Category Archives: Currencies

Lessons for Europe’s Fiscal Union from US Federalism

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.

Greece Poised to Default

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”.

Satyajit Das: Europe’s The Road to Nowhere, Part II – Roadblocks Ahead

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.

S&P Downgrades Europe Rescue Fund

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?

Wolf Richter: Greece – Disagreement Everywhere, Rift in the Troika

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.

Satyajit Das: Europe’s The Road to Nowhere, Part I – Fiscal Bondage

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.

Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part IV

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.

Wray: Krugman has shined the headlights on the crucial currency issuer-currency user difference

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 […]

Europe Braces for Long Winter

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.

Wolf Richter: Political Realities Threaten To Split The Eurozone

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Nicolas Sarkozy will be the only French president since World War II with two recessions under his watch, if the forecast by the National Institute of Statistics and Economics (Insee) turns out to be correct. Recessions are rare in France: between the end of the war and the beginning of the financial crisis, there were two. Then came the four negative quarters of 2008/2009. Now, Insee forecasts another contraction: -0.2% in the fourth quarter of 2011 and -0.1% in the first quarter of 2012.

After an uptick over the summer, economic indicators have gone south.

ECB Success and Folly

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.

Yet another interesting night in Europe. Spain managed to over sell as it latest auction with €6.03 billion sold versus €3.5 billion targeted which in the current environment is seen as a good result.

Hallelujah Corporations

Some holiday black humor. I have to point out that doing a choral piece with only four voices is pretty impressive. Hat tip reader Helaine.

Eurocrisis Solutions For Whom?

This Real News Network segment was recorded before the supposed “this time we’re really gonna fix it” Eurozone deal was announced today. Nevertheless, it is a useful discussion of the political dynamics that drove the pact.

Central Banks Plan for Possible Euro Breakup as Merkel Focuses on Wrong Issues

The denial about the existential nature of the Eurozone crisis seems to be lifting. The press has featured reports of companies and banks doing contingency planning for the possibility of a Euro dissolution or exits by some member states.

In keeping, the Wall Street Journal tonight reports that even central banks are starting to contemplate what had heretofore been unthinkable: