March 12, 2008

Unfair competition from Northern Rock

From The Guardian:
Northern Rock offers a number of table-topping accounts, including an online account aimed at the over-50s paying 6.49% and a fixed-rate cash Isa with a rate of 6.2%. Its one and three-year fixed-rate savings bonds paying 6.45% and 6% respectively are also listed as best buys on the website of the financial data provider Moneyfacts.

Not only are the interest rates good, the state-owned Northern Rock, unlike other high street banks and building societies, can offer its customers a guarantee that any money in its accounts - whether it is £1 or £1m - is 100% secure.

The bank says its customers' cash is "completely safe ... The Bank of England and HM Treasury guarantee arrangements protect all savers in all accounts, regardless of the amount deposited, and applies to all existing and new accounts".
Ugh. "Give us your money. The UK taxpayer will be glad to give you a handsome return on you deposit."

More Shortsighted Dollar Speculation

EADS, the Franco-German aerospace group, is preparing to adjust to a “weaker and weaker US dollar” by demanding that its big European suppliers bid for new contracts in the US currency, according to Louis Gallois, chief executive.
Not a good idea when the US dollar is in its weakest. Euro seems more and more like a bubble against the US dollar.

When US deflation hits in force--because US financial institutions have no choice but to reduce leverage--the dollar will start to regain its value. Of course, it might take a long time for the euro-bubble to pop, but it will happen.

For EADS this might be feasible, because much of its income is in dollars as well, but there's no doubt that those suppliers will put considerable risk premiums into their bids for the currency volatility.