Portuguese borrowing costs jump one whole percentage point

The report from the Wall Street Journal's Market Watch is linked here. A quote: Reports said the government sold 450 million euros of four-year bonds at a yield of 4.695%, up from 3.621% in a previous sale. Portugal reportedly sold 300 million euros of 10-year bonds at a yield of 6.242% versus 5.312% in a previous sale. A one per cent jump on the four year cost seems bad enough, but ten year interest rates of effectively six and a quarter per cent seems horrendous! Bring back the Escudo must soon become the only sensible recourse. PS Must reads for this afternoon David McWilliams in the Irish Independent on the real meaning of 6% plus interest rates, from here, followed (if you have the stomach) a good description of David Cameron's slippery treachery on the EU from Iain Martin in the Wall Street Journal, from here.

The 'Cloud Cuckoo Land' of the UK Property Market and NHS

The Daily Telegraph's Personal Finance Correspondent writes this week that UK property prices return to 2007 levels until 2014. Read the entirely incredible article from here. Elsewhere the same paper reports that the IMF predicts Britain's gross debt to GDP ratio will reach 109.7% by 2015 (Le Figaro reports the IMF predicts 115% by the same year for France, our supposed ideal partner for future aircract carriers on which more tomorrow). The Telegraph this morning quotes a second month of property price falls, read here and concludes: The average home currently costs £169,347, according to Nationwide. Yet Myra Butterworth, Personal Finance Correspondent of the Daily Telegraph, informs us that homeowners "will have to wait until 2014 for a recovery, when average prices will reach £226,900" We recall that Ambrose Evans-Pritchard, astute finance commentator on the same newspaper, last November reported Société Générale advising its clients of potentiel global collapse and suggesting they buy "sovereign bonds (to) "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc" What else was forecast in that perceptive report: "Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said."

And the crowning UK National disaster that is the NHS, read this gob-smacking nonsense from the Daily Mail this morning:

£130,000 to quit now for NHS bosses facing axe as plans are drawn up to sack up to 20,000 managers

Does Lansley not know the nation is bust. Cash from public employees and those sitting on large unearned house equity are the only future source for repaying the debts if private enterprise is to be allowed to play its historical role of wealth creation. Cap public pensions at three times the OAP as a maximum, recoup the wealth with a five year reducing property tax as earlier proposed on this blog (read the Brown Levy from here). In reality there are no other choices!

Insanity from the Independent on Sunday

A so-called panel of experts, in fact a group of journalists employed by the New Labour donating paper itself, asks twenty questions about the sterling collapse and Britain's bankruptcy among which is this particular nonsense:

Can we afford present levels of public spending?

The real question is can we afford not to spend on big infrastructure projects?

Naturally enough the panel does not answer, nor even attempt to consider the centuries old dilemma for the poverty stricken - namely how do you spend money you do not have and which NONE will lend?

British Car Moguls beggar Mandelson for Cash

The Guardian fittingly reports on the final disgrace for a once proud industry, read here. A quote: Car sales in the UK have fallen by more than 20% in each of the last two months while export sales have also been hit. The industry is seeking a series of measures to help boost sales by bolstering consumer confidence and making finance for car purchases more easily available. A bit like like wondering where the first time home-buyers have disappeared.... you know those ill-educated youngsters who are presumed to be stupid enough to step in halfway down a collapsing housing market!!

A Panic cut in Interest Rates

The media seems unanimous that the 1.5 per cent cut today is the first such a large cut since 1981. Looking at the Bank of England statistics page, here, I cannot see such an event in 1981. In 1980 there was a cut of 2 per cent on 25th November, from 16 to 14 percent namely a reduction of 12.5 per cent. Again on 11th March 1981 there was another 2 per cent cut to 12 per cent namely a reduction of 14.285 per cent. Today's cut of 1.5 per cent from 4.5 per cent to 3.0 per cent is an historically massive decline of one third or 33.333r per cent and is totally without precedent and clearly an act of pure blind panic! End result a Footsie plunge of 258.32 points at the close. Read my earlier post at the time of the announcement to gauge whether I am surprised at this response! One thing is clear, there are none in any positions of power or influence within the UK who have the first idea as to how to handle the crisis they have delivered. As I have repeatedly blogged (Blears please note) this is a House Price Crisis not a Banking Crisis. For good measure it is now a political crisis as well!