Friday, 18 May 2018

Teds and Target 2 - the coming news agenda

Slang is fascinating. A bottom-up generated change in language reflects a substantial forming or modification of outlook. I'm surprised we don't have chairs in Slang at the new universities. I write this as I found this week two new slang terms for the Germans, both words born of common parents here in the trans-Alpine region. The first is Italian. Tudro is not a kind word; it means oafish, unimaginative, lacking feeling or sensibility and is pure Italian. The second is from the British army stationed in southern Austria at the war's end, guarding hundreds of thousands of broken, dispirited, rumpled, at-heel German troops. A score could be herded by one man with a loosely carried Lee-Enfield. They were no longer Huns, Krauts or Jerries - the swagger, the insolence, the arrogance had been beaten out of them in battle. So for their British guards they became Teds, from the Italian Tedeschi. I like Teds.

With the news agenda swinging round like an oil tanker at bow-anchor to Italy, AEP starts the move with a piece in the Telegraph (£)  on how the new Italian government's finance proposals have 'enraged' the Teds. It's all about Target 2, or T2 as we shall say. There are some useful papers on T2 about - Here from FT Alphaville, and Here from Forbes, if, like me you need a crash course. I suspect over the next year we'll all be hearing a lot more about T2 in the news. The headline is that the Bundesbank is owed nearly a trillion Euros by the rest of the Eurozone, whilst Spain and Italy have heavy T2 debts. Martin Selmayr is turning his death-gaze from West to South. A couple of interesting points, if I've read the briefings right -

- National banks are given an allocation of Euros to print. Printing more than the allocation creates a debit with the ECB. Germany's Bundesbank has been printing hundreds of billions of excess Euros possibly to offset their trillion-Euro T2 credit with the ECB 

- QE money created by the Bank of Italy has been substantially invested by the Italian market in, erm, Germany, substantially increasing Italy's T2 liability and Germany's T2 credit

- Germany's huge T2 credit now forms by far the biggest asset of the Bundesbank, having overtaken in the early noughties the previous biggest Bundesbank assets of loans to German banks. 

- Germany is not quite alone in having a substantial T2 credit; the Netherlands and Luxembourg are also in the creditors club. So expect some commensurate alignments. 

Right. Off to the Herrenfriseur, then.

22 comments:

right-writes said...

While they still wage war in Europe, as if they hadn't been beaten yet, the kraut still hasn't paid his war debts from previous take over bids.

One day they will get their come-uppance I hope.

And we are told that the Russian is the devil.

jack ketch said...

They were no longer Huns, Krauts or Jerries - the swagger, the insolence, the arrogance had been beaten out of them in battle

...who then after interment dragged their sorry "Ă„rsche" back home, grabbed a sausage , a beer and their Marshall Plan and then set about building an Economic Miracle (actually a bit of a myth,a sacred cow) 'conquering' Europe with scare a shot fired.

Cuffleyburgers said...

Well Jack, the Marshall money helped as did not ever paying their war debts ever, as did the Eberhard reforms afetr a rather shaky start with the Allies trying and dismally failing to run their economy.

That liberalisation lit the blue touch paper, unfortunately UK govt failed to notice and stuck with their idiotic labour shite of natioanlisation and the difference in outcome is rather a good indication two two opposing economic models.

Still now they are hoist by their own petard, Target 2 shoudl fuck them nearly as comprehensively as the rape of berlin, and there'll not be too many tears shed in this neck of the woods.

Mr Ecks said...



They didn't have you to help them then Ketch--but they do now.

Dave_G said...


It all comes back to "the banks" - doesn't it?

Always.

Yet people never seem to want to do anything about it. Those that have the power to do so either don't employ it or get assassinated before they can.

Doug Shoulders said...

I’m sure GB repayment of debt to USA was useful in rebuilding Germany and Japan after WW2. Those countries then going on to become the apex economic powerhouse in their respective regions.
You couldn’t make that up really.
We keep telling ourselves that we won that war. To the victor the spoils doesn’t seem to apply.
Banks are the only winners as they back both sides and then hand out loans to clear up the mess.

Anonymous said...

"It all comes back to "the banks" - doesn't it?

Always."

And woe betide you should you notice who runs the banks.

Anonymous said...

Raedwald said:

'A score could be herded by one man with a loosely carried Lee-Enfield. They were no longer Huns, Krauts or Jerries - the swagger, the insolence, the arrogance had been beaten out of them in battle.'

It sure was, twice:

Hellstorm - a documentary

https://www.youtube.com/watch?time_continue=4&v=VCsKqOAChTY

Steve

Bill Quango MP said...

The UK paying its war debts isn't exactly a myth. As it is true. But we also repaid less than 2% of the total we actually got, for free, from America.
That is, the UK paid for goods and food and supplies up until only the middle of 1941.

Once Lend-Lease was signed, we stopped paying for any war items that the USA could spare.

Once the US entered WW2 we never paid for another thing that came fro the USA. Not a single penny for the millions of barrels of oil. For all the shipping that was replacing our sunken merchants. Not for any of the thousands of Sherman Tanks. P-51 fighters or F4Fs. Or the Browning MGs that equipped our airforce. Or the ammunition to use in them.

And the reason the USA insisted the UK pay its way before 1941 is twofold.

One - BY LAW the USA was forbidden, in its Constitution, from supplying foreign powers with arms. It took a long time to get amendments through an isolationist USA to change that.

Two - The main reason the USA wasn't just handing stuff out prior to lend-lease, was countries had defaulted on their WW1 war debts. The most significant of which was the British Empire. Which defaulted on its war loans repayments in the 1930s. And NEVER re payed them.

The USA's stance is echoed on blogs where sensible people reside, all across the internet. Don't get involved. Don't loan warring nations anything. Let them get on with it themselves.

Yet we expected the USA to help. To give for free, anything the UK asked for simply because we we spoke English.

And, finally, The USA gave, again, for free, for nothing, almost TWICE as much money in Marshall Aid as it gave to Germany and France COMBINED.
And at the same time wrote of all the enourmous debts a bankrupt and bombed UK had run up under the socialists post war government since 1945.

We are incredibly lucky that the USA teaches even less about war economics than UK schools do. Because if the USA's generosity was as widely known as it ought to be, the UK's sneering attitude to America and Americans, would result in them forever telling the UK to 'go truck ourselves whenever we asked for anything.'

Trt said...

Had Germany, or The USSR, conquered the UK, the middle east would've been next, then the african and east Asian colonies, and the none colonies, then Australia, and finally a long march up from the southern tip of Chile, and theres not a damned thing the US could do to stop them by then.

TrT said...

Target2 actually isn't a big deal.
EUR m3 is 12,000,000,000,000 Euros.
Gbp m3 is 02,500,000,000,000 pounds

Italy wouldn't default on Target2 in isolation.
It would default on the entire monetary base and start over.

jack ketch said...

And, finally, The USA gave, again, for free, for nothing, almost TWICE as much money in Marshall Aid as it gave to Germany and France COMBINED. Bill Q

Today I have learnt something, thank you.

right-writes said...

As the German said in that famous Fawlty Towers episode when Basil told him to stop talking about the war...

You started it.

No, said Basil, YOU started it, you invaded Poland.

That is the long and the short of it, there are many heroes and villains, but in the end, they started it, in the 1870's, the 1900's, the 1930's and the 1950's and each time the rest of us have had to do something about stopping them.

They are sick.

And on each occasion, our thick politicians have refused to believe it is happening.

Oh and they still haven't paid the Greeks, but they have got their hand out.

jack ketch said...


No, said Basil, YOU started it, you invaded Poland.


Britain 'started it' by declaring War on Germany...except even that was classic British fudge in as far it was not a declaration of war but a 'finding' that a 'state of war exists'.

right-writes said...

As I understand things, Basil was right, and you are wrong Jack.

Bill Quango MP said...

I believe MR K is stating that it was Britain and France who declared war on Germany.
This is correct, as we all know.

It was Germany’s attack on Poland that led to the Alloes ultimatum.
So, WW2 kicked off with an act of aggression by Germany.

So Basil is correct, and the German was too.
As Germany wanted to avoid war with UK and France, but was declared war upon, by the allies.

Dave_G said...


quote w-r

"And on each occasion, our thick politicians have refused to believe it is happening.

....as they continue to do today with both the EU/multi-kulti/Islam...etc etc

Budgie said...

Jack Ketch, No, Britain did not "start it". Germany did, by attacking Poland on 1st Sept 1939. There was an Anglo-Polish military alliance (April 1939), backed by France, that in the event of an attack on Poland, the UK would assist - that is why the phrase "a state of war exists" was used.

The UK was however rather selective in its enemy. The USSR also attacked Poland about a week after Germany started its own attacks. But we did not declare war on the USSR. Indeed when Germany attacked the USSR Britain supplied the USSR with war materiel.

We (British socialists, perhaps?) compounded that tacit cooperation with the Russian socialist regime by handing them up to 2 million white Russian refugees at the end of the war, who were almost certainly murdered by Stalin.

I have a connection because my father-in-law fought the Russians in 1939, before escaping Katyn, and spending the next 2 years as a "guest" of Uncle Joe. He was freed due to the efforts of Churchill, transferred to the British army in the Polish II Corps under General Anders in the Middle East, and fought his way up the length of Italy. Helped of course by Wojtek at Monte Cassino. Not trusting Russia, he was able to settle in the UK as a refugee.

Cascadian said...

Reading about central banks and money "creation" is always dispiriting, I always come away with the sense that the pretty pieces of plastic we call "money" is only a store of value as long as politicians/bureaucrats say so. In fact the only reason that many of us can call ourselves millionaires is due to devaluation through inflation and quantitive easing, certainly not due to an excess of riches. We are millionaires in the same sense that most Zimbabweans are multi-trillionaires.
So central banks will do what central banks always do, disguise the underlying problem for as long as possible. Thus the ECB stuffed with crap bonds from insolvent eurobanks pretends the Euro has value. I applaud Italy for attempting to decouple its economy from the Euro, and trying something different like flat rate income taxes and if it hastens the demise of the EU so much the better.

TrT said...

"I always come away with the sense that the pretty pieces of plastic we call "money" is only a store of value as long as politicians/bureaucrats say so"
Money has value because the issuing government accepts it as payment of taxes.
It ceases to have as much value when they cease to accept it, either a full renunciation, or simply by printing to supplement or replace taxation.

"In fact the only reason that many of us can call ourselves millionaires is due to devaluation through inflation and quantitive easing, certainly not due to an excess of riches. We are millionaires in the same sense that most Zimbabweans are multi-trillionaires."
Yes and no

The great asset price inflation really started with Chinas entry on to the global economy. the equivalent of the entire low skill work force of EUrope and the USA joined the market, its hard to imagine precisely what the central banks could have done differently, it was asset price inflation or wage reduction.
Sure, it was treated, by governments, as some miracle of their economic plan, but thats a different issue.

Budgie said...

Raedwald, Thank you for raising the issue of TARGET 2. I have now read some of the papers and learnt a lot.

I tend to the view that blaming T2 for bailing out the PIIGS (or the more PC: GIIPS) is a bit like blaming your speedometer for the fact you are driving at 40mph in a 30mph zone. The real "culprits" are: the NCBs (National Central Banks) can print money out of thin air; and capital flight from the GIIPS to "safer" homes in Germany and the Netherlands.

T2 is the system which enables this electronically, and records it. If T2 was not available the capital flight would still have taken place but using more traditional means such as high denomination notes and assets like jewelry. Of course the real problem is the Euro EMU system itself. But the EU PTB know this and want the problem which they will "solve" with fiscal, financial, and political union.

Cascadian said...

TrT, you make my point, our pretty pieces of coloured plastic should be able to be returned to the bank for a solid asset such as gold.We should not be beholden to the governments whims and fancies, it is OUR money.

I have no sympathy for the central banks, nor their masters the politicians. By using quantitive easing they flooded the market with their useless currency but pretended the underlying value of the currency had not been devalued by a proportionate amount, at the same time they failed to hold accountable the criminal banksters, and propped up many inefficient enterprises that should have been liquidated.

China is not the culprit, though they have since created some serious imbalances.