in the war.
The excavation of Bud Wolfe's plane is part of Dig WWII, a series for BBC Northern Ireland by 360 Production to be presented by Dan Snow and due to be shown next year.
Fascinating.
Memorable.
In today’s leader the Daily Mail wrote:
It is not often that this paper defends the Guardian, whose politically correct, bien-pensant views seem increasingly detached from both the real world and the concerns of ordinary Britons.
But when police invoke the Official Secrets Act to try to force one of its reporters, Amelia Hill, to reveal her sources, everybody who cherishes the freedom of the Press and the vital role of the fourth estate in a healthy democracy should be deeply alarmed.
Wonders NEVER cease!
18 September 2011 Last updated at 12:39Leeds City Varieties reopens with gala performance
The £9.9m refurbishment has been carried out to replicate the 1890s style
Continue reading the main storyRelated Stories
A Grade II*-listed Victorian music hall in West Yorkshire is to reopen with a gala performance after a £9.9m refurbishment.
Renovation on the City Varieties in Leeds began in 2009 and was carried out in the style of the 1890s.
The fundraising performance on Sunday evening will feature comedian Ken Dodd.
The Varieties theatre was the home of The Good Old Days, the BBC's long-running TV variety show for over 30 years.
Once there were more than 300 such theatres nationwide but few now remain in working existence.
The work has been part-funded by Leeds City Council and the Heritage Lottery Fund, with donations from the Friends of City Varieties and The Monument Trust.
Harry HoudiniA donation was made by the family of the late Jimi Heselden, who made his fortune with his Leeds-based firm Hesco Bastion.
The auditorium will be named after Mr Heselden who died in September 2010 after an accident on a Segway near his home at Boston Spa.
Facilities for audiences and performers have been improved with new seats, a glass lift and technical equipment installed.
Charles Thornton opened his New Music Hall and Fashionable Lounge in 1865 above a public house in a Leeds side street.
The City Varieties - as it later became known - has survived virtually unchanged.
Its stage has hosted Charlie Chaplin, Harry Houdini, Lillie Langtry, Mickey Rooney, Frankie Vaughan and Barry Cryer.
It was in 1953 that the Varieties became the home of The Good Old Days.
GOOD NEWS!
Facebook is expected to announce the launch of its much-hyped music service in f8, its annual developers’ conference, on September 22. [1]
The social networking giant is expected to partner with digital music providers Spotify, MOG and Rdio in this initiative. After having success with online games such as Mafia Wars and Farmville, Facebook’s digital music service suggests that the company is steadily moving in the digital content space, giving struggling competitors such as Yahoo and AOL even bigger reasons for worry.
We currently value Facebook at around $45 billion.
Facebook Music: What’s In Store For Users?
Similar to its applications and games, Facebook does not intend to become a hosting site for digital music. Instead, the company would be acting as a platform for providing digital music content from providers such as Spotify that already have their music licensing in place. It’s a win-win situation as Facebook’s partners get the advantage of Facebook’s immense reach of +750 million users while Facebook gets additional time spent on its website.
While it might be too early to say that this launch will revolutionize digital music, online music providers such as Spotify and Rdio are bound to benefit from Facebook’s key networking features such as the “Like” button and the news feed (for instance, the user profile will automatically update the music track he/she is listening to).
This launch is also a sign of bigger things to come, and Facebook might not be stopping at just music for its content. In fact, it would not be a surprise if we soon see online video providers such as Netflix being roped in to provide video content for the company. This also represents a competitive threat to Apple’s iTunes and even Sirius XM in mobile music listening.
See our full analysis for Facebook
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Is FB getting too complicated for it's own good?
