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:
Read more...This Real News Network interview nominally is about whether Greece should leave the Euro. But it is really about the struggle between the bondholders, who are crushing Greek democracy and society, versus the population. The interviewee Costas Lapavitsas makes an forceful case why defying the banks is the best route for Greek society, even thought the transition will also be difficult.
Read more...Yves here. There has been a lot of press, deservedly so, on the information that Bloomberg managed to pry out of the Fed on its emergency lending programs during the crisis. The Fed again is in crisis mode, again in a controversial and arguably compromised position in extending currency swaps to the ECB to provide dollar liquidity to European banks. They are having difficulty securing funding because US money market funds are no longer keen about parking money with them and US regulators have been discouraging banks from extending credit lines to them. As a consequence, another set of important revelations about Fed conduct, namely, the release of the results of a GAO review of crisis related Fed operations, is not getting the attention it warrants.
Read more...By David Apgar, co-founder of GoalScreen, a web app still in trials that lets investors test alternative price drivers of specific securities (free though the end of the year at www.goalscreen.com. He has been a manager at the Corporate Executive Board, McKinsey, the Office of the Comptroller of the Currency, and Lehman, and writes at www.goalscreen.com/blog.
What if there are good reasons for the preternatural calm of German Chancellor Merkel’s inner circle as the English-language media (based, after all, in the investor capitals of London and New York) light their collective hair on fire about the euro’s imminent immolation? Surprisingly, you can make a decent argument that the euro zone is at no risk of breakup – unless someone secretly switches its purpose from facilitating European trade to providing investors an implicit guarantee against losses.
Read more...I’m in the middle of a serous shredding which is taking longer than I’d like. But for your viewing pleasure in the meantime, Mark Ames has found this tidbit:
Read more...Rob Johnson brings a wide ranging perspective (from politics, as a former Senate staffer; from markets, as a former hedge fund manager; and an economist, by training and via his current role as head of the Institute for New Economic Thinking) to this interview on the immediate and deeper implications of the central bank intervention on behalf of the Eurozone earlier this week. Johnson is deeply skeptical both of the near and longer-term approaches taken to rescue the Euro. This talk has a particularly clear and layperson friendly discussion of the rationale for and failings of austerity.
Read more...By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Amidst a flood of proposals, plans, and rumors to save the euro and the Eurozone, much has been made of the Merkozy couple, the uneasy partnership between French President Nicolas Sarkozy and German Chancellor Angela Merkel. During his speech today in Toulon, an ancient Mediterranean port town, Sarkozy reemphasized his commitments: the ECB must remain independent, and France and Germany must remain the pillar of stability. “To defend the euro is to defend Europe,” he said. Alas, he may be out of a job by May 2012—and his potential successors to the left and to the right have different ideas.
Read more...I’m still mystified as to the market reaction on Wednesday to the coordinated central bank effort at waving a bazooka at the escalating European financial crisis. But as readers pointed out in comments, the big move was overnight, in futures, when trading is thin, and there was no follow through when markets opened. And volume was underwhelming.
Read more...By Warren Mosler, an investment manager and creator of the mortgage swap and the current Eurofutures swap contract and Philip Pilkington, a journalist and writer based in Dublin, Ireland
Recently the Greek economist Yanis Varoufakis responded to the euro exit plan that we published on Naked Capitalism a few days ago. While Varoufakis was broadly supportive of the plan if an exit was absolutely necessary, he criticised some of the details therein.
Read more...Any of you who are market oriented no doubt are all over the news of central bank coordinated liquidity efforts. This is from the Federal Reserve’s announcement:
Read more...After telling readers that the Eurozone leadership looks to be suffering from “dulled reaction times…so out of line with market events that even if they were to snap our of their stupor now, it would be too late,” news reports suggest that they have finally roused themselves.
Or have they?
Read more...Things are only going from bad to worse in Europe.
Read more...As our overly-long headline tells you, Wednesday was a really bad day in credit land. Not only has the reality of the severity and seeming intractability of the Eurozone mess started sinking in, but US investors seem finally to be facing up to the fact that a full blown crisis would not be contained and will engulf American banks. If you thought September-October 2008 events were nasty, they could look like a mere trial run for what may be in the offing.
The Financial Times coverage on the failure of the Bund auction is suitably grim:
Read more...Our headline at odds with the media reports on the newest confidence-bolstering ploy by the Federal Reserve, that of new, improved stress tests for the six banks at the apex of the US financial services industry looting operation: Bank of America, Citi, Goldman, J.P. Morgan, Morgan Stanley and Wells.
There’s a noteworthy gap between the scenarios employed in the 1.0 version, which took place in early 2009, when the banks were told to get more capital or else, and the ones about to be implemented.
Read more...Yves here. I’m putting myself in the rather peculiar position of taking exception to a guest post. One might argue as to why I’m featuring it. Das gives an articulate but nevertheless fairly conventional reading of views of market professionals about the US debt levels. For instance as you’ll see, it conflates state government deficits (which do need to be funded in now skeptical markets) with the Federal deficit. And this sort of thinking, due to fear of the Bond Gods, is driving policy right now.
In addition, he posits that depreciation of the US dollar continues apace. I’m always leery of what amount to trend projections. Complex systems often have unexpected feedback loops. There is an interesting question of whether markets have over-anticipated QE3. In addition, the dollar has fallen to the point where it is becoming attractive for manufacturers to repatriate activities. But given the loss of managerial “talent” (and here I mean people who know how to run operations, not executives) and infrastructure, there will be a marked lag before the weakened dollar produces the next leg up of domestic production.
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)
Extortionate Privilege…
Given the magnitude of the US debt problem and the lack of political will, the most likely policy is FMD – “fudging”, “monetisation” and “devaluation”.
Read more...