And in other news…

Funny pictures of Prince William, his bride Kate Middleton and two royals juxtaposed to Disney cartoon characters

Bill Gross: ‘Low policy rates represent an immediate threat to investment portfolios’

Bill Gross: Low policy rates and the increasing negative real yields that they engender as inflation accelerates represent an immediate threat to investment portfolios. Bond prices don’t necessarily have to go down for savers to get skunked during a process of “debt liquidation.” PIMCO advocates a renewed vigilance, stressing bond market “safe spread” alternatives available globally, including developing/emerging market debt at higher yields denominated in non-dollar currencies.

UK PMI Hits Low

Sterling is falling against the US dollar this morning after the April manufacturing PMI has come in weaker than expected at 54.6, the lowest in seven months. Inflation is the third highest since the data was first collected in

GDP, Policy Mixes and Sterling-Yen Trade Idea

The US and UK report their first estimates of Q1 11 GDP this week. While the US economic data, like ISM readings suggest the US economy is enjoying reasonably good momentum, the GDP components are distinctly softer and suggest a disappointing sub-2% reading. Headwinds caused by higher oil prices, which appears to have been a factor cutting into consumption, and the ever-difficult-to forecast– inventory data, appear to be the main culprits

More anti-foreigner rhetoric in Europe, this time in the UK

When unemployment is high, immigrants are seen as a burden and the mood shifts toward the anti-immigration rhetoric we are hearing from Mr. Cameron. Economic nationalism is a force to be reckoned with. This anti-foreigner sentiment will only increase unless the general economic situation improves

Simon Johnson: U.S. Banks Need More Capital

The Vickers report came out in Britain identifying areas where Britain’s banking system needed to alter its regulatory structure. Simon Johnson talked to Bloomberg about this report and banking regulation in general. His view is that first and foremost large globe-spanning banks are too large. Johnson believes a 25% equity financing level is the right amount. That would give banks four-to-one leverage (discounting the embedded leverage of derivatives, of course).

Austerity in the UK

The UK is a good example of what austerity means. In the wake of tax increases and budget cuts in the UK, retail sales in Britain have plunged by the most on record. I seriously doubt that the coalition government there will meet its deficit cutting goals with so many people still out of work. The good thing is that UK is but one country. Moreover, inflation played a key role in creating the mess there. And it is not clear yet that inflation will continue to be as much of a problem going forward. Nevertheless, when we get the same sorts of policies in the U.S., things will be different. The U.S. is a much bigger economy and the loss of that level of spending will have far-reaching consequences

Why Iceland Voted “No”

The vote reflected widespread belief that government negotiators had not been vigorous in pleading Iceland’s legal case. The situation is reminiscent of World War I’s Inter-Ally war debt tangle. Lloyd George described the negotiations between U.S. Treasury Secretary Andrew Mellon and Stanley Baldwin regarding Britain’s arms debt as “a negotiation between a weasel and its quarry. The result was a bargain which has brought international debt collection into disrepute … the Treasury officials were not exactly bluffing, but they put forward their full demand as a start in the conversations, and to their surprise Dr. Baldwin said he thought the terms were fair, and accepted them. … this crude job, jocularly called a ‘settlement,’ was to have a disastrous effect upon the whole further course of negotiations …”

And so it was with Iceland’s negotiation with Britain. True, they got a longer payment period for the Icesave payout. But how is Iceland to obtain the pounds sterling and Euros in the face of its shrinking economy. This is the major payment risk that is still unaddressed. It threatens to plunge the krona’s exchange rate.

Will Iceland Vote ‘No’ on April 9 or commit financial suicide?

A year ago, in March 2010, Iceland’s economy was so small that it did not warrant much attention when 93% of its voters rejected the Social Democratic-Green government’s surrender to demands by Gordon Brown and the Dutch, the European Union (EU) bureaucracy and IMF that the island nation impose austerity. Britain and the Netherlands wanted to be reimbursed for having paid out more than $5 billion to some 340,000 of their own depositors – whom their own bank oversight agencies had failed to warn about the looting that was going on.

Iceland’s taxpayers were told to bear the cost, as virtual tribute. In effect, it was to be penance for believing the neoliberal fairy tales about how bank deregulation and “free markets” would make it the richest, happiest country in the world. Indeed it seemed to be, according to United Nations data. But the dream was dashed after the Icesave electronic Internet bank branches abroad were emptied out by their proprietors.

UK Manufacturing Data Soft, Dollar and Sterling Weak

BBH CurrencyView US dollar continues to weaken ahead of tomorrow’s ECB and BoE meeting UK manufacturing much weaker than expected; Swiss CPI exceeds estimates Euro remains resilient ahead of ECB meeting; Portugal raises €1 bn in auction The dollar continues to weaken, paring yesterday’s gains, ahead of tomorrow’s policy decision from the ECB and BoE,

Thoughts on Austerity

Yesterday, Paul Krugman wrote: Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up. What do these events have in common? They’re all evidence that slashing spending

Isn’t that the former Chancellor of the Exchequer sleeping during the budget debate?

Apparently, George Osborne, the current Chancellor, has such a bedroom voice that he puts the Lord Chancellor to sleep. Sweet dreams