29th Aug EARLY - Gameplan changed, or end of the world?

EURUSD is happy higher. Breakout coming?

Summary: Huge amount of material to read, even after the two updates during the weekend. European situation is escalating: EFSF trouble, euro interbank crisis, and strange rumors that forced increase of eurobanks’ capitalization is in the works. I added a new subpage "Best", I'll put some of the more timeless and more interesting links from the daily posts there.

Views: Maybe the rumors were leaked to test the idea, and against that backdrop the recent uptick in EURUSD could be explainable. Currency pairs over the past few weeks have suggested we are not anymore in the "risk-off" mode, but at the same time stock markets have not rallied. Either the correlations are breaking down, or the best the bond- and stock markets can do in "risk-on"-mode is to stay unchanged. So it's either a catastrophe waiting to happen or the game plan has changed.

EURO CRISIS

Without citing sources, Sunday Times said officials from the ECB and EC are considering offering central guarantees over certain types of debt issued by banks.

EU Working on ‘Radical’ Plan for Banks: Report – CNBC

 

Barclays looks at data and suggests that bank funding trouble is NOT contained to only few names. The banks have just been careful not to go after more expensive funding – but that cannot last forever.

Europe's Funding Scramble: Peeking Below The Calm Surface Waters Of French Bank Liquidity (And Lack Thereof) – Zero Hedge

European debt crisis worse, banks in problems, money markets seizing up. “This time it will be different”, as there is not enough money to bail out everyone.

From Green to Red – Is Credit Crunch 2.0 Imminent? – EconoMonitor

On Sep 23 Germany votes on the EFSF expansion

September 23: The Beginning Of The End For Merkel... And The Eurozone? – Zero Hedge

“Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe's revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga.”

Euro bail-out in doubt as "hysteria" sweeps Germany – The Telegraph

Very good roundup by the author of “Europe on the Brink”.

Johnson: Euro’s Appeal Masks the Gathering Storm – BB

Nasty: Trichet was saying nothing important on anything important at Jackson Hole

Trichet Gives Master Class in Saying Nothing – CNBC

Greece 1-Yr Rate 60%; Finland Retains Collateral Demand; Multiple Veto Points; ECB "Litmus Test" Coming Up; Germany Accuses ECB of Treaty Violations – Mish’s

International Monetary Research says "Eurozone Break-Up Certain"; I say Embrace the Fact "Banks Cannot Be Saved" – Mish’s

European banks set cash test by IMF chief – The Telegraph

Italy Tests Appetite for Debt When ECB Is Absent – SF Gate

Greek Notes Slump on Concern Aid Deal Will Fail; Bunds Decline – BB

German Lawmakers Can Set EFSF Role, Schaeuble Tells Tagesspiegel – BB

European Debt Crisis: Between Solving and Not Solving It – Also Sprach Analyst

Probably not worth your time, main point is that ECB has been too hawkish all the time.

Europe’s Big Mistake – The New Yorker

FINANCIAL CRISIS

Roundup of the Jackson Hole meeting

Central Bankers Urge Governments on Expansion – BB

Highly recommended bullet point list. There is not a single point here that I would disagree with.

Some Predictions for the Rest of the Decade – EconoMonitor

An article on Washington Post after the Buffett’s bailout of BoA. Suggestion is “Go Swedish”

How-to Guide for Fixing America’s Banks – The Big Picture

Trade did not remain as open as is often suggested – and this points to increased dangers of protectionism if crises escalate.

Import protection and the Great Recession – voxeu.org

Banks officially complain about the planned capital requirement increases – my view: there is no limit how evil and full of moral hazard the banks can be.

Banks Decry Surcharges as Basel Plans Capital ‘Punishment’ for Size, Risk – BB

OTHER

Goldman Sachs’s weekly charts package is definitely worth a look.

As Stock And Sector Correlation Hits Fresh 20 Year Highs, Here Is Who Is Benefiting – Zero Hedge

Fundamentals, speculation, and oil prices - Econbrowser

Most of the so-called software companies are actually something else

The “software company” bubble – This is the Green Room

EMERGING

Week ahead: 29 August – 2 September – beyondbrics FT

Summary of HSBC’s report “Can Asia Save the World”

Asia: the world’s super hero? – beyondbrics FT

DIVERSION

Pretty people still get the best deals in the market, from labour to love – The Economist

Interesting way to chart an industry – worth checking out

Mobile phone market dynamics – Can Turtles Fly