Credit Mutuel Gone To Lunch

Credit Mutuel appear to be an a poor investment….moody’s rating agency has just warned over their exposure to Greek debt and they may soon be downgraded something which moodys appears to be discussing according to the article below.

http://seekingalpha.com/news-article/1274926-moody-s-close-to-downgrading-french-banks-on-greek-debt-exposure

While microfinance is extremely benificial to the bank in establishing brand in emerginging markets one can only be amazed that at a time when 3500 famine refuges as day are exiting Somalia, Credit Mutuel lists along side their exposure to Greece  debt (which is Moodys main concern) exposure to….Somalia. Credit mutuel is known to send correpondance abroad citing numbers which may only be dialed from within France and not internationally. Clearly given their international activities there is a somewhat darkly comical good reason for this idiotic level of  customer service!

http://www.independent.co.uk/news/world/africa/famine-victims-to-get-un-aid-as-somali-militia-backs-down-2315441.html

http://www.bfcm.creditmutuel.fr/en/bfcm/pdf/BFCM_AN_12_2007.pdf

Page 46 Soverign risk Somalia – from Credit Mutuel finacials.

http://www.bfcm.creditmutuel.fr/en/bfcm/pdf/BFCM_AN_12_2007.pdf

Some observers may be inclined to believe that such ineptitude is typical of a bank floating on such work place practices as taking solid hour long lunchbreaks and a lack of linguistic capacity beyond French in their front line staff. A fine example of a crumbling edifice of European banking that should have been properly shelved in 1950, as the remarkable preponderance of paper cheque banking in the French market is a tribute to in the age of chip and pin and online transfers.

One example of this is for example P. L’Homme an employee who is known to send  correspondance to international destinations with telephone contact details that may only be dialed from within France, takes solid 1 hour lunchbreaks and  makes no reply to correspondace unless addressed in French, dispite writing to international destinations. Acceptable perhaps in the 19th century when viewed by someone external to French banking practices, he may perhaps eventually obtain a position advising on which famine struck country Credit Mutuel should grow it’s brand and throw it’s capital in next.

Zorba the Greek would be spinning in his grave.

 

Imperial Decline 11 – Municipal Debt and the American City

 

“It’s a feedback toward economic shrinking, downsizing, and de-urbanization,” Hudson predicted. “Exactly the same thing happened in the Roman Empire when in the end Rome was left almost a deserted city and all of the production shifted back onto the land. That’s what you’re faced with here although the land on this case will be abroad rather than in the United States.“

 Michael Hudson, Wall Street analyst and professor of economics at the University of Missouri.

As The EU faces it’s own fiscal issues a  smokescreen is created  which conceals the real problem of US collapse (see the split in the Roman Empire). The once unified western alliance symbolised by NATO is completely divided as Europe spins off on it’s own course just as Rome divided into two. Can there be any doubt that Berlin is the new Byzantine? The hinterland of underdeveloped low wage former warsaw pact territory certainly gives the eastern Empire more possibilty to develop that the US which burdened by an aging, demanding and economically and socially worthless ‘baby boom’ generation that are in their own right a key reason for the incredible decline in the US.

OPEC continues to do as it wishes and it is a matter of if, not when a major crisis brings the US collapse back to the forefront. The municipal bond situation the the US is chronic. This debt bubble brings the debt issue onto the streets of US urban life just as credit card and morgage debt brings it into the home. A huge portion of US local and urban governance is mired in debt and verging on bankruptcy. The municipal bond market which feeds overbudget spending and administrative expansion is a poor investment and has serious potential to implode with a direct imact on basic services which support economic activity such a policing, refuse collection, road repair and sanitation.

“The continual war around Rome in the 530s and 540s left it in a state of total disrepair — near-abandoned and desolate with much of its lower-lying parts turned into unhealthy marshes as the drainage systems were neglected and the Tiber’s embankments fell into disrepair in the course of the latter half of the 6th century.[9] Here, malaria developed. The aqueducts were never repaired, leading to a shrinking population of less than 50,000 concentrated near the Tiber and around the Campus Martius, abandoning those districts without water supply. There is a legend, significant though untrue, that there was a moment where no one remained living in Rome”

Wikepdia – History of Rome

One wonders if there will one day be a legend that there was a time when no one lived in Detroit?

The dollar has been now so debased and the level of personal, semi-state (banks), national, personal and municipal debt in the US so huge that at any point in the next five years a significant event could trigger a complete winding down of US economics. A Carolininan senator recently proposed that they have their own currency prepared in the evnt that the dollar hyper inflates.

As Italy broke into warring statelets that were not reunited for hundres of years, so it appears will America. The only aspsect which can be debated is the timeline, 5 years or 50?

State Senator Lee Bright of South Carolina is trying to move legislation as to whether “whether this State should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.”.

While the political culture of  South Carolina is curiously unevolved (stuck in 1865 and with some of it’s population being members of the arcane and comical KKK) it is nonetheless noteworthy that this attention seeking antic is placing the possibility of fed and dollar collapse in legislative print.

The idea that a political and geographical entity such as  South Carolina with it’s poor geographical boundaries and deep internal divisions is a viable independent entity is laughable.  It is the fact that such thoughts are being voiced at all in this context that is noteworthy. Perhaps South Carolina would do better by writing a polite letter to the French governement informing them that the state is for sale! It’s unlikley the EU would be interested, after all France and Germany are being kept quite busy paying off the morgage on their own outright purchase of newly impoverished holiday destinations such as Greece, Ireland and soon Portugal. Another possibility is the adoption of a joke currency like the UK Pound or Danish Kroner (essentially Euros in all but name)!

Ignoring the comic antics of a redundant backwater like  South Carolina for a moment, the real and pressing issues over the comming months are the continuing EU bailouts, US municipal debt and OPEC. It will be a summer of discontent.

Imperial Decline 10 -OPEC, SAMA, Saudis and Ecuador

A spot of current affairs.  The fate of the dollar is very much linked to its’ use in the oil trade. OPEC are a key element in any change and not much changes in OPEC without Saudi approval.

The fate of the dollar currently rests entirely on the voluntary pegging of the Saudi riyals exchange rate with the dollar.

As with ECB pronouncements on the future role of the dollar earlier in the year one wonders why SAMA the Saudi institution controlling the arrangement was compelled to announce in November  that the peg ‘benefits’ the kingdom.

The fact that Kuwait exited their own peg arrangement and thus also exited the monetary framework based on dollar pegging that was core fical policy behind the new ‘gulf’ unitary monetary policy/currency earlier on the year means that there is clearly some polar opinion on the dollar in OPEC.

The Saudis’ for historical reasons are the greatest defenders of the dollars role in oil trade.

The Saudis themselves cannot cease the dollar oil trade and trade in Euros while their own economy is pegged to the dollar.

The  death knell for the dollar will be a SAMA decision to remove the peg.

This is enables a unilateral OPEC decision to move the oil trade out of dollars.

With the next OPEC president hailing from Ecuador and taking his place in January, a country which currently stands in an unfriendly posture towards American foreign and oil interests with the move away from the dollar next year looks more probable.

Venezuela and Ecuador are in a state of ‘mini cold war’ with Colombia, the regional proxy for the American Empire.

Like Iran, Venezuela has been active in promoting an anti-dollar position in the oil markets.

The next OPEC meetings take place in December 22 and January in Vienna (OPECS HQ).

Of course OPEC will fire the dollar as the oil trades currency, how and when are the issues.

Expect the realignment of gulf monetary policy, the abandonment of the dollar peg, introduction of a new peg and shift of the oil trade into Euros soon.

The magic trick will be to do this without triggering a plunge and disturbing the carefully managed monthly 2.5 cent fall of the greenback.

Imperial Decline 9 – Taxation and Empire

Incomplete post – will be updated

“As time passed each successive emperor was challenged with meeting the soaring costs of administration and financing the legions, both for national defense and to maintain loyalty. New schemes to revise the tax structure came and went throughout the Empire’s history. Large inflation rates and debased coinage values, by the reign of Diocletion, led to one of the more drastic changes in the system. In the late 3rd century AD, he imposed a universal price freeze, capping maximum prices, while at the same time he reinstated the land tax on Italian landowners. Special tolls on money traders and companies were also imposed to help increase the tax collections”

From: Taxes in the Roman Empire

“Special rates have been introduced twice within the post-war years, causing income tax in certain circumstances to exceed 100%.

• For 1947-48 a special contribution was payable when a person’s total income exceeded £2,000. For investment income over £5,000 it was 50%. So with income tax at 45% and surtax at 52.5%, the effective rate was 147.5%.
• In 1967-68, the special charge was imposed. For investment income over £8,000, the rate was 45% which – with income tax at 41.25% and surtax at 50% – meant a total rate of 136.25%

“

From UK HM Customs – A Government site from the UK. Income Tax Today

It seems strange that given the massive bureaucratic resources of the British Empire in its’ terminal years that something as utterly mindless as a tax in excess of 100% could be applied. Yet Empires in decline always feature political and social classes  that act as tax collection mechanisms and are quite willing to destroy their host Empire/Nation completely in order to provide for their own administrative income. Even at the risk of the loss of the Indian subcontinent, the Empire proved unable to deal with the prosepct of abandoning the ‘salt tax’, effectively a tax on poverty.

If historical cycles illustrate anything it is that the IRS will quite willingly bankrupt the American Empire and it’s economy before allowing any change to reduce the administrative cost of taxation.

“The heavy tax burden was responsible in part for revolts in Anatolia, abandonment of farm lands, and depopulation of villages; thus the empire experienced a decline in tax revenues despite higher taxes.”

The Ottoman Empire

Imperial Decline – 8 The Dollar, Books, Afghanistan and Nukes.

Just a quick note. I am a fan of good second hand book stores. I today happened to come across the following ‘Piers Brendon – The Decline and fall of the British Empire 1781-1997′. The decline and fall of Empires is an interest of mine so naturally I picked it up along with a copy of “The savage Frontier – A History of the Anglo-Afghan Wars’ by D.S Richards.

The “The savage Frontier’ addresses more that the British Imperial ventures into Afghanistan but also spends a little time on the failed Soviet expansion into the territory.

In relation to currency I note that the dollar is in decline again today versus both the Euro and Gold, indicating a continuation of a years long fundamental fall in value for the currency.

The status of the dollar as the world reserve currency is now being questioned publicly. It is interesting to note that the European central bank has recently commented in order to defend the dollars role. That the central bank felt the need to issue a statement that the dollar would continue to have an important role in 10 years time is in itself a remarkable tribute to the shift it status for what was a once unassailable component of  American Imperial power.

My own personal instincts lead me to conclude that should the dollar break from the current 1.25-1.45/.50 trading range and drift to a 1.170-1.90 trading range that the dollar will not in fact continue to be of such substantial importance.

The dollar may pass the psychological level of 2 Dollars to a Euro and currently Dollar supporting investment positions by the Chinese state continue to be shifted elsewhere. In these circumstances that the International Oil, Gold and industrial and agricultural  commodities markets markets will cease to become dollar centric and be dominated by replacement currencies. The main  candidates being the Euro and the Chinese Yuan. The key role of oil provides a simple indication of when this shift occurs. The most likely indicator is that Oil will be a Euro trade. An interesting possibility is that trade in other commodities is related to the Yuan, especially given the recent Chinese expansion into commodity investment in order to diversify away from the dangerously weak dollar.

From “Welcome to Linda’s and Garr’s China pictures.”

As can be seen in the graphs in the other articles here, a currency collapse/Imperial collapse is always accompanied by a reasonably rapid plunge in currency value,  a shift from the acceptance of the dollar as a stable reserve currency and an evolution of commodity trade priced in Euros and Yuan would trigger such a rapid plunge, especially so given the trillion upon trillion of  dollars currently absorbed in these trade mechanisms and reserved that are thus out of domestic American circulation.

The return of these dollars to domestic circulation and the management of the decline process of the dollar by Chinese and European institutions seeking to assure global stability in banking, trade and investment is already underway. However given the historical record of sharp currency plunges occurring as a phase in Imperial decline it would seem apparent that they are fighting to avert a pattern that repeatedly asserts itself in historical economic Imperial cycles.

The extent which the decline in value can be spread over time diminishes the risk of destabilization of trade and commodities mechanisms. Thus every month that the decline in dollar value can be slowed and eased is a minor victory for those divesting themselves of dollar investments. It does seem apparent to me though that a plunge phase is highly likely.  There is no need for this to have any global ‘apocalyptic’ impact. The world and global markets will continue to function as before, absorbing the decline of the American empire and  the functionality of the dollar.

Certainly the collapse of the British Empire or Soviet Empire did not result in a collapse of either America or European states. There is no reason to suppose that the collapse of the American empire will in conclusion much trouble the European nations of Chinese state. The American empire is a  nuclear  one, yet if the collapse of the Soviet empire (our only other example of the collapse of a nuclear empire) serves an example then there is nothing to fear in this unless a malfeasance in American Imperial political culture emerges. Hopefully the American empire will drift peacefully into senility without any large bangs.

Update:

A shift to alternate reserve and trading currencies will definitely collapse gold prices as money returns from a ‘flight to safety’ during dollar collapse. I would also expect a fall in the pound sterling and Yen as focus moves to the ‘rising stars’ the Yuan and Euro.

Imperial Decline – 7 USSR the dollar and rouble

Currency collapse was of course a factor in the post cold war Russia and the collapse of the USSR. High  inflation rates  quickly lead to a new Ruble being created. Administrative and state salary bills were crushing. The new ruble survived and Russia recovered speedily. It emerged however divested of the final trappings of Empire.

The collapse of the ruble, as usual in the terminal stage of empire was accompanied by a ‘frontier’ war between Imperial Soviet political factions and alienated cultures subsumed by existent on the edge of Empire. The pressure of the war in Chechnya on expenditure and the external shock of the Asian financial crisis was enough to knock the already sick currency into terminal plunge.

As with Every Empire in decline the military and administrative economic burden was literally astronomical in the old ruble economy.

As an aside it seems odd to have come this far without referencing Wiemar Germany, the gasping corpse of Prussian Imperialism. This is however a hardly typical Imperial collapse. The Prussian state was a short lived Empire and it’s demise in conflict hardly left time for it to degrade into the typical Imperial stagnation of high administration,   colonial warfare and  currency collapse. As an example of inflation and currency collapse it is however noteworthy. No Empire declines without it’s currency also declining rapidly in value.

The Economist

Ottoman Inflation and Imperial Decline

To be continued…please read posts 1-6 in the meantime

Imperial Decline 6 – Empire and Flat Currency

Nicely illustrates the debasement of US dollar and Pound Stirling over time

ON THE CONTINUOUS DEVALUATION OF THE ROMAN CURRENCY B. Lukács

Imperial Flat currencies – while the Roman currency was linked directly to Gold and silver, the debasement of coinage via Imperial policy in effect was equivalent to printing dollars.

“The Crisis of the Third Century (also “Military Anarchy” or “Imperial Crisis”) (235–284 AD) was a period in which the Roman Empire nearly collapsed under the combined pressures of invasion, civil war, plague, and economic depression.”

Wikipedia.

Imperial Decline 5 – The British and the American Empire

Rough Visual Guide the US 'Empire Lite'

The sun never sets on the Empire of the USA. With it it has brought mass media, consumerism and incredible advances in military technology.

‘Terrorism’ is always apparent on the edges of Empire. This was the case for Rome, Britain  and the USSR. The  overwhelming military conventional superiority of Imperial forces naturally results in non-conventional warfare by opponent political factions. Conventional warfare is suicidal in such circumstances.

The Roman Empire encountered similar problem with violent religious fundamentalism when it engaged the Zealots to that which the American Empire faces with Qutbism today.

Ironically it is frequently seen that violent and fundamentalist groups have a role in  the origins and foundation myths for successful nation states and Empires. The USA itself traces it’s foundation myth to an extremist and violent religious fundamentalist group from Britain. Clearly wanted or not they are a part of the cycle of history and frequently are evident in the decline of Empires as their insular and excursionist viewpoints cannot be adapted to political representation within Empire.

As can be clearly seen from the maps above the American Empire inherited much of the British Empires physical territory.

Afghanistan also  vexed the British Empire, the soviet empire and now vexes the American Empire. One could ponder why this is so indefinitely. What is clear is that military engagement and defeat in Afghanistan has has marked a limit to territorial expansion for  two previous modern Empires. Britain did  persevere

“Despite the success of the military venture, by March 1880 even the proponents of the Forward Policy were aware that defeating the Afghan tribes did not mean controlling them.”

When Empires cease to expand the phase of decline begins. An interesting question is that whether the geographic structure of the British Empire and its expansion caused the conflict to be. Certainly the USA inheirited and absorbed much of the former and current British commonwealth into a dollar and military Empire following the ‘pawning’ of the British Imperial gold reserve to the USA under lease lend. Thus the British Empire lost the possibility of re-establishing the ‘Gold Standard’ to fund the second world war. Much of the British Empire transitioned to the USA sphere of influence under the cold war. The British Empire retired in senility and was taken into the protection of the American Empire. Has the inheiritance of the USA of the broad geographical structire of the British Empire and the inheirent expansionist nature of empire dragged it involuntarily to the border regions of what is now Pakistan just as the British were?

The final stand took place at Gandamak on the morning of 13th January 1842 in the snow. 20 officers and 45 European soldiers, mostly of the 44th Foot, found themselves surrounded on a hillock.

Imperial Decline 4 – Military Expenditure

A factor in most Imperial declines, Soviet, British, Roman.

Once military starts sucking the economic blood from Empire, collapse is inevitable. The bigger and more global the current conflict the quicker the process takes effect.

Military Spending Patterns in History

Jari Eloranta, Appalachian State University

“In order for military spending to hinder economic performance, it would have to surpass all other areas of an economy, such as is often the case during wartime.”

Military budget and total US federal spending (wikipedia)

World military spending (wikipedia)

http://upload.wikimedia.org/wikipedia/en/c/ca/WorldMilitarySpending.jpg

The USA dwarfs the rest of the world in military expenditure.

The most interesting period to observe here is the third century. Note the collapse in military manpower.

US naval manpower

Relative Size of US Military Spending (1940-2003)

http://www.history.navy.mil/faqs/faq65-1.htm

Imperial Decline 3 – Property and Currency

Currency has a primary role. To be used as a means for exchange for property and goods. While many indexes change land and housing is a consistent factor. Ownership under Empire is ultimately the national or Imperial governance and usage restrictions may be implemented based on  social qualification for example citizenship or oligarchical membership, legal status, sex, race or religion.

The interaction between property, currency and tax during Empire is quite revealing.

Liquidity and monetary supply, debt and increased governmental land ownership and regulation were also were also a factor in Ancient Roman politics during decline. The interaction between currency value, demographics, property value, taxation and administration pressures a constant and consistent fall in real purchasing value in the currency. These pressures are especially intense in the founding nation state. Inflationary spikes relating to land and taxation and military expenditure are frequent sources of crisis in Empires in decline.

Money and Government in the Roman Empire
By Richard Duncan-Jones

http://books.google.com/books?id=bI338ayHqXIC&lpg=PA25&ots=7PENECxg8C&dq=roman%20empire%20property%20price&pg=PA24#v=onepage&q=&f=true

Major Uses of Land in the United States, 2002/EIB-14
Economic Research Service/USDA

http://www.ers.usda.gov/publications/EIB14/eib14j.pdf

The Decline of British Economic Power Since 1870
By M. W. Kirby

http://books.google.com/books?id=2DAFNLjqHVMC&lpg=PA17&ots

UMqmtk2Whv&dq=british%20empire%20economic%20decline&pg=

PA19#v=onepage&q=british%20empire%20economic%20decline&f=false