The news you may have missed, debt and a walk on Mars

Midway my holiday and to stay in tune with the first 10 days, it is rainy and cold today. What happened to the world in the mean time? You have all heard that our european family grew with one member (Croatia). Surely you are following the developments in Egypt as well where the people is having its second revolution in one year. Rudy Vranckx, journalist at the belgian broadcast vrt, tweeted this breathtaking picture of a helicopter being lasered by the crowd above Tahrir.

What may have slipped by you however is following:

Cyprus is in the 19th week of the 'temporary' capital controls. They do however remain welcome in the united and harmonised eurozone. Only their bonds are not welcome anymore. The ECB decided not to accept cypriot government bonds anymore as collateral. In other words they are junk.

Portugal is in the midst of a political crisis. Two key ministers offered their resignation. The result is the interest on goverment bonds went sharply up. But no worries, Merkel declared the eurocrisis is under control and on hold until after the german elections after Summer. There is nothing to see in this graph, move on.

The big european summit of last week took some decisions about future bank rescues. The tax payers should bail outbanks only in the last resort. First the shareholders have to take a loss, then the bond holders, then the deposit holders but only those who have more than 100000 euro on an account. And only then the taxpayers. So anyone with more than 100000 euro on one account knows now that (s)he is betting the surplus on the survival of the bank. But how do you know if a bank can survive? Banks are good at hiding risks, so how can a simple account holder know? Maybe those famous stress tests can help out? Well... last time those stress tests declared Dexia being safe and one week later Belgium had to bail out the bank and nationalise it. And the 3rd round of stress tests has been postponed, surely this is not because all is well in banking land. Conclusion: you have no possibility to know if your bank is trustworthy or not. If you think this is a problem for individuals, just consider a company, even a small one. It's liquidity is very quickly bigger than 100000 euro. Just the account for paying the wages alone would be. So how can a company guarantee it can pay next months salaries if it does not know if its bank can survive? Seems to me that as sensible the EU summit decision might have been, our financial survival is now more than ever built on the quicksand of our trust in banks.

O and as a reminder: how did the (western) world end up in this financial mess? Too much debt. The BIS (bank of international settlements) is like the central banks of central banks. When they speak one better takes notice. They did warn the world about the (hidden) debt back in 2007 and no one listened. In their latest report (you can read it here: http://www.bis.org/publ/arpdf/ar2013e.htm) they state that we have only been borrowing time since the outbreak of the crisis. That is to say that all the extra money created through quantitative easing (by the US, UK and Japan), and the long term refinancing operations (by the ECB) has not solved anything, but just kicked the can further down the road. The can in the mean time got a whole lot bigger. The BIS shows that since 2007, global debt has risen with 23000 billion euro (no this is not a typo). Hello??? Anybody listening???

Some distracton from this ongoing debacle is offered by NASA who put online all pictures taken by the Mars Explorer such that you can have a stroll on Mars! Thanks NASA and enjoy the walk: http://mars.nasa.gov/multimedia/interactives/billionpixel/