Monday, August 28, 2006

Housing market blues

It looks like the US housing boom is turning into a bust. You'll find lots of horror stories on Mish's blog. Over here there are also definite signs of a sudden slowdown with almost one in 5 houses deals in Copenhagen now taking place at a discount of more than 10% off the listed price. People are predicting a housing crash in Norway too. (Meanwhile, the German market - especially Berlin - looks a bit undervalued to me. Perhaps I'm just confused by crazy Danish prices.)

At the same time, I wonder what is going on in Iceland. Their central bank just raised rates to a hefty 13.5% with more rises 'inevitable'. This comes after a few years where Icelandic companies have been buying companies in the UK and Denmark (where they now own Illum and Magasin, the most prestigious department stores in Denmark). Icelandic money is also financing a new national free newspaper here in Denmark and apparently a thousand other capital-intensive projects. Are they borrowing all that at a rate of 13.5%, the sort of interest rate associated with the Stagflation of the 70s?

One of the companies that Baugur now controls is Keops, the Copenhagen property company who have of course done very well out of the property boom there. They even do "high yield bonds, secured in property, listed on the Copenhagen Stock Exchange". (Yes, Keops is a pyramid builder - I think the intended association is 'large building' rather than 'dodgy financial scheme').

Let's hope the house price booms do achieve that much hoped-for soft landing. (The Bank of England apparently managed a soft landing for the UK housing market after they eased interest rates a little last year). However, instability can spread quickly - the economies of the world are all very closely interlinked. In 1999, small changes in Danish interest rates helped provoke the spectacular collapse of a huge US hedge fund. It's not far fetched to think that a financial meltdown in Iceland could have similar unexpected consequences today.

Those with large amounts of variable-interest rate debt might do well to consider that even Iceland's 2006 interest rate of 13.5% isn't especially high in historic terms. After the 90s and especially the zeroes we have become accustomed to borrowing huge sums for practically nothing, but there's no rule that says that will continue to be possible.

Thursday, August 24, 2006

Stupidity Pact

It now looks like Germany will manage to keep the public sector deficit under 3% this year, which means they will comply with the rules for being part of Euroland. Well, actually it would mean that they would comply with half of the rules, which I suppose is a good start: for some reason all the news sources writing about this development forget about the requirement to keep total government debt under 60% of GDP.

So now that they are on track to get onto the right track, perhaps we can forget that nasty business about France and Germany deciding not to bother punishing themselves for breaching the stability pact. I don't think it's excessively cynical to speculate that, had France and Germany managed to stay within the limits of the stability pact, the EU would not have hesitated to threaten to levy huge fines on smaller countries breaching those same rules.

It has turned out that the stupidity pact, far from operating in an automatic (and brutal) fashion, (as the German negotiators wanted, ironically) is a political tool of the EU establishment, with the potential to totally undermine the political independence of any peripheral country that falls foul of its rules. At the same time, it hasn't managed to ensure anything resembling fiscal discipline, as the "under 60%" link above, shows.

Another huge problem with Euroland is the absence of Norway, which makes the Scandinavian part of the map look like a huge flaccid penis, pointing ominously at Denmark. Whoever was responsible for moving Scania around 100km north didn't exactly make that situation any better.

Wednesday, August 23, 2006


The audiophile community amazes me every time I stumble over it on the web. Apparently it's perfectly legal to sell stuff like this magic GSIC chip. How on earth a chip is supposed to alter a read-only data medium by having the one spin in proximity of the other, I really don't know. And as for the "Ultra Tweeters", even the passing bats aren't going to get any pleasure out of that one.

Monday, August 21, 2006

Protecting the young and impressionable

Auntie is reporting that old Tom and Jerry cartoons are going to be gone through with a fine tooth comb (not a fine toothcomb!) for examples of unsuitable smoking by the protagonists. Offending scenes will be cut out to protect their impressionable audience.

Clearly there's no problem with letting kids have their minds fried by endless hours of mindless or sadistic violence, but the sight of a cat smoking a cigar might make them slaves to nicotine for life. Is it silly to point out that cutting down to half a packet a day isn't going to redeem Tom and Jerry's ultraviolent, destructive behaviour? Probably it is, and since most of the newer junk they transmit on Cartoon Network is much worse, I guess I should be happy that those two antedeluvian happy slappers are being house trained so they can stay with us in the new millenium.