After the German-French council of ministers in Paris, Chancellor Angela Merkel and President Nicolas Sarkozy gave a joint TV interview at the Elysée Palace, the official residence of the French president. Merkel berated François Hollande, Sarkozy’s top challenger in the upcoming presidential election. Then Sarkozy lashed out against him. Never before had a German chancellor campaigned so hard for a French president.
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives
Another day andthe markets remain fixated on whether Greece comes to a “voluntary” arrangement with its creditors. The key word is“voluntary” because the myth of “voluntary compliance has to be sustained so that those deadly credit default swaps avoid being triggered.
But let’s face it: Greece is a pimple. If the rest of the euro zone could cut itlose with a minimum of systemic risk, Athens would have long gone the way of Troy. The real issue is whether the credit default swaps trigger such a huge mess with the counterparties that it creates renewed systemic stress which more than offsets the benefits to the holders of the CDSs.
The more interesting question is: suppose Greece finally does get a deal?
Read more...By Daniel Alpert, the founding Managing Partner of Westwood Capital. Cross posted from EconoMonitor
While we may be hours away from a partial (and certainly a stopgap) agreement in the talks among the Greek government, the troika and private sector creditors, it is doubtful that a deal will emerge in a fully constructed fashion that will survive its application in the real economy.
It is likely that the only common view amongst participants in the various talks is a desire to try to avoid a disorderly default. Beyond that there is a severe disconnect fostered by parallel realities that seem unable to intersect. Accordingly, a deal that can hold up both in the streets of Greece and in the markets is both illusive and unlikely. Here’s why I think so.
Recently I have had opportunities to meet with and question senior members of the economics establishment within the German government and the broader German intelligentsia. Our meetings were held under Chatham House rules so I can’t name names, but – after several meetings with policy delegations from Germany over the past 60 days – I am prepared to sum up what appears to be the pretty-universally-held German policy position as follows (my apologies if the below evidences some degree of frustration – but these encounters leave me quite chagrined):
Read more...Unemployment is a staggering problem in Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16-24 year-olds, it’s an unimaginable 51.4%. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%. But highly educated young people have begun leaving in massive numbers—with harsh long-term consequences for their heavily indebted countries.
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as “Australia”. For convenience I will refer to the country by this older name. We will now turn to the outlook.
Read more...By Marshall Auerback, a portfolio strategist and hedge fund manager
News stories continue to suggest that Greece once again appears on the verge of reaching a deal with its private sector creditors on how much of a loss they would be willing to accept on their bond holdings.
Read more...Yves here. Even though both writers are affiliated with the Peterson Institute, this post talks about the need for countercyclical mechanisms in the eurozone, which makes it less austerian than the prevailing line of thinking in the officialdom. But some readers will not be so keen about the worship of Hamilton.
By C Randall Henning, Professor of International Economic Relations, American University and Martin Kessler, Research Analyst, Peterson Institute of International Economics. Cross posted from VoxEU
In the last few months, several Vox columns have drawn parallels between Europe today and an emerging – and even less stable – United States in the eighteenth century. This column stresses that Europe’s leaders in search of a fiscal union need not seek to replicate the US experience but they should at least learn from it.
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Another melee won by the ECB overnight with the LTRO once again pushing sub 3 year sovereign auctions into a “happy place”.
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
Over the next few months, the Euro-Zone faces a number of challenges including: the implementation of the new arrangements, possible further downgrading of a number of nations, refinancing maturing debt and meeting required economic targets. There will also be complex political and social pressures.
Implementation of the new fiscal compact may not be a fait accompli.
Read more...This site and many others deemed the European rescue fund, the European Financial Stability Fund, to be unworkable (among other things, the device of having troubled countries on the hook to finance their own rescues seemed absurd). But it’s one thing to have informed critics view this contraption with skepticism, quite another for a ratings agency to ding it formally.
US investors can still treat the EFSF as AAA based on Moody’s and Fitch AAA ratings. But who with an operating brain cell would buy bonds that are so clearly exposed to downgrade risk?
Read more...Austerity measures are taking their daily toll on Greece. Suicides and attempted suicides have jumped by 22.5%. Unemployment rose to 18.2%. Pharmacies are having difficulties obtaining medications. More cuts are coming. If there is no agreement with the bailout Troika, Greece will default in March. But now, even the Troika is in disarray.
Read more...Yves here. As much as the image of Frau Merkel decked out as a domme is more than my tender sensibilities can take, the metaphor seems to apt for writers like Das to pass it by.
By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
Financially futile, economically erroneous, politically puzzling and socially irresponsible, the December 2011 European summit was a failure. Only the attending leaders and their acolytes believe otherwise. German Chancellor Angela Merkel’s post-summit homilies about the “long run”, “running a marathon” and “more Europe” rang hollow.
Read more...By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives
I have set out a simplified model of a monetarily sovereign government. But near the end of the previous section, I began to suggest that the United States government is indeed a monetary sovereign by this kind. The reader might now suspect that I have yielded my rational mind over to a simplistic fiction of my own creation. And by this point, the reader is probably thinking that however interesting it might be to imagine this fictional entity, the so-called monetary sovereign, such fictions have nothing to do with the complexities of the real world, because actual governments maintain accounts that are indeed constrained by the amount of money in those accounts and by the external sources of funding to which they have access. After all, can’t a government default on its debt? What about the recent debt ceiling debate in the US? What about what is happening in Europe with the sovereign debt crisis? Also, if a government like the United States government was a monetary sovereign of the kind I have described, the consequences would seem to be enormous. Surely if a democratic government possessed this kind of power, we would make much more use of it than we do. In short, monetary sovereignty as described seems both too simple to be real and too good to be true.
These skeptical intuitions are reasonable, so they need to be addressed.
Read more...Edward Harrison here. The post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone. While I have an Austrian bias overall, for me, MMT is the best way […]
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Well, it looks like Santa finally stuck his head out of the dark cave for a look around. It is yet to be seen if he rams it straight back in again because he doesn’t like the weather, but at least he has appeared for one night.
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