UK banks running out of the Eurozone

An article from the Telegraph revealed today that UK banks are abandoning the Euro zone to protect their investments from the incoming collapse of Greece, another warning signal of the dismal situation in the Euro area and a clear signal of how the markets are convinced that all the reassurances of the ECB and EU are merely words not being supported by facts. Quite day on the Euro front this Sunday in preparation of the incoming storm next week.


Excerpt from The Telegraph:

Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.

Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.

Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal.

In its interim management statement, published in April, Barclays reported a wholesale exposure to Spain of £6.4bn, compared with £7.2bn last June, while its exposure to Italy has fallen by more than £100m.

One source said it was “inevitable” that British banks would look to minimise their potential losses in the event the eurozone crisis were to get worse. “Everyone wants to ensure that they are not badly affected by the crisis,” said one bank executive.

Moves by stronger banks to cut back their lending to weaker banks is reminiscent of the build-up to the financial crisis in 2008, when the refusal of banks to lend to one another led to a seizing-up of the markets that eventually led to the collapse of several major banks and taxpayer bail-outs of many more.

Travel Photo: Magaliesberg, South Africa

Italy downgrade looming

Italy's long due revision has arrived at the worst moment, it seems that rating agencies have a special talent for bringing bad news at the worst possible time, quite interesting how the fundamentals of the Italian economy have been horrible for years and suddenly on the eve of the Greek bankruptcy Moody's has finally decided to be honest on this. It seems we are set for some torture next week.
For those who want to know more on the real status of the Italian economy, I would reccomend reading the following report from SocGen:
How Vulnerable is Italy

Below Full text from Moody's:

Frankfurt am Main, June 17, 2011 -- Moody's Investors Service has today placed Italy's Aa2 local and foreign currency government bond ratings on review for possible downgrade, while affirming its short-term ratings at Prime-1.

The main drivers that prompted the rating review are:
(1) Economic growth challenges due to macroeconomic structural weaknesses and a likely rise in interest rates over time;
(2) Implementation risks surrounding the fiscal consolidation plans that are required to reduce Italy's stock of debt and keep it at affordable levels; and
(3) Risks posed by changing funding conditions for European sovereigns with high levels of debt.
Moody's review will evaluate the weight of these growing risks in light of the country's high rating but also relative to some credit-strengthening trends that have been observed in recent years and are expected over the coming years, such as improved fiscal governance, lower budget deficits and a modest economic recovery.

RATIONALE FOR REVIEW
First, the Italian economy faces growth challenges in an environment characterized by long-term structural impediments to growth and potentially rising interest rates. Structural economic weaknesses -- mainly low productivity and important labour and product market rigidities -- have been a major impediment to growth in the last decade and continue to hinder the economy's recovery from the severe recession it experienced in 2009. Italy has so far only recovered a fraction of the nearly seven percentage points in GDP that it lost during the global crisis, despite low interest rates, which are likely to rise in the medium term. Growth prospects for the Italian economy in the coming years will be a crucial factor that will determine the government's revenues and the achievement of fiscal consolidation targets.
Second, there are implementation risks to the fiscal consolidation plans that are required to reduce Italy's stock of public debt to more affordable levels. Against a backdrop of rising interest rates and weak economic growth, the government may find it difficult to generate the primary surpluses that are needed to place the public debt-to-GDP ratio and the interest burden on a solid downward trend. The adoption of additional conservative fiscal policies may prove more difficult in the near future because the current government's electoral support is weakening, with the government facing challenges in gaining public approval for its policies. For example, the government's recent energy and water supply proposals were rejected by popular vote.
Third, the fragile market sentiment that continues to surround European sovereigns with high levels of debt poses additional risks for Italy. The continued stability of market demand for Italy's debt is uncertain at current yields. Although future policy actions within the euro area could reduce investors' concerns and stabilize funding costs, the opposite is also possible. In any event, going forward, investors appear likely to differentiate more among euro area sovereign borrowers than they did prior to the financial crisis, to the disadvantage of euro area countries with higher-than-average debt burdens, like Italy.

FOCUS OF RATINGS REVIEW
Moody's review of Italy's sovereign rating will focus on the growth prospects for the Italian economy in coming years, and particularly the prospects for a removal of important structural bottlenecks that could hinder a stronger economic recovery in the medium term. The review will also examine the government's ability to achieve ambitious fiscal consolidation targets and to implement further plans to generate substantial primary surpluses in the medium term. This will include an analysis of the vulnerability of the Italian government debt trajectory to a rise in risk premia, as well as the options for the government to react. The government's new fiscal plan, which is expected to be announced shortly, will be considered during the review.
In addition, any broader developments across the euro area, in particular with regard to the resolution of the euro area debt crisis and its impact on funding costs, could be important determinants of the outcome of Moody's rating review

PREVIOUS RATING ACTION AND METHODOLOGY

Moody's last rating action affecting Italy was implemented on 15 May 2002, when the rating agency upgraded Italy's Aa3 government bond ratings to Aa2 with a stable outlook. The rating action prior to that was taken on 3 July 1996, when the rating agency upgraded Italy's A1 government bond ratings to Aa3.

Emigration visualized

Peoplemovin, an experimental project in data visualization by Carlo Zapponi, that shows the flows of 215,738,321 migrants as of 2010. The migration data provided by The World Bank is plotted as a flow chart that connects emigration and destination countries. The chart is split in two columns, the emigration countries on the left and the destination countries on the right. The thickness of the lines connecting the countries represents the amount of immigrated people and the color code from blue to red puts the countries in comparison to the rest of the world.

Online Education Infograph

Check out this infographic from OnlineEducation.net about how the world of online learning has changed and grown over the years.



Via: OnlineEducation.net

The man who screwed an entire country

For those who missed one of the harshest articles ever written on a western leader and for those who want to learn how to destroy a country a must-read from The Economist on the infamous Italian Prime Minister Silvio Berlusconi, the title of the article is self-explanatory: The Man Who Screwed and Entire Country.

read the full article HERE

Travel Photo: Abras on Dubai Creek

Abras on Dubai Creek

NATO´s Middle East Chess Game

Every good chess player knows that before striking the opponent you want to carefully position your pieces on the board and when ready then unleash hell.
NATO is playing the same game in North Africa and Middle East, toppling down every dictator and replacing it with a military junta as in Egypt with no clear leader and easy to be controlled and replaced if the case, they also get a democratic branding from the support of western countries together with a generous support package to keep things calm among the population.
The choice of countries is not casual, all of them have a strategic relevance either in oil production or logistics, as you can see below Egypt and Yemen are vital to oil supplies, Bahrain is vital to both oil production and logistics and Libya is a perfect replacement for oil from the Middle East should an Iranian blockade take place in Strait of Ormuz, the oil chockpoint where 50% of the world´s seaborne oil transits daily.

Libya has some of the biggest and most proven oil reserves -- 43.6 billion barrels -- outside Saudi Arabia, and some of the best drilling prospects. Libya's oil is unusually "sweet" and "light," fundamentally is high-quality crude oil providing a better value than Saudi one should supplies from the Arabian region be disrupted at any stage. And furthermore Libya is close to Europe making easier to transit oil to the European and American markets while avoiding any possible disruption when the situation in the Middle East will escalate.
No doubt that once that Libyan oil fields will be under NATO control and production will be re-established  a new front of the New Resource War we entered into will be opened most probably directly on the Iranian borders.
Iran is well aware of this and since many years its government has been counteracting to the siege that is being undertaken on its borders. After all Iraq on the western border and Afghanistan on the eastern border are under US control, Saudi Arabia and the Gulf States on his southern border are close US Allies and hosting major military bases. Pakistan on his south eastern border is without leadership and in lack of control while allowing the CIA to do whatever they want on its territory included staging a farsical attack to Osama Bin Laden on the outskirts of their capital. The Iranian northern borders are with Turkey a close US ally and not a good friend of Iran and the Caucasus republics of Russia which aside from Azerbaijan are normally hostile to Iran, the only friendly border at least for now is the one with Turkmenistan which is also vital for Iranian exports to China and Central Asia.
When the tension with Iran will mount and if a full scale war will explode the first victim will be the economy, The Strait of Ormuz will be shut down immediately and oil prices will explode to historical heights, a new great depression will start and as a consequence demand destruction will allow to make up for the shortfalls in production. If NATO plans will succeed Middle East will become a large battlefield for the core resources we covet and we cannot live without. Strange world where you have to wish that a dictator like Gaddafi will live another day.

Peak Oil alert gaining momentum

Since 2006, the international oil company TOTAL has consistently voiced warnings about the future inability of the oil industry to meet continued oil demand growth. In 2006, then CEO Thierry Desmarest stated that maximum oil production lies between 100 to 110 million b/d, reached potentially by 2020. Only a year later the new CEO Christophe de Margerie announced that it would be difficult for the industry to produce beyond 100 million b/d.

To summarize, according to TOTAL the world can likely not produce over 95 million barrels per day due to constraints in producing more technically challenging oil fields such as deepwater, heavy oil, and fields located in the arctic. Furthermore, such a production level is only possible if the countries in the Middle-East, especially Saudi-Arabia, Iran, and Iraq, will be able and willing to increase their production.

Ad when it comes to Saudi Arabia being able to increase production well the latest news are not encouraging:

From elEconomista.es (translation in English here)

The electricity company of Saudi Arabia warns that oil in this country could be depleted by 2030 if left unchecked domestic consumption. According to a report of Saudi Electric, domestic consumption is estimated to be between 2.5 and 3.4 million barrels a day.

The report, published in the magazine Al Mashka says that the increase in domestic consumption of oil is one of the main challenges facing the country, mainly because oil accounts for 80% of national income.

Abdel Salam al-Yamani, head of the Saudi Electricity Company also warned of the consequences for citizens to ignore the calls to save electricity and water, and has advised that they depend more on solar energy.

It appears the Saudi governement is well aware of this issue since on the 1st of June announced its intention to build 16 nuclear power plants which is quite ironic for a country supposedly full of oil.

From Reuters

DUBAI, June 1 (Reuters) - Saudi Arabia plans to build 16 nuclear power reactors by 2030 which could costs more than $100 billion, a Saudi-based newspaper reported on Wednesday, citing a top official.

The world's top crude exporter, Saudi is struggling to keep up with rapidly rising power demand. It has considered boosting its domestic energy capacity using nuclear reactors.

"After 10 years we will have the first two reactors," Abdul Ghani bin Melaibari, coordinator of scientific collaboration at King Abdullah City for Atomic and Renewable Energy, told Arab News.

Many have backed away from atomic plans after the accident at Japan's Fukushima Daiichi plant but oil-rich Gulf states are among the few countries looking to make major investments in nuclear power plants.

"After that, every year we will establish two, until we have 16 of them by 2030," he said.

Also from The Economist: Oil production fails to keep up with demand

CRUDE-OIL prices shot up on June 8th—Brent crude to a one-month high of $118.59 per barrel—after OPEC representatives meeting in Vienna were unable to reach an agreement on production quotas. Many had expected an increase in quotas as members with spare production capacity, led by Saudi Arabia, pushed to avoid a price spike that may dampen long-term demand. As figures released in BP’s "Statistical Review of World Energy" show, global oil production has struggled to keep up with increased demand recently, particularly from Asia. In China alone consumption has risen by over 4m barrels per day in the past decade, accounting for two-fifths of the global rise. In 2010 consumption exceeded production by over 5m barrels per day for the first year ever, as world oil stocks were run down.

Long-term consumption cannot exceed production. Even in short time frames, consumption can only exceed production if there is sufficient production in storage.
To cover 5 million barrels per day of excess consumption for a year, global oil stocks would have had to drop by 1.825 billion barrels. If that did not happen, we need another explanation.

Possible Explanations

Cheating (under-reporting production) by OPEC
Poor consumption numbers from China or elsewhere
Another source of production not shown
Some combination of the above 

Regardless, it simply is not possible for oil consumption to grow faster than production for years on end.

Travel Photo: Sunset on Jounie, Lebanon

Sunset on Jounie, Lebanon