Wealth management stays strong, Shale keeps on fracking and France feels the heat...

Tax Privacy lies no more

The continuing transition of banking secrecy becoming more open, continued last week, as Luxembourg, the British territory of Bermuda and Chiefs of Uni Credit began a mixture of transitioning towards a mixture of openness towards taxation figures, and bank balances.

The Austrian chancellor though is going one step further. He has been given approval to negotiate with the US a tax centred upon foreign bank account holdings. More centered towards account holders in the US, it will most likely be a two part situation for EU member states also. Austria is also signing up with the US to a mutual administrative assistance in regards to tax matters.

The movement is a combination of pressures implemented from the EU and US. Allowing for tracking of financial intermediaries that can involved in a rouge transactions, to increasing the strain on beating tax avoidance. Obviously a growing concern for large investors, though that hasn't put them off too much...

Regardless of this big shake up, wealth management and private banking are still on the rise. The likes of Goldman Sachs and JP Morgan are preferring to have a stickier type of deposit holder, where reserves are less volatile than those entwined within their investment arms.

As all these changes for reform, glide out of the former Habsburg empire, from neighbouring italy Tax evasion scandels for Mr Belesconi as he loses his appeal for a zero four-year jail sentance, for his punishments for tax evasion. FT article

Black Clovers

Ireland has now been recognized for offshore exploits to a once ignored segment of the Eurasian plate. This will hopefully bring a few more receipts into the stagnant Irish economy, though still striving as the only euro-zone member, that is currently able to repay its debts to creditors and the ECB.

Whilst the ocean floor is being discovered off the west coast of Kerry, in the US, commercial competitive rates of liquefied natural gas have raised hopes for the department of Energy, as the mining of shale has unlocked vast amounts of the fuel source. So much that the US is on high prospects to be net exporter by 2020.

The new energy boom is acting as a boost to the US recovery, as will eventually be reflected within the future months whilst the Brent Crude price fluctuates  The oil price staying firm on still low growth forecasts, and possibly more so into the end of 2013, that the US's energy chat moves further away from coal and oil, in the hope to reduce CO2 emissions and increase its strategic dominance, by becoming less energy dependent.

French woes

Last Friday marked 25 years of the Franco-German relationship within the council of financial and economic affairs. Though a Francois Hollande has certainly realized he and his government may have really played with fire, in relation to their bullish comments amongst other EU nations over the previous weeks.

With taking advantage of trade woes with UK & China, and insulting government figures in Germany, it is only obvious for Mr Hollande to possibly expect a more uncooperative relationship, in regards to their views against the Germans and their strong Hayek position. As well he also needs to manage a healthy cabinet reshuffle.

Protectionism and National independence is becoming more an issue, and with the organisations, such as the WTO, being in a crisis, slowly taxes and tarrifs may comeback into being. Though it is more likely that free-trade-areas and economic zones will continue to exist, just with larger import/export costs.

The Euro and Europe , Which will last?

A good day to all.
The debauchery of this week foretells the story of a possible burn up in the re-entering of the euro into uncharted waters. The UK government delvers its budget and Iraq is seen as the place not to do oil business. Also old news, we have new executive pope for the Vatican bank.

The Drop Ultimatum 

Cyprus has now joined the PIIGS (Porturagal, Ireland, Italy, Greece and Spain), to become the sixth country to need emergency funds to support its crumbling financial system. Germany is leaving the terms melt into Cyprus for time being as the emergency funds run low. German pins lay sealed against the collars of the ECB & IMF as no room is left for breathing.

The idea of a leaving of the Euro is more likely than maybe dear readers may imagine... Cyprus is in a few good corners for this to work. Firstly it is a small country and second Russia is a big backer in Cypriot infrastructure, though the last thing the oligarchs want is their back-door into the EU being lost. Still it seems that the church, being the largest landowner in Cyprus has agreed to help out the Cypriot government. At the same time Cyprus losing it's trading advantage from having the increased cost of currency exchange transactions will not be a pleasant move.

Cyprus wants to stay part of the euro, though the only current options at its disposal are to take a percentage of deposit holders reserves, which by far will fuel a bank run. Or try and lipo out any money that is in the economy. This evening from the democratic side of the government, mentioned the ability to raise at least funds from the nationalisation of the state pension scheme, though this is not reassurance to safety. Neither in the same interview conducted on Monday's BBC 'Newsnight' program that they are also looking at a Euro zone exit and going back to the Cyprus pound.

The stickier ends of Black Gold

Ten years after the invasion of Iraq by British and US forces, there have been many rumours that it was not for weapons of mass destruction but for the sweet blood of the world that everyone is desperate for. Well the truth of ten years on Iraq can possibly be one of the worst places to buy a lease to drill.
FT interactive map of Iraq Oil ten years on

Iraq has only seen production levels hit similar sums before the war. a few years ago oil firms were running to buy up leases, but with the low margins and excessive problems with payments by government, bad infrastructure and continuing unrest, many have chosen to pull out.

In the other view it has shown that iraq is unafraid of playing hardball over its resources and despite what many think. Iraq is incharge of its oil and many would rather face other countries beaucreacy than Iraq's.

The Endpoint

So time for the monthly forecast from Mr Gothic Economist...

http://youtu.be/-LSxpxjMQ9c?t=1m5s (a bit of music for the mood)

We may see the first ever exit of a country from the euro-zone. It could be a marvellous move, or spell continuing economic black areas for the euro. My guess is with the tiredness of Germany and it's direct position on Cyprus, the currency exit looks very possible.

Negative growth is forecast for the next two months of the year with a continuing rise in inflation and maybe an increase interest rates soon to combat this, regardless of what Mark Carney (New bank of England head) is known for. It would be a bold move; maybe bold enough to reduce the ongoing increase in the cost of living.

A continued increase in the cost of the barrel of oil. Barak Obama may have visited the middle east to cool tensions, but the only thing that is possible from that is stagnation as the best outcome.

And the new Argentinian pope will keep on watching & Playing from the Vatican Bank.

Good Evening!
http://www.youtube.com/watch?v=F0PLZzi2JJo

The tale of two Islands in Asia

We are a week into the glimpse of China's new management board, upon the stage for China, seven suits encased with red ties stood before the world.

Mr Xi Jinping is now leader of an >80m Chinese communist party with his six new team members at the helm also, however attending the congressional announcement was former president Jiang Zemin. He was there for one reason only, to reassure the world, that as much pressure china's political system is under to become democratic, it will not cease. Mr Jiang actually got more attention due to this, compared with the new president at the congressional announcement, as Mr Xi is seen to be more open in a rational sense to changes within the political system.

This would be honey to the ears of Japan, as it announces it largest trade deficit with China, and this is not due to organic economic slowdown, it is down to a bunch of islands that Japan purchased. This has now led to negative growth in nearly two quarters, ergo Japan will be declaring a recession. Though even with a slightly easier going president, that's not to say members of the old school are not present in the other six.

Going to Behavioural and Strategic impact. The US has taken a very notoriously cunning step and in some ways it will overall benefit China. The US shifted the fire-power of 40,000 troops to conduct exercises   in the area, in a mutual indication to China, that it would standby Japan to defend it's territory, as Japan and the US have a treaty on defence of each other.
However at the same time, the US will now be overtaking Japan as largest export partner to China. So throwing a few 40,000 troops in an area to keep Japan happy for a while, whilst you take over their trading position is quite a good deal.
But it is just not the US that are conducting strategic positioning  China is producing bilateral trade agreements with South Korea, so to anyone's guess, economic pressure is fully being exerted onto the sword of the samurai. In return Japan is attempting trade agreements with the EU and Australia, regardless it will loose out.
Though it's not all sunshine and butterflies for the red flowers.
China's investor arms are going into the emerging markets, as western traders start getting bullish with their Chinese weighted portfolios. They seek non domestic protection, and as much as China racks on more tax incentives and lifts investment barriers, non of this is being seen to make a world of good; only behavioural investment sense of desperation, just making traders increase their bet values against China.

So China is plotting the downfall or economic suicide of Japan with its sustainable deficit of +200% of GDP.
Though it could be worse... You could be Greece, having to deal with your politicians not agreeing with the death dealers aka IMF and the EU, which just entered negative growth also. http://www.ft.com/intl/cms/s/2/0a35504a-0615-11e1-a079-00144feabdc0.html#axzz2CnY7xTPX

Whilst you then have to watch energy companies pay fines, of larger sums that what your country so desperately needs.
http://www.ft.com/intl/cms/s/0/555fa13c-2f46-11e2-8e4b-00144feabdc0.html#axzz2CnY7xTPX

Positive economics combined with the church of monetarism and Hayek. It lacks so much irrational emotion in these scaring areas, its hard to believe this is how economies work the best!!

Tata for now... GE

When the IMF reaffirms in your mind, why it is the Last Resort...

This week really marked a major time within the History of the European Monetary Union, the first stages of Greece having no more power in it's own country.


After the markets being stressed over the future of the €zone and Italy, it seemed a deal had been sealed on the weekend and the markets were looking hopeful for Monday, that was until the Greek PM flew back to Athens and announced there would be a referendum vote given to the Greek people to ask if they still wanted to be part of the euro and EU. Obviously the markets went to the panic button and Italian bond yields rose to the roof (The higher the bond yield, the higher the cost for Italy to borrow).


The last time I read of such a immediate of loss of power, was in the Oil Crisis peak of the 70s when the UK had to borrow from The International Monetary Fund. The IMF is the lender of last resort by any country's eyes, and when a combined package with the ECB was made in the last weekend of October, Greece seemed to think it had time to hold a referendum. The heads of the IMF, Germany & France just turned round and refused to give Greece any extra money this week until Greece did the right thing. Now Greece will not be trusted for a very long time...


There is without a doubt in my mind that the Greek PM did the wrong thing, he could have nearly produced the default on Tuesday. It was that serious and also he wasted a huge amount of money within the market. Not only that but when you take into consideration that Greek bond holders lost >50% of their value on their assets negotiated between the ECB & main holders, you can see why Angela Merkel, Nicholas Sarkozy & Christine Lagarde may want to hire an assassination Squad to take down George Papandreou.


Today FT.com produced an interactive map of the possibilities of the Fallout of the EU if Greece were to default, it's interesting whichever way you take it.


http://www.ft.com/cms/s/0/0a35504a-0615-11e1-a079-00144feabdc0.html#axzz1cXJyG6ms


I don't want to be 'I told you so'...but the default is only becoming more likely, November 2011 will be something European Economic history. The EU will be quite likely, kicking Greece into the dessert by the end of the month to sacrifice the few for the many. Then stage two gets under way... Italy


I'll promise I'll lighten the mood with one of my silly graphs on the weekend^^ Maybe zombies could trigger the collapse of the Eurozone? Stay tuned!