What a crap weekend, Banks can't even wait for a Monday morning to go down the pan, but that is not the main worry any more. We have seen the Icelandic get into serious trouble, inflation and interest rates at 14 - 15% and its currency almost worthless. And here's
why it screws us up.
Euler Hermes, one of the UK's biggest credit insurers, has withdrawn cover for suppliers to a number of retailers run by Baugur, which owns high-street fashion chains including Hamleys, Karen Millen, and House of Fraser, after the financial crisis in Iceland.
On its own, manageable, but other economies, including ourselves are not that far behind Iceland. The Irish Government now guarantees all savings 100%. How? I doubt that the Irish economy is big enough to cover that guarantee, even if only a fraction of it is called upon, so the guarantee is not credible. But it does cause further instability in the international retail deposit market. Good for Ireland? NO. It shows they are panicking and making unrealistic promises. Germany? what the hell they are doing know one knows, yet. But it does look like a substantial guarantee will emerge as well. Is this good, NO. It will force the UK and other countries to make less than credible guarantees just to save the retail deposit market.
None of this is good because governments have gone into headless chicken mode, all operating independently to save their own economies and monetary systems in a global market place. I would have to dig into the history books to confirm this, but I would expect to find that this is exactly what happened during the great depression. Individual governments acted independently in a protectionist way, which ultimately made things worse.
The crisis has now spread from the banking system, to the currency system. The words 'I promise to pay.....' written on a bank note, less people trust that promise today than they did last week. Proven by the activity of the mints. They can't hammer out gold fast enough. The smart guys don't want currency any more.
The LSE is down 5% before my first cuppa