For less than what the US spent to save AIG, a corporation, with relatively easy terms; a country sinks below the financial waves. TBTF reaches across the ocean. As posted by Zeus-boy, his comments on his homeland of Ireland. (introduction by run75441)
Ireland is Bankrupt
Herman Van Rompuy, President of the European Council, warned that if Ireland didn't apply for an EU/ECB/IMF bailout for its failed banking system, its soaring budget deficit and its colossal national debt, then the European single currency might collapse [the bond markets have already panicked and cashed in], and if the International markets lost confidence in the Euro, then the dissolution of the Union would quickly follow. He said the future of the Eurozone depended on stemming the tide of market distrust caused by the tanking Irish economy. He feared contagion, that Portugal and Italy and Spain would soon follow.
Ireland is not only insolvent because it has no liquidity, no way of meeting its debts. The government decided to link the economic future of the country to a failed banking system and now the two are inextricably intertwined. No amount of raised taxes can bail out the banks and still pay the day-to-day running expenses of our welfare state. The famed 'Celtic Tiger' boom economy was always a high-risk, dangerous fiction. Someone dubbed Ireland the 'Wild West of Economics'. Our illusory wealth was tied to a property bubble that was as unsustainable as it vacuous, and all the money was borrowed, primarily from German savers. We were hooked on credit like it was crack cocaine. We binged but never purged and we stayed high to postpone the inevitable hangover. Everybody was in cahoots, from corrupt local governments, driving through emergency rezoning laws, to rogue bankers financing the criminal inflation of developments and shoveling billions to builders, to newspapers cashing in on their property advertising to regulators asleep at the wheel. Our mafia don cum Taoiseach, Bertie 'Gombeen-Man' Ahern, invited critics of the system to commit suicide. Nobody left the orgy. Nobody wanted to leave. Planet Hollywood had finally come to Planet Ireland!
But inevitably the whole house of cards would come crashing down, and Bertie [who tendered his timely resignation just before the collapse] soon got his wish as the suicide rate started to climb to the highest in Europe. The government panicked. The Minister for Finance, a barrister by profession, got a crash course in national and global economics. He learned about markets and budgets and bonds and gilts on the job, on a need-to-know basis. He instituted an abstraction called N.A.M.A. http://www.nama.ie/ , The National Assets Management Agency, whose remit basically is to buy up all the debt and properties left unfinished and unpaid for by the construction moguls [developers & builders] and their bankers, to transfer them to a national trust, cue Irish tax-payer, as if we owned them, or even wanted them, or could avail of them in any way, and to pay off the outstanding loans. All over Ireland, in every town and village, are these unfinished ghost estates. These now belong and do not belong to the Irish taxpayer. This offense was compounded by the decision to bail out the very banks [like Anglo Irish and Irish Permanent, really, all of them] that got us into the mess. The banks were hemorrhaging money [and still are] and the government was on hand to provide on-the-spot triage, a botched stitch-up job if there ever was one, a cluster-fuck of cosmic proportions.
The government, Fianna Fáil in coalition with The Greens and a few independents, lied through their teeth and kept telling the Irish taxpayer that exports were up, that the revenue would come in once the austerity budget was passed, once the 4-year plan was unveiled and ratified and that no bail-out would be necessary. Reduce public spending, they told us, tighten our belts; cut the public sector; Trim this, give a haircut to that and all would be hunky dory. Well, the same shower of gangsters who gave the green light to sub-prime lenders and hedge-fund speculators-gamblers went to the ECB/IMF with cap in hand this week and begged for a bailout. Then they came on TeeVee to announce the done-deal. Ireland will borrow over 85 billion from its partners in the EU and the IMF and, depending on the repayment interest, 5 -7%, we could be paying back upwards of 4 billion a year. That's about 1/4 of the Tax intake. The debt is completely beyond our means as Constantin Gurdjiev, http://trueeconomics.blogspot.com/ and David McWilliams http://www.davidmcwilliams.ie/category/articles/ are trying to point out.
Ireland is used to erosions of its sovereignty ever since we joined the European Union. We, we had our first referendum on the Lisbon Treaty in June 2008 and it was defeated. Sarkozy told our Taoiseach that he delivered the wrong result and to go back to the people and get the right result next time, so that's exactly what happened and so in April 2009 the treaty was finally passed in Ireland. So much for Irish sovereignty. Our membership of the single currency in 1998, as part of our EU obligations under the Maastricht Treaty, further compromised that independence. Now ceding control to the IMF -- to save the Eurozone -- is the final nail in the coffin of that putative myth known as Irish sovereignty. We gave away so glibly what we fought so hard to achieve.
Was it for this the wild geese spread
The grey wing upon every tide;
For this that all that blood was shed,
For this Edward Fitzgerald died,
And Robert Emmet and Wolfe Tone,
All that delirium of the brave?
Romantic Ireland’s dead and gone,
It’s with O’Leary in the grave.
I'm afraid the verdict isn't very flattering. Ireland is indeed a banana republic, a land full of cronyism, wink and nod business deals, insider trading, nepotism, feather your own nest and forget about the next guy, take all you can as quickly as you can no matter who gets hurt, ostracize the whistle blowers and critics, advance number one every time and keep the circles closed. There's no sense of civitas here, no notion of self-sacrifice, no pride in history, culture, nation; it's all up for grabs to the highest bidder. It doesn't matter that we struggled for 800 years to achieve independence, that millions died in the process; it doesn't matter that the folk memory of harsher times is still very much alive; none of this mattered to the few generations that have dismantled our country institution by institution and thrown the Irish people to the wolves, the bean counters in the IMF who will now control our destiny. Our political system is in ruins. The people have lost all faith in their elected representatives. They feel that welfare for the wealthy, bailouts for crooked corporations and rewards instead of punishments for embezzlement and thievery is the rule of the land. And what the British and the world said about us, all the stereotypes, seem to be true after all and maybe were always true: we were never equipped to govern ourselves, we're a nation of drunks, peasants, irresponsible wasters and chancers addicted to violence and quick fixes. Our independent republic is less than a century old and already it's in smithereens -- we're in the gutter and being dictated to by the UK, Germany, France and the IMF. Mr. Ajai Chopra is our new vice-chancellor, our new Taoiseach, our new overlord and big boss and we've just been recolonized, first by our own brood of inbred gangsters and now by international bankers. We didn't deserve any better. It's our own damn fault.
By 'we' I mean the select few that got our country into the financial mess. But the blame game serves no useful purpose now: we're all fucked, not equally, mind you [but when are people ever fucked equally?], and the nation has no option now but to drive through a draconian austerity budget and then take the bailout and let our affairs be run by outsiders. Could we say 'Fuck You' to the Euro and go back to the punt? Could we say 'Fuck You' to Germany and all our debtors? Could we say 'Fuck You' to the EU and let the Eurozone fall? Our politicians tell us we have no choice. It would be therapeutic to tell the lot of them to piss off and to return to hunter-gatherer status but how feasible is that? Kids think beef patties are really square and grow on trees. They wouldn't know how to pluck a chicken let alone sow and reap a harvest. Everything's in the grocery store and they're too busy playing play station, twittering and gabbing on Facebook to worry about the right time of year to plant a tuber. The EU is run by neo-liberalist economic policies and if Ireland doesn't play ball the multi-nationals will up and relocate to cheaper labour markets. They're already doing just that. They're encouraged to do it by Merkel and Sarkozy and Cameron.
And then there's always the fear that this crisis will inaugurate excessive nationalism, that the Provos will exploit civil unrest and lack of confidence in the government to push their demented and deranged United Ireland bollocks. Gerry Adams has already announced his candidacy for a seat in Co. Louth which, if elected, will find him in Dáil Éireann. This would be disastrous for Ireland. Ireland doesn't need Sinn Féin's brand of patriotism. People should remember Gerry Adams' devolvement announcement for the Good Friday Agreement: He said he was now ready to pursue through the political process the same agenda he failed to achieve through armed struggle, that is, a United Ireland. If Sinn Féin ever gets a foothold in Irish politics there will be a return to the rule of the gun; if his bunch of murderous, terrorist thugs are ever allowed to exploit the political vacuum in Ireland there will be a bloodbath. Adams has always preached against the EU and partnership with Britain. He's still the same dickweed that did time in Long Kesh and had Jean McConville a widowed mother of 11 children murdered because she administered last rites to a British soldier who died on her footstep. His brand of fascistic nationalism is no good for Ireland. We must reject him and what he stands for.
As a nation we're a joke, a laughing stock, and now it's time to become a colony of the IMF under the direction of the same cowboy outfit that brought peace and prosperity to Argentina and Iceland. O Joy, I just can't wait. We the Irish People have our asses greased for yet another bout of sodomy. We're used to it. It feels good. And this time we walked right into it. Heck, we can always get drunk afterwards, have a rare old session and weep and wail over our Fenian dead.
Wednesday, December 1, 2010
IMF and EU Hammer Ireland: "We're all Fucked"
By Mike Whitney at informationclearinghouse.info
November 29, 2010 "Information Clearing House" -- The terms of the EU/IMF's €85 billion ($113 billion) bailout for Ireland are much worse than analysts had anticipated. Ireland will be required to use its National Pension Reserve Fund (NPRF) to shore up its insolvent banks and to maintain government operations. At the same time, senior debt-holders will not share any of the losses brought on by the banks reckless lending. According to Bloomberg News, "Prime Minister Brian Cowen told reporters there had been no support in talks to ask senior bondholders to lose part of their stake on loans made to Ireland's debt-crippled banks." Thus, 100 percent of the EU/IMF's €85 billion "Financial Rescue Package" will be paid for by Irish taxpayers.
This is a very bad deal. Irish workers have already endured nearly 3 years of depression-type conditions with shrinking wages, soaring unemployment and dwindling home equity. Now Brussels is taking aim at pensioners to save bondholders in Berlin and Paris from any losses on their bad bets. And that's not all. Here's an excerpt from the government's statement:
"The facility will include up to €35 billion to support the banking system; €10 billion for the immediate recapitalisation and the remaining €25 billion will be provided on a contingency basis. Up to €50 billion to cover the financing of the State.....If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum."
This is nothing but extortion. If Ireland wants to put its banks on solid footing, there's a way to do it that doesn't involve years of debt-slavery for its people. The government can underwrite the banks with a €10 billion loan from the Pension Reserve Fund that will guarantee deposits while the banks are nationalized and restructured. It is an excruciating process, but it's been done many times before. Ireland does not have to accept indentured servitude if it chooses not to.
And why would the government even consider paying an interest rate of 5.8% per annum? Interest rates should be the same as they are for the banks; 1 percent. Should a sovereign nation get a worse interest rate than a crooked banker who ripped off millions of investors?
Besides, Ireland is in the drivers seat. It's Ireland that should be making the demands, not the IMF or the EU. After all, the government currently owes the European Central Bank more than €130 billion. If the ECB wants to get its money back, it should be flexible about the conditions. Otherwise, Ireland can simply cut off negotiations and let the ECB hire a collection agency. See what good it does them.
Here's more from the government's statement: "The Programme for Support lays out a detailed timetable for the implementation of the measures contained in the National Recovery Plan....The Programme has two parts – the first part deals with bank restructuring and reorganisation and the second part deals with fiscal policy and structural reform."
(Note--Bank restructuring is a moot point. Ireland can use its own national pension fund to guarantee deposits and underwrite loans.)
"The Programme endorses the structural reforms contained in the Plan which will underpin a return to sustainable economic growth over the coming years....The Programme endorses the Irish Government’s budgetary adjustment Plan of €15 billion over the next four years, and the commitment for a substantial €6 billion frontloading of this plan in 2011....The adjustment will be made up of €10 billion in expenditure savings and €5 billion in taxes...."
In other words, more penance for the victims. More belt-tightening, higher unemployment, more foreclosures, fewer social services, slower growth, and an ever-deepening slump. And for what? To be a member-in-good-standing in Brussel's Banktopia?
German chancellor Angela Merkel had been pressing other EU leaders to create a framework in which senior debt-holders would share losses with taxpayers in the future. On Sunday, Eurogroup Ministers announced the creation of a European Stability Mechanism (ESM) which was designed to address Merkel's concerns. It works like this: If a member state appears to be insolvent, then they must agree to a "restructuring plan" that may involve haircuts for bondholders. So far, so good, only that's not the way the ESM will work. Here's an excerpt from the Statement by the Eurogroup which explains why:
"This would enable the creditors to pass a qualified majority decision agreeing a legally binding change to the terms of payment (standstill, extension of the maturity, interest-rate cut and/or haircut) in the event that the debtor is unable to pay......We restate that any private sector involvement based on these terms and conditions would not be effective before mid-2013." Statement by the Eurogroup, Financial Times)
So, an insolvent country (like Ireland) would need to get "majority" approval before it could declare bankruptcy. How's that going to work if the other countries are only interested in protecting their own bondholders? Surely, they would block the process.
Jean-Claude Juncker, the head of the Eurogroup, more or less admitted that the ESM was a fraud when he said that "private creditors would be forced to take losses only if ministers agreed unanimously that the country had run out of money." (Bloomberg) There's no way that German government officials would allow a country like Ireland to declare bankruptcy if its own banks stood to lose billions of dollars. (which they would)
This should remove any doubt about whose interests are really served by the Eurogroup.
Prime Minsiter Brian Cowen has sold out Ireland bigtime. The so called "rescue package" should have been rejected outright. It merely provides shady bankers with more money for speculation while condemning the rest of the population to years of grinding poverty and high unemployment. It's a "lose-lose" situation. Here's a blurp from a post titled "Ireland is Bankrupt...letter from an Irish citizen" which seems to sum up the mood pretty well:
"It doesn't matter that we struggled for 800 years to achieve independence, that millions died in the process; it doesn't matter that the folk memory of harsher times is still very much alive; none of this mattered to the few generations that have dismantled our country institution by institution and thrown the Irish people to the wolves..... Our political system is in ruins. The people have lost all faith in their elected representatives. They feel that welfare for the wealthy, bailouts for crooked corporations and rewards instead of punishments for embezzlement and thievery is the rule of the land. ... Our independent republic is less than a century old and already it's in smithereens -- we're in the gutter and being dictated to by the UK, Germany, France and the IMF. Mr. Ajai Chopra is our new vice-chancellor, our new Taoiseach, our new overlord and big boss and we've just been recolonized, first by our own brood of inbred gangsters and now by international bankers....
...But the blame game serves no useful purpose now: we're all fucked." (Ireland is Bankrupt...a letter from an Irish citizen", angrybearblog.com)
November 29, 2010 "Information Clearing House" -- The terms of the EU/IMF's €85 billion ($113 billion) bailout for Ireland are much worse than analysts had anticipated. Ireland will be required to use its National Pension Reserve Fund (NPRF) to shore up its insolvent banks and to maintain government operations. At the same time, senior debt-holders will not share any of the losses brought on by the banks reckless lending. According to Bloomberg News, "Prime Minister Brian Cowen told reporters there had been no support in talks to ask senior bondholders to lose part of their stake on loans made to Ireland's debt-crippled banks." Thus, 100 percent of the EU/IMF's €85 billion "Financial Rescue Package" will be paid for by Irish taxpayers.
This is a very bad deal. Irish workers have already endured nearly 3 years of depression-type conditions with shrinking wages, soaring unemployment and dwindling home equity. Now Brussels is taking aim at pensioners to save bondholders in Berlin and Paris from any losses on their bad bets. And that's not all. Here's an excerpt from the government's statement:
"The facility will include up to €35 billion to support the banking system; €10 billion for the immediate recapitalisation and the remaining €25 billion will be provided on a contingency basis. Up to €50 billion to cover the financing of the State.....If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum."
This is nothing but extortion. If Ireland wants to put its banks on solid footing, there's a way to do it that doesn't involve years of debt-slavery for its people. The government can underwrite the banks with a €10 billion loan from the Pension Reserve Fund that will guarantee deposits while the banks are nationalized and restructured. It is an excruciating process, but it's been done many times before. Ireland does not have to accept indentured servitude if it chooses not to.
And why would the government even consider paying an interest rate of 5.8% per annum? Interest rates should be the same as they are for the banks; 1 percent. Should a sovereign nation get a worse interest rate than a crooked banker who ripped off millions of investors?
Besides, Ireland is in the drivers seat. It's Ireland that should be making the demands, not the IMF or the EU. After all, the government currently owes the European Central Bank more than €130 billion. If the ECB wants to get its money back, it should be flexible about the conditions. Otherwise, Ireland can simply cut off negotiations and let the ECB hire a collection agency. See what good it does them.
Here's more from the government's statement: "The Programme for Support lays out a detailed timetable for the implementation of the measures contained in the National Recovery Plan....The Programme has two parts – the first part deals with bank restructuring and reorganisation and the second part deals with fiscal policy and structural reform."
(Note--Bank restructuring is a moot point. Ireland can use its own national pension fund to guarantee deposits and underwrite loans.)
"The Programme endorses the structural reforms contained in the Plan which will underpin a return to sustainable economic growth over the coming years....The Programme endorses the Irish Government’s budgetary adjustment Plan of €15 billion over the next four years, and the commitment for a substantial €6 billion frontloading of this plan in 2011....The adjustment will be made up of €10 billion in expenditure savings and €5 billion in taxes...."
In other words, more penance for the victims. More belt-tightening, higher unemployment, more foreclosures, fewer social services, slower growth, and an ever-deepening slump. And for what? To be a member-in-good-standing in Brussel's Banktopia?
German chancellor Angela Merkel had been pressing other EU leaders to create a framework in which senior debt-holders would share losses with taxpayers in the future. On Sunday, Eurogroup Ministers announced the creation of a European Stability Mechanism (ESM) which was designed to address Merkel's concerns. It works like this: If a member state appears to be insolvent, then they must agree to a "restructuring plan" that may involve haircuts for bondholders. So far, so good, only that's not the way the ESM will work. Here's an excerpt from the Statement by the Eurogroup which explains why:
"This would enable the creditors to pass a qualified majority decision agreeing a legally binding change to the terms of payment (standstill, extension of the maturity, interest-rate cut and/or haircut) in the event that the debtor is unable to pay......We restate that any private sector involvement based on these terms and conditions would not be effective before mid-2013." Statement by the Eurogroup, Financial Times)
So, an insolvent country (like Ireland) would need to get "majority" approval before it could declare bankruptcy. How's that going to work if the other countries are only interested in protecting their own bondholders? Surely, they would block the process.
Jean-Claude Juncker, the head of the Eurogroup, more or less admitted that the ESM was a fraud when he said that "private creditors would be forced to take losses only if ministers agreed unanimously that the country had run out of money." (Bloomberg) There's no way that German government officials would allow a country like Ireland to declare bankruptcy if its own banks stood to lose billions of dollars. (which they would)
This should remove any doubt about whose interests are really served by the Eurogroup.
Prime Minsiter Brian Cowen has sold out Ireland bigtime. The so called "rescue package" should have been rejected outright. It merely provides shady bankers with more money for speculation while condemning the rest of the population to years of grinding poverty and high unemployment. It's a "lose-lose" situation. Here's a blurp from a post titled "Ireland is Bankrupt...letter from an Irish citizen" which seems to sum up the mood pretty well:
"It doesn't matter that we struggled for 800 years to achieve independence, that millions died in the process; it doesn't matter that the folk memory of harsher times is still very much alive; none of this mattered to the few generations that have dismantled our country institution by institution and thrown the Irish people to the wolves..... Our political system is in ruins. The people have lost all faith in their elected representatives. They feel that welfare for the wealthy, bailouts for crooked corporations and rewards instead of punishments for embezzlement and thievery is the rule of the land. ... Our independent republic is less than a century old and already it's in smithereens -- we're in the gutter and being dictated to by the UK, Germany, France and the IMF. Mr. Ajai Chopra is our new vice-chancellor, our new Taoiseach, our new overlord and big boss and we've just been recolonized, first by our own brood of inbred gangsters and now by international bankers....
...But the blame game serves no useful purpose now: we're all fucked." (Ireland is Bankrupt...a letter from an Irish citizen", angrybearblog.com)
Ashley leaves trail of doubt
The abrupt closing of an Abilene furniture store has left many customers wondering when they will get their money back or receive the furniture they ordered.
Ashley Furniture HomeStore was closed Monday, with a sign taped to the door saying that stores in Abilene, San Angelo and Wichita Falls “have temporarily closed their doors due to shipping difficulty.”
Attempts to reach the owner of the store, San Angelo-based Lanford and Bratton Holdings, LP, were unsuccessful Monday.
Mary Ross, executive director of Workforce Solutions of West Central Texas, said her organization will conduct an informational session Wednesday for workers who lost their jobs.
“We don’t think that there will be any jobs coming back,” Ross said.
For customers, the locked store doors offered no direction about what to do regarding orders already placed with the store, though the posted note said “a buy out negotiation” was in progress, with “more details as news becomes available.”
“I’m feeling worried,” said Joseph Plata, who pulled into the lot Monday morning hoping to find out the status of a $1,200 order for living room furniture he said he placed in October. “I don’t know if I’m going to get my furniture or my money back.”
The store is the third furniture store since September to either close or announce it is closing in Abilene, following Lacks and Havertys, both chain stores. The Lacks chain announced it was filing for bankruptcy, while the Havertys chain announced it was closing its Abilene location.
Andrews Furniture on North First Street; Gallery Furniture (three locations, including South Danville Drive); and Thomas Everett’s Fine Furniture on South First Street are among the few remaining new furniture stores in town.
Tom Rose, owner of Thomas Everett’s Fine Furniture, said he was surprised to hear about the recent closings, though sales have been down at his store.
“This year, we’re down from the year before. We were steadily climbing for a number of years, and I would stay in the last three years it’s decreased every year,” Rose said.
His store focuses on service and also stocking American-made merchandise, he said, adding that he was optimistic the economy would improve and that he was “looking forward” to staying open for many years.
“I think there were more stores than Abilene could support,” Rose said.
Christian Rambo, manager of the Gallery outlet store on Butternut Street, also said that Abilene was “oversaturated” with furniture stores.
Furniture purchases can be seen as optional by consumers in a tough economy, Rambo noted.
“You don’t have to have it,” Rambo said.
The Butternut store mainly features items ranging from $299 to $499, showcasing items with at least one in stock, Rambo said.
Both Gallery and Thomas Everett’s Fine Furniture carry Ashley furniture.
“We have a lot of people calling us already” since the HomeStore closure, Rambo said.
People who already paid money to Ashley Furniture HomeStore expressed frustration, however.
Beverly Snyder is among the Ashley customers unsure of what will happen with their furniture orders.
She said she called a 1-800 number provided by the company’s corporate headquarters, but wasn’t satisfied with what she was told.
“They had been given instructions to tell people that called that they didn’t know what was going on. As soon as they knew something, they would call each and every person that purchased furniture,” Snyder said, adding, “I feel like we were just absolutely taken advantage of.”
Snyder said she used a check nine weeks ago to pay about $850 for a sofa, then received different answers about when the item would be delivered when she called to check on the status of her order.
“About three weeks ago, they told me it was supposed to be here the 29th,” Snyder said. “Well, I called again the next week, and it was, ‘Well, we don’t know when it’s going to be here.’”
Snyder said last week, she was told “it was going to be here sometime in December, not to worry about it.”
The Wisconsin-based manufacturer of Ashley furniture does not operate the stores that carry its name. On its website, the company states that each store is “independently owned and operated” by a licensee, through a licensed operating agreement. The company, which has 42 such licensed stores in Texas, as well as stores in other states, did not return a phone call from the Reporter-News seeking comment.
But the Abilene Better Business Bureau has received plenty of complaints about the store’s closing.
“The phone’s been ringing constantly since we got here this morning,” said Steve Abel, president of the Abilene bureau, on Monday.
Abel said his only advice was for customers to “have some patience.”
“Hopefully, news will develop later on about the current status of these particular stores,” Abel said, though he added, “I couldn’t even venture a guess as to what might happen.”
Annie Shegen said she had paid about half the cost of $15,000 in furniture. She said she thought a national brand like Ashley would be less likely to close abruptly.
“I never thought something like this would happen,” Shegen said.
Kevin Willhelm, an attorney with Weir & Willhelm, said he didn’t know what sort of contracts people had signed with the furniture store.
But customers might have a basis for a claim with the store owner — “‘I paid X number of dollars on a piece of furniture, I either want to finish paying that amount to get the piece of furniture or I want my money back,’” — Willhelm said.
Rodney Bratton is listed as the registered agent for Lanford and Bratton Holdings, according to online records from the Texas secretary of state, which list the address for the organization as 2639 Sunset in San Angelo, the address for the Ashley Furniture HomeStore in San Angelo.
Recent news accounts have described Bratton and Tad Lanford as owners of the stores.
In an Associated Press article published in May, Lanford said he planned to open three new furniture stores in West Texas.
ALCO Closing 44 Duckwall Stores
Abilene based Duckwall-ALCO is closing 44 Duckwall stores, and will put more money into its ALCO stores.
According to the company, which currently operates 214 ALCO stores in 23 states including Kansas, intends to change its corporate name to ALCO Stores, Inc., to reflect its new strategic focus.
Rich Wilson, President and Chief Executive Officer said "after careful analysis, we have concluded that the small, limited-selection Duckwall stores no longer meet the needs of most shoppers." He went on to say "we expect that redeploying the resources used in the Duckwall stores to our more productive ALCO stores will improve the Company's earnings."
The 44 Duckwall stores that are closing have a total of 267 full- and part-time associates.
The company is closing 20 stores in Kansas.
With the store closings, Duckwall-ALCO will still have more than 200 stores across 23 states. The company's corporate headquarters is in Abilene.
Belgium's survival at stake
NEW YORK - There is nothing attractive about a country going down into an economic crisis. It usually includes panicked investors, angry citizens, and, in some cases, riots and demonstrations. In 2010, we have watched Greece tumble into an International Monetary Fund/European Union bailout and later in the year, Ireland.
The second case should be of particular alarm to global policymakers and investors as the Irish government made a very strong effort to avert a bailout, imposing tough austerity on the country for two years running. Now there is more pain coming in the form of the 2011 budget and an IMF/EU support package, a situation complicated by elections in January 2011.
Despite the horror of the situation, Ireland is still going to exist as
a country. Yes, its sovereignty is dented, but nobody is questioning its future existence. If that were the case, the financial panic would no doubt be greater. That is why the case of Belgium, one of Europe's largest debtors, remains so intriguing.
Greece, Ireland, Portugal and Spain have all been in investor crosshairs since 2009. The issues of too much debt, the imposition of tough-nosed austerity, and ongoing concerns over access to capital - the critical lifeblood of national finances - have rearranged the political and economic landscape in Europe.
The EU now has a European Financial Stability Fund (EFSF), Germany is emerging as the regional bloc's heavy with France following behind, and small countries are being warned to get their fiscal houses in order.
Yet, Belgium's political drama has largely sailed under investor radar screens. But this fractious country of 10.8 million known for its Flemish painters, waffles, French fries and beer, potentially faces a profound political crisis that could see an end to the unified state, something which has substantial implications for the management of its debt. It tends to be forgotten, but Belgium has one of the higher levels of debt to gross domestic product in the EU with French banks having the largest exposure.
Belgium was established in 1830, following a revolution that pulled the predominately Catholic Southern Law Lands out of the United Kingdom of the Netherlands. The country was, and continues to be, divided between two major linguistic groups, the Dutch-speakers, mostly Flemish, and the French-speakers, overwhelmingly Walloons. Hence, Belgium has two political-cultural poles, Flanders in the north and Wallonia in the South. There is also a small German-speaking minority.
To accommodate this often culturally-at-odds mix, Belgium's constitutional monarchy presides over a complicated political system that has devolved considerable authority into regional governments at the expense of the center. This leaves a state headed by the king and a government led by a prime minister, but with a federal cabinet that seeks to equally balance Dutch and French-speaking ministers as prescribed by the constitution.
Adding to the cultural-regional mix, the parliament's upper house, the senate, consists of 40 directly elected members and 21 representatives appointed by three community parliaments, 10 co-opted senators and the children of the king (as senators by right who in practice do not cast their vote). The lower chamber has 150 representatives who are elected under a proportional voting system from 11 electoral districts.
The Belgian political system worked relatively well from 1958 to 1999, with a chain of largely Christian Democrats running the country. In 1999, a major scandal over contaminated food was the catalyst to an unwinding of the Christian Democrat's hegemony and a shift to more regionally driven political parties. Although the regional polarization factor loomed large over Belgium's political landscape, the country benefited from the governments of prime minister Guy Verhofstadt (1999-2008), during which attention was given to improving the country's fiscal situation, containing the growth of national debt, and making some tax reforms.
With the end of the Verhofstadt government, Belgian politics entered a period of instability from which it has yet to find an exit. The latest failure in forming a government came in October when the winner of the June elections, Bar De Wever, head of the separatist N-VA (Flemish) party, proposed greater fiscal autonomy for the regional governments, ie more control over tax revenues in regions at the expense of the federal government, a move which would no doubt favor the more affluent Flemish areas.
As one journalist noted: "It would leave Flanders, the country's most popular but also wealthiest region, to grab the lion's share of 45% of tax revenue no longer in the hands of the federal government." The French-speaking parties were opposed to De Wever's proposal as it could lead to tax competition (ie the Flemish areas could lower taxes to attract business).
The thing that most investors are not focused on is that one exit from the situation of June's inconclusive 2010 election from which a government has yet to emerge is the end of Belgium as a unified country. Simply stated, Belgium could split into two separate countries, much like Czechoslovakia's "Velvet Divorce" in 1992. While the birth of the Czech and Slovak republics was handled without a major sovereign debt crisis, the current environment in Europe and international capital markets is not as open to the birthing process, especially considering that Belgium's debt burden (in terms of debt to gross domestic product - GDP) is the third highest.
Are we overstating our concerns? While we hope our perception of Belgium's sovereign risk is overstated, The Economist Intelligence Unit (EIU) observed in October that "Belgium is the least stable country in the EU, in that there is no consensus about what form the state should take or whether it should continue to exist at all".
Although the EIU went on to emphasize that its central forecast was that Belgium will still exist in 2014, it also stated "there will be no long-term resolution of the divisions between the Flemish and francophones. There is indeed a possibility that majorities on both sides will decide their future is as separate countries."
Just to add a little more flavor, the Financial Times' Stanley Pignal on November 15 stated: "The budget questions Belgium faces are the same ones that many other countries in Europe and beyond are asking themselves. But, at the moment, there is no government in office to provide answers."
As of October 2010, Belgium was presided over by interim Prime Minister Yves Leterme, a Flemish Christian Democrat who led the last official government that folded earlier in 2010. A Flemish separatist party was the winner of the June elections and is trying to form a government with a collection of both federalist and separatist parties, not a very promising landscape. This leaves the door open to new elections, a costly yet potentially inconclusive exercise.
It is very likely that a new election will only return the same cast of characters - De Wever was recently given 70% support by potential Flemish voters. This situation has hit Belgian society, leaving the daily De Standard to comment: "There is practically no solution but new elections. Chaos is just around the corner."
Belgium's economy has its own set of problems. Real GDP contracted 2.7% in 2009, but headed back into positive territory in 2010 (with the IMF forecasting 1.6%). Like so many countries in the euro area, Belgium has been forced to adopt austerity with an eye to reducing the budget deficit and public debt to meet targets set with the 2010-2013 Stability and Growth Program agreed upon with the European Commission. This situation is not helped by efforts of the regions to increasingly take a larger share of federal tax authority, especially revenues.
The challenge on the economic side is that Belgium is likely to share in the larger slowdown, which is expected to hit the domestic economy hard as the situation is likely to be complicated by ongoing political uncertainty, leaving the export sector one of the few areas of modest expansion. If growth dips lower than expected, it could add to social discontent, considering that unemployment is set to remain above 8% for the foreseeable future.
Bearing in mind the international environment - with Ireland having crashed and pressure now on Portugal - domestic political risk and the less-than-robust economic landscape, we expect that at some point questions could be raised over Belgium's ability to pay, especially if there is ongoing uncertainty over whether the country remains as a unified entity or splits into two new units.
Belgium has remained a unified polity since 1830 and a velvet divorce is most likely not a short-term outcome. The EU, with its headquarters in Brussels, would also have a stake in engineering an optimal outcome if tensions were to increase. However, the political squabbling and entrenchment of regionalism among voters pushes a possible day of separation that much closer.
For a country with debt forecast toward 100% of GDP and an uncertain political future, Belgian debt trades too tight for the risk. One also has to question the strength of the country's Aa1/AA+ ratings. At some point, investors are going to recognize the gravity of the situation.
Hopefully we do not have another Greece or Ireland-like situation on our hands.
Scott B MacDonald is a senior consultant at KWR International Advisor, a consulting firm specializing in the delivery of Asia-focused trade, business and investment development, research and public relations/public affairs services for corporate and government clients. For more information, please visit http://www.kwrintl.com .
(Copyright 2010 KWR International. Run with permission.)
The second case should be of particular alarm to global policymakers and investors as the Irish government made a very strong effort to avert a bailout, imposing tough austerity on the country for two years running. Now there is more pain coming in the form of the 2011 budget and an IMF/EU support package, a situation complicated by elections in January 2011.
Despite the horror of the situation, Ireland is still going to exist as
a country. Yes, its sovereignty is dented, but nobody is questioning its future existence. If that were the case, the financial panic would no doubt be greater. That is why the case of Belgium, one of Europe's largest debtors, remains so intriguing.
Greece, Ireland, Portugal and Spain have all been in investor crosshairs since 2009. The issues of too much debt, the imposition of tough-nosed austerity, and ongoing concerns over access to capital - the critical lifeblood of national finances - have rearranged the political and economic landscape in Europe.
The EU now has a European Financial Stability Fund (EFSF), Germany is emerging as the regional bloc's heavy with France following behind, and small countries are being warned to get their fiscal houses in order.
Yet, Belgium's political drama has largely sailed under investor radar screens. But this fractious country of 10.8 million known for its Flemish painters, waffles, French fries and beer, potentially faces a profound political crisis that could see an end to the unified state, something which has substantial implications for the management of its debt. It tends to be forgotten, but Belgium has one of the higher levels of debt to gross domestic product in the EU with French banks having the largest exposure.
Belgium was established in 1830, following a revolution that pulled the predominately Catholic Southern Law Lands out of the United Kingdom of the Netherlands. The country was, and continues to be, divided between two major linguistic groups, the Dutch-speakers, mostly Flemish, and the French-speakers, overwhelmingly Walloons. Hence, Belgium has two political-cultural poles, Flanders in the north and Wallonia in the South. There is also a small German-speaking minority.
To accommodate this often culturally-at-odds mix, Belgium's constitutional monarchy presides over a complicated political system that has devolved considerable authority into regional governments at the expense of the center. This leaves a state headed by the king and a government led by a prime minister, but with a federal cabinet that seeks to equally balance Dutch and French-speaking ministers as prescribed by the constitution.
Adding to the cultural-regional mix, the parliament's upper house, the senate, consists of 40 directly elected members and 21 representatives appointed by three community parliaments, 10 co-opted senators and the children of the king (as senators by right who in practice do not cast their vote). The lower chamber has 150 representatives who are elected under a proportional voting system from 11 electoral districts.
The Belgian political system worked relatively well from 1958 to 1999, with a chain of largely Christian Democrats running the country. In 1999, a major scandal over contaminated food was the catalyst to an unwinding of the Christian Democrat's hegemony and a shift to more regionally driven political parties. Although the regional polarization factor loomed large over Belgium's political landscape, the country benefited from the governments of prime minister Guy Verhofstadt (1999-2008), during which attention was given to improving the country's fiscal situation, containing the growth of national debt, and making some tax reforms.
With the end of the Verhofstadt government, Belgian politics entered a period of instability from which it has yet to find an exit. The latest failure in forming a government came in October when the winner of the June elections, Bar De Wever, head of the separatist N-VA (Flemish) party, proposed greater fiscal autonomy for the regional governments, ie more control over tax revenues in regions at the expense of the federal government, a move which would no doubt favor the more affluent Flemish areas.
As one journalist noted: "It would leave Flanders, the country's most popular but also wealthiest region, to grab the lion's share of 45% of tax revenue no longer in the hands of the federal government." The French-speaking parties were opposed to De Wever's proposal as it could lead to tax competition (ie the Flemish areas could lower taxes to attract business).
The thing that most investors are not focused on is that one exit from the situation of June's inconclusive 2010 election from which a government has yet to emerge is the end of Belgium as a unified country. Simply stated, Belgium could split into two separate countries, much like Czechoslovakia's "Velvet Divorce" in 1992. While the birth of the Czech and Slovak republics was handled without a major sovereign debt crisis, the current environment in Europe and international capital markets is not as open to the birthing process, especially considering that Belgium's debt burden (in terms of debt to gross domestic product - GDP) is the third highest.
Are we overstating our concerns? While we hope our perception of Belgium's sovereign risk is overstated, The Economist Intelligence Unit (EIU) observed in October that "Belgium is the least stable country in the EU, in that there is no consensus about what form the state should take or whether it should continue to exist at all".
Although the EIU went on to emphasize that its central forecast was that Belgium will still exist in 2014, it also stated "there will be no long-term resolution of the divisions between the Flemish and francophones. There is indeed a possibility that majorities on both sides will decide their future is as separate countries."
Just to add a little more flavor, the Financial Times' Stanley Pignal on November 15 stated: "The budget questions Belgium faces are the same ones that many other countries in Europe and beyond are asking themselves. But, at the moment, there is no government in office to provide answers."
As of October 2010, Belgium was presided over by interim Prime Minister Yves Leterme, a Flemish Christian Democrat who led the last official government that folded earlier in 2010. A Flemish separatist party was the winner of the June elections and is trying to form a government with a collection of both federalist and separatist parties, not a very promising landscape. This leaves the door open to new elections, a costly yet potentially inconclusive exercise.
It is very likely that a new election will only return the same cast of characters - De Wever was recently given 70% support by potential Flemish voters. This situation has hit Belgian society, leaving the daily De Standard to comment: "There is practically no solution but new elections. Chaos is just around the corner."
Belgium's economy has its own set of problems. Real GDP contracted 2.7% in 2009, but headed back into positive territory in 2010 (with the IMF forecasting 1.6%). Like so many countries in the euro area, Belgium has been forced to adopt austerity with an eye to reducing the budget deficit and public debt to meet targets set with the 2010-2013 Stability and Growth Program agreed upon with the European Commission. This situation is not helped by efforts of the regions to increasingly take a larger share of federal tax authority, especially revenues.
The challenge on the economic side is that Belgium is likely to share in the larger slowdown, which is expected to hit the domestic economy hard as the situation is likely to be complicated by ongoing political uncertainty, leaving the export sector one of the few areas of modest expansion. If growth dips lower than expected, it could add to social discontent, considering that unemployment is set to remain above 8% for the foreseeable future.
Bearing in mind the international environment - with Ireland having crashed and pressure now on Portugal - domestic political risk and the less-than-robust economic landscape, we expect that at some point questions could be raised over Belgium's ability to pay, especially if there is ongoing uncertainty over whether the country remains as a unified entity or splits into two new units.
Belgium has remained a unified polity since 1830 and a velvet divorce is most likely not a short-term outcome. The EU, with its headquarters in Brussels, would also have a stake in engineering an optimal outcome if tensions were to increase. However, the political squabbling and entrenchment of regionalism among voters pushes a possible day of separation that much closer.
For a country with debt forecast toward 100% of GDP and an uncertain political future, Belgian debt trades too tight for the risk. One also has to question the strength of the country's Aa1/AA+ ratings. At some point, investors are going to recognize the gravity of the situation.
Hopefully we do not have another Greece or Ireland-like situation on our hands.
Scott B MacDonald is a senior consultant at KWR International Advisor, a consulting firm specializing in the delivery of Asia-focused trade, business and investment development, research and public relations/public affairs services for corporate and government clients. For more information, please visit http://www.kwrintl.com .
(Copyright 2010 KWR International. Run with permission.)
China imposes price controls as inflation threatens social unrest
China’s cabinet, the State Council, announced on November 17 that price controls were being adopted to stem inflation, which historically has been a major factor in triggering social unrest in the country. Two days later, the Chinese central bank raised the banking system’s capital reserve requirement—for the fifth time this year—to rein in bank lending that is fuelling speculative rises in property prices.
According to the National Bureau of Statistics, China’s consumer price index (CPI) increased 4.4 percent in October from the same period last year—the highest rise in 25 months. Food prices soared by as much as 10.1 percent. Inflationary pressures will increase over the coming months, with high demand during the New Year and Chinese New Year season, exacerbated by the difficulties of transporting agricultural produce to urban areas in winter.
The most likely targets of the price controls will be items immediately connected to daily life, such as grain, cooking oil, meat, eggs and milk, as was the case when similar measures were imposed in 2004 and 2008. In some cities, such as Fuzhou in Fujian province, price restrictions have already been imposed on four main vegetables. Beijing is also seeking to control rising utility prices through temporary subsidies of coal, oil and gas.
The State Administration of Grain started selling corn, soybeans and vegetable oil from its strategic reserves last week to stabilise prices. The State Council has also ordered local governments to ban toll collections on trucks transporting agricultural produce, and to crack down on speculation and the hoarding of commodities such as sugar and cotton. The China Banking Regulatory Commission has urged banks to provide additional lending to the agricultural sector, while admitting there is a severe shortage of corn, cotton and other crops.
Reports have emerged that students at a high school in the impoverished southwest province of Guizhou rioted this month over a second increase of cafeteria food prices this year. The broader fear in the Chinese government is that inflation could lead to protests by urban workers whose living standards are being eroded by price increases. Wang Yanling, a fruit stand owner in a food market in Beijing’s Deshengmeng Avenue, told Bloomberg News last week that sales of apples had dropped from as much as 250 kilograms per day a year ago to just 100 kilograms, after prices soared over 60 percent. “People are buying less with prices jumping up,” he said.
In 1989, inflation was a major factor in the mass movement that developed against the regime and which was only ended by the brutal military crackdown in Tiananmen Square. This year, there have been clear signals of developing militancy in the working class. In May-June, a wave of strikes by young workers in auto and electronics plants forced employers to raise basic wages, but often at the expense of other bonuses and with increased workloads. Just two days after Beijing announced the price controls, 7,000 workers at an affiliate of electronics giant Foxconn in Foshan in southern China, took to the streets, protesting over poor pay and the company’s plans to relocate factories to inland provinces where labour is cheaper.
The anti-inflation measures will have contradictory effects. Even if they temporarily slow price rises in urban areas, price caps will aggravate social discontent among hundreds millions of farmers, from small vegetable growers to peasant households selling pork. They are paying more for manufactured goods but will not be able to sustain their living standards by charging more for their produce. Such conditions can cause farmers to cut back their production or hoard, leading to supply shortages and even greater pressure on prices in black markets outside official control.
Moreover, the pricing measures cannot counteract the vast global economic forces working beyond the national borders of China. Food prices are rising internationally due to rampant speculation in commodity markets. Neil Watkins, a director of ActionAid, told Asia Times Online recently: “As more and more investors get involved in commodity markets, [food markets] are being pulled away from real purchasers and sellers and more into the financial world.”
Soaring food prices sparked riots in several poverty-stricken countries in 2007-2008. Last month, the World Bank reactivated its Global Food Crisis Response Program (GFCRP), giving $760 million to countries at the risk of food price volatility. Major flooding in Thailand and Vietnam, two of the world’s largest exporters of rice, is predicted to cause a significant slump in world rice production and the World Bank expects volatile food prices until at least 2015.
Inflationary pressures are also being fuelled by the measures taken by the Chinese government in response to the 2008 global financial meltdown. Since late 2008, Beijing has pumped some 4 trillion yuan ($US600 billion) in stimulus spending into the economy. The total stimulus reached to 10 trillion yuan as a result of a frenzy of state-ordered bank lending.
Earlier this month, Professor Li Daokui, an adviser to the central bank, estimated that China’s total money supply had reached $10 trillion in September, or as much as 200 percent of gross domestic product (GDP). This compares with 60 percent in the US, 80 percent in South Korea and India, and 100 percent in Japan. The People’s Bank of China data provided an indicator of the massive growth of so-called M2 (cash or near-cash forms of money). The M2 had grown from 21.92 trillion yuan ($US3.34 trillion) in 2003 to 61 trillion yuan in 2009—almost tripling in six years.
Lower profitability in manufacturing has driven businesses into property and stock speculation. Average housing prices in China have tripled since 2005. In major cities such as Beijing, the ratio of home prices compared with average incomes had reached 27 to 1—five times the international figure—making a house purchase almost impossible for urban workers. Property speculation is fuelling widespread resentment toward wealthy developers and corrupt officials who are amassing huge fortunes.
The Chinese regime is facing a dilemma. It cannot afford to rein in real estate speculation too quickly because it depends on high growth rates to keep unemployment under control, and the construction industry is one of the largest employers. At the same time, the government’s tight control of its currency exchange rate to maintain export competitiveness means it cannot stabilise domestic prices by revaluing the currency to lower the cost of imports.
On October 28, the Chinese central bank lifted the one-year deposit rate—the benchmark interest rate—to 2.5 percent and the one-year lending rate to 5.56 percent, to curb property speculation. Many of the world’s largest investment banks have forecast that China will have another 0.25 percent rate rise before the end of this year.
China’s credit tightening has sent shock waves through global share and commodities markets in recent weeks, due to the fears it will impact on economic growth. China’s construction industry in particular, consumes 40 percent of the world’s steel and cement every year. China’s GDP growth is beginning to slow, with the economy expanding 9.6 percent in the third quarter, compared with 10.3 percent in the second and 11.9 percent in the first.
Many analysts expect China’s real estate market to slump due to the tightening of lending and other measures. A report by Goldman Sachs in early October predicted a 20 percent drop in housing prices over the next 12 months. A report by the Chinese Academy of Social Science on October 21 predicted property prices may fall 20 percent in the first half of 2011.
Any property market slump will create a debt crisis for many local governments, which set up investment companies to tap into the stimulus lending and invested in infrastructure and speculative real estate projects. An official investigation in October found that local governments were unable to fully meet repayments on half of the 7.66 trillion yuan they were lent. It is estimated that 26 percent of the loans will never be repaid.
China’s financial instability is another measure of the deepening global economic crisis and sharpening social antagonisms. Beijing’s measures to control inflation and speculation could slash growth sharply leading to rising unemployment, poverty and social discontent.
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