David Cameron, it has to be hoped, is setting the agenda and preparing the ground for some major reductions in the non-productive part of the economy in the attempt to reduce the deficit, rein back in the absurd spending and waste and to get the public sector 'out of the way' so that enterprise and commerce can create the necessary jobs to rebuild our economy.
It has to be hoped that he takes a bludgeon to the public sector:
1) Reduce public sector salaries on a tiered basis: 5% on salaries >£40k (so marginally above the 40% tax threshold); 7.5% on salaries >£60k; 10% on salaries >£80k; 12.5% on all public sector salaries >£100k;
2) Increase the retirement age by two years for everyone under 55;
3) Move all public sector employees under the age of 40 onto defined contribution schemes immediately.
Let's hope that 22 June is the date that the public sector stops 'crowding-out' the private sector so that resoucres can be allocated efficiently within the economy.
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Of course you have to be of an age to remember World cup Willy but I'm thoroughly looking forward to this tournament. There are a number of potential winners so it should be the most open world cup for a while. You have to expect the Dutch to implode as usual but the Spanish are made of sterner stuff these days... You have to go a long way to better the Argentina squad tho'.
Sporting stat of the week has been provided by the remarkable Rogere Federer. His loss to Soderling ended his run of 23 CONSECUTIVE grand slam semi-finals. An amazing run of consistency. It's one thing to get to the top but quite another to stay there.
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Politicians around the world have been vociferous about the structure of CDOs and most importantly the utilisation of the credit rating of a high quality borrower to mask the underlying risk associated with lower quality borrowers. The lowest tier of a CDO is called the equity layer where the highest risk tranche is housed. The entire structure would then be marketed as a high quality investment instrument as it had the protection afforded by the application of a high quality name to 'guarantee' the structure. As everyone knows AIG was used to guarantee many of these structures.
If you think about it this is very similar to the structure of government borrowing within the Eurozone. Poor quality borrowers with poor credit histories (e.g. Greece) have been able to borrow at lower rates thanks to the artificial structure of the euro allowing them to borrow at similar rates to high quality borrowers (e.g. Germany). This flawed debt structure has been further destabilised by the low quality borrowers not even managing within the Maastricht obligations.
As ever the politicians should put their own house in order first.
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As regulators around the world struggle to understand the OTC markets and define the appropriate oversight regime we all know that the opacity and inefficiency of the OTC markets can be improved at a stroke. Every trade completed in the OTC markets, be that executed on a platform or in the voice market, should be published within 60 seconds. The trade details should include the principal transaction details and the price and size. Of course we all know that this transparency would in fact increase market efficiency as prices would tighten up saving money for insurance companies, pensions funds and asset managers. And given that liquidity begets liquidity more transaction flow would be brought to the markets. Of course the profile of investment banking revenue might change....
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