Paul Jorion's Blog

Category: Finance

  • AH! THE IMAGE OF FINANCE!

    Translated from the French by Tim Gupwell.

    We learned on Tuesday that the fifth largest British bank, Standard Chartered, had promised the New York State regulator that it would pay a fine of 340 million Dollars for illegal transactions with Iran. The matter is not yet closed, as four other American regulatory bodies continue to pursue their enquiries on this subject.

    There was a danger that the affair, dating back to last week, would get bogged down, and it had already started to poison relations between British and American financial authorities (to which I alluded in my article on … Read the rest

  • THE GOLDMAN SACHS AFFAIR: CORRUPTED JUSTICE, OR AN UNTOUCHABLE FINANCIAL SECTOR?

    Translated from the French by Tim Gupwell.

    The first hypothesis which comes to mind with regard to the American Justice Department’s decision on Friday not to prosecute the bank Goldman Sachs for its alleged role in the Subprime crisis, is of course of corruption at the very heart of the Department. The facts are well-established and eminently reprehensible: exploiting the trust of their best clients to sell them junk products; organizing bets and participating actively in these bets on complex securities which had been manipulated to ensure they were of the worst possible quality.

    Which begs the next question: “is … Read the rest

  • LAST CHANCE FOR THE EUROSYSTEM, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    While the parties in the Greek Coalition government are trying to come to an agreement on a plan to make savings of 11.6 billion Euros over the coming two years, which is going to be painful even though they have to present it as a pledge of good faith, the European experts are working on a rescue plan, called the “last chance plan”. They are revisiting the issue from a perspective that has already been tackled. A new write-down of Greek debt is being looked into, which will be easier to … Read the rest

  • MARIO DRAGHI: WHAT IF IT WAS ALL A TERRIBLE MISUNDERSTANDING?

    Translated from the French by Tim Gupwel.

    A short while ago, I was taking a siesta, sleeping with a sound conscience, when I woke up with a start, my heart beating wildly, my forehead soaked with sweat and prey to a strong emotion: what if we had completely misunderstood the words of Mario Draghi, President of the European Central Bank, the day before yesterday? What if he had actually said something completely different to what we had heard him say?

    This is far from impossible: during the period from 1997 – 2006, I conscientiously read every single speech made … Read the rest

  • THREE STRATEGIES FOR REDUCING THE DEBT, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    Whenever monetary creation, or the famous concept of printing money, is alluded to, the idea of hyperinflation is never far away. Subsequently, reference is made to history to predict a return to these episodes that left such an indelible mark in people’s memories. The conclusion immediately drawn is that the same cause will have the same effect.

    However, the crisis we are living through might well lead us to a more nuanced picture. The first thing that needs to be considered is that we are seeing an inflation of financial assets, … Read the rest

  • WAITING IS NO LONGER A VIABLE POLICY, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    Once again, the European stock and bond markets have sounded the alarm. The fall in stock values has been accompanied by an increase in bond rates for the countries in the firing line. The capacities of the banks and of the states to fulfill their commitments are being simultaneously called into question.

    For the time being, the means of supporting those who need it are just not there, and it is hoped that Italy does not go down the same path. Patience is needed because the ESM is not yet close … Read the rest

  • SPAIN : THE MARKETS ARE EXPECTING NEW DEVELOPMENTS SOON

    Translated from the French by Tim Gupwell

    Exceeding 6% on 10 year debt is already dangerous. According to the terms of the balanced budget rule, this signifies that a nation will require growth of around the same amount, whereas in fact Spain has registered a negative growth since the beginning of the year! So, 7.567% at 10.15  this morning! As the German 10 year Bund stands at 1.255%, this means that for Spain over 10 years there is a risk premium (for the possibility of the debt not being repaid) which can be reckoned at 6.312%.

    © Bloomberg… Read the rest

  • QUIET ON THE SET, AND… INACTION!, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    Events are moving fast. We were expecting it of Greece, but Spain is overtaking it. Yesterday evening, a human tidal wave invaded Spanish town streets, which these days have become virtually permanent places of mini-demonstrations at midday or after work. Today, at the very moment when the Eurogroup ministers were adopting the bail-out plan for the Spanish banks, the bond rate had edged up to 7.20% and the Madrid Stock Market plunged more than 5%. Instead of falling as had been predicted, the government has announced that the official unemployment rate … Read the rest

  • FIRST IT WAS THE AGENCIES, NOW ITS THE FORECASTERS’ FAULT, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    “I can’t see any time soon when…the pressure will be off” replied David Cameron, the British Prime-Minister, in an interview with The Daily Telegraph. He continued, “this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts”. In conclusion, his austerity policies are likely to continue beyond 2020, as the situation is “a lot tougher than the forecasters were expecting”. Georges Osborne, the Chancellor of … Read the rest

  • LIBÉRATION, “Plundering and looting must be punished”

    Plundering and looting must be punished?

    For the economist and anthropologist Paul Jorion, the financial system needs regulating.

    The LIBOR scandal took place in 2008 against a backdrop of almost total indifference. This time there has been a huge outcry. Why?

    It is a situation specific to Great-Britain. It is in this country that a context has appeared which has given the public the impression of being able to identify the real causes of the crisis. And suddenly, at the time when it was made known that a British bank, Barclays, had cheated and that it was going to … Read the rest

  • THE PROVERBIAL OBJECTIVITY OF THE COLUMNIST, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    The case is clear-cut judging by the current climate! The banks are behaving like louts, the regulators supervising them are looking the other way, and the politicians are covering their backs. Indeed, it is difficult to draw up a full list of the scandals which have just come to the fore without missing some of them.

    Of course there is Barclays, not to mention all the other megabanks waiting for their fate to be made known, in a context spiraling out of control, hoping to escape from public condemnation, fines and … Read the rest

  • ATLANTICO.fr, The LIBOR scandal : are bankers totally untrustworthy?

    The LIBOR scandal : are bankers totally untrustworthy??

    Translated from the French by Tim Gupwell

    Can a banker be trusted? This is indeed the question one is obliged to ask in the light of the “LIBOR affair” which broke in April 2008 and saw a dramatic turn of events four years later, on the 27th June, when the British bank Barclays was publicly condemned to pay an exceptionally large fine, equivalent to 365 million Euros, for having manipulated the family of rates known as LIBOR, determined daily at the time by Barclays plus 15 other banks, and today … Read the rest

  • FORMER C.O.O. OF BARCLAYS, JERRY DEL MISSIER’S HEARING, BEFORE A BRITISH PARLIAMENTARY SELECT COMMISSION

    Translated from the French by Tim Gupwell

    Up to now in the LIBOR affair, the witness statements before the parliamentary select committee have essentially seen everyone lying to protect their own interests. The inevitable result is a sort of cacophony, compounded by strategy changes half-way through, which was particularly the case for Bob Diamond, former Chief Executive of Barclays, who one day sought to bring down with him Paul Tucker, Vice-Governor of the Bank of England, only to attempt the following day to absolve him of any responsibility, with the catastrophic result you can easily imagine.

    As for the officials, … Read the rest

  • THE RESULT OF UNRAVELLING A BALL OF WOOL… FROM THE WRONG END, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    François Hollande has confirmed that the Government is going to propose for adoption an organic law (which a simple law cannot undo) in order to have the balanced budget rule adopted, on the advantageous pretext that it is provisional. There have been many occasions in recent French history when special measures have been adopted for their presumed importance, without ever leaving good memories behind.

    At the same time, the debate in Europe continues to move on, focusing once again on the reduction of the banks’ debts. Thanks to the Wall Street … Read the rest

  • LE MONDE-ÉCONOMIE, The LIBOR affair…… a scandal postponed from 2008, Monday 16 – Tuesday 17 July 2012

    My most recent column in the French daily paper Le Monde : Le scandale du Libor, c’était en 2008. Translated from the French by Tim Gupwell.

    When the LIBOR affair first broke in April 2008, the press comments were laconic to say the least. Last month, when the fire that had been smouldering flared up again with the conviction of Barclays for having manipulated the rates that govern the loans (in dollars) that banks contract amongst themselves, we saw media fireworks. At the time Barclays was one of the 16 banks (which number 18 today) responsible for submitting the … Read the rest

  • THE FOUR YEARS NEEDED TO CREATE A SCANDAL

    Translated from the French by Tim Gupwell

    Over recent years you may have seen me carrying out extremely complex complications such as this: “it needed four years – between 1929 and 1933 – before any genuine measures were taken at the time of the Great Depression!” And it was this kind of calculation which led to my disenchanted musings– since nothing was being done – when I wondered on the 28th June whether I should put an end to the blog.

    And then, and in fact it was on this very same day, the second episode of the LIBOR … Read the rest

  • PROGRESS, TOO GOOD TO BE TRUE, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    When there seems no way out, and the future seems unclear, it is then that promising visions of the future seem to abound.

    The Bundesbank, accompanied by all those who take their cues from it, never miss an opportunity to remind us of the formula they stick to so stubbornly: their promise of growth at a later date once labour costs have been reduced and a renewed competiveness in the international markets.

    Jens Weidmann, its enlightened president, has even suggested immediately extending the European aid provided to Spanish banks to the … Read the rest

  • PERPLEXING MATTERS, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    Two days ago, Christian Noyer, the Governor of the Bank of France, confidently commented on the decision taken by the BCE to put an end to all remuneration on the liquidities parked in the Eurosystem by the commercial banks. The banks prefer placing their holdings in a sure location, rather than lending it out to their peers. 800 billion Euros have recently taken this route – an unprecedented level. As one can see, there is no lack of liquidity in the market, the problem is the use it is put … Read the rest

  • WELL SPOTTED, BRAVO!, by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    As already highlighted the Spanish government is already benefitting from a de facto rescue plan under another name. To save appearances, the new austerity measures put forward for vote in parliament have not been the object of a memorandum jointly signed with those providing the funds, as had previously been the case for other countries. In fact, the announcement of these measures came the day before that of the banking bail-out!

    One major difference with the preceding rescue plans can be observed: the entirety of the 100 billion Euros loans provided … Read the rest

  • TIME WILL TELL… AND MAYBE IT ALREADY HAS , by François Leclerc

    Guest post. Translated from the French by Tim Gupwell

    In the hope of solving the problems once and for all, Mariano Rajoy has decided to take drastic measures in Spain. Taken as a whole, he asserts that the measures that he is going to have adopted by the Cortes (the Spanish Parliament) represent some 65 billion Euros of savings or additional revenues over a period of two and a half years, the remaining time granted to him by the European authorities to meet the new public deficit reduction schedule.

    By committing himself to a path which El Pais has compared … Read the rest