Saturday, September 24, 2011

So who funds the god fund?

Greek plates © fintag

News comments:
The noise is starting to hurt.

The tittle tattle of default and resignation is starting to bite. UBS say goodbye to the old man who sold out UBS to the Americans and pushed private money to Panama and Andorra. DB will soon be hoovering up the best bits and UBS will be no more.

UBS is a bank. It uses our money to make money. When things go awry it asks us to help it out so we do. UBS is "guaranteed" by the country it resides in. Switzerland. This country is quite wealthy but not quite wealthy enough to look after UBS. This is why it will soon be breaking up UBS.

Some countries have run out of money. That is its people are saying no to more tax and austerity. Companies are running off to lower taxation places or struggling to make profits that can be taxed.

Take Greece. Haircuts all round.

The recent rumors of bail out funds to preserve the Euro and stop any sort of default remind me of the Jim Cramer rhetoric surrounding Bear Stearns. It is too little too late. The German taxi driver (and German tax payer) told me as I went to the airport that over his dead body would be give anything to those lazy Southerners (Greeks, Italians, Spanish and Irish!).

Europe is creating another bail out fund (yawn) based on that well abused TARP fund. This time it is very different because it won't just be financial institutions wanting some free cash. Countries will soon be dipping in. Governments having a lender of last resort is madness.

Who funds the god fund? You and I. The rich are bailing out the poor. Socialism is truly with us. As China turns towards capitalism we all turn into marxists. Funds to bail out the feckless. Funds to preserve the financial system?

If Greek defaults, the IMF will struggle to bail out Italy et al.

We all die in the end. Let us not pretend we don't. Countries do die. Just let them. They can rebuild.

Today's shorts:
The mother of all funds (bloomberg)

Today's longs:
UBS: A new beginning (reuters)

The Europe Sovereign Debt fund (ESDF) to be guaranteed by China.