Core (Germany, and maybe France) could not, and would not accept a debt load of that magnitude. By suggesting such solutions, a political wildfire and rampant speculation will ensue, as getting these measures accepted in all the national parliaments is not going to happen.
Toothless Fed will hold their meeting next week and announce something, but probably not QE3 – it has not worked and will not work this time either. Or maybe they will announce QE3, but no-one will care, except banks, which will increase charging customers for their deposits.
Toothless Fed will hold their meeting next week and announce something, but probably not QE3 – it has not worked and will not work this time either. Or maybe they will announce QE3, but no-one will care, except banks, which will increase charging customers for their deposits.
Quote of the Day: “The European dream of equality has always been based on assumptions - the first that treating everyone as equals and ignoring differences meant they did not exist (the Eurostrich syndrome we have seen echoed throughout the last 2 years of crisis management). The second assumption was that if barriers were removed to trade, funding and nationality then geographical mobility would iron out local hot spot differences. The third was that the dream was perfect, unassailable and defendable by regulation so there would never be the need for safety nets.” – Macro Man
Quote of the Day 2: “Italy/Spain too big to fail & too big to be saved/bailed out. ECB buying their bonds not enough as public debt is 3Tr euros & EFSF too small” – Nouriel Roubini via Twitter
Joke of the Day: “I would encourage everyone to remain calm and breathe deeply.” Economic and Monetary Affairs Commissioner Olli Rehn today on telly.
Views: I’ll update during the weekend, but nothing new, no recommendations and no positions, except the Brazil short. Keep it. It will allow you to retire. Besides, Brazil is not Italy.
EURO CRISIS
Very good summary and review of each of the PIIGS, extensively linked to other articles. This is a good one to bookmark.
Some very good points, heavy criticism of ECB
Stiglitz: A Contagion of Bad Ideas – Project Syndicate
Quote of the day, above
Now What? – The Macro Man
ESFS is conceptually convincing, but complex. Two choices: political union or restoration of Maastricht Treaty pillars of no bailouts by ECB of sovereigns or banks. If the politicians continue the current middle way, DB sees a significant risk of a breakup of EMU.
(PDF) Financial Supervision in the EU – DB Research
Deutsche Bank: Euro Zone Crisis Needs Coordination – Advanced Trading
Old research piece from May 2010, but timely. Even negative rates would not stop the flows.
(PDF) Reflections on negative interest rates in Switzerland – J.P. Morgan
“Financial markets have made clear, among the EU’s top institutions, the ECB also has room for improvement.”
ECB: After Botched Job, A Second Chance – The Source / WSJ
“U.S. officials privately complain to their EU counterparts that they keep promising plans and not delivering with decisive action.”
Crisis Exposes Rift Between ECB and Euro-Zone Governments – The Source / WSJ
“Governments in the eurozone’s periphery, including Spain and Italy, now face a dilemma: they must undertake structural reforms to increase their long-term potential growth, but at the cost of even greater short-term pain. The debt crisis will end only when they have shown that they have understood this and accepted the inevitable sacrifices.”
Gros: From Pain to Gain on the EU Frontier – Project Syndicate
Italian and Spanish CDS curves have moved away from the ‘core’ countries and are flattening. When you figure out why this is so, leave a comment. And beware.
Going south — CDS inversion edition – alphaville FT
“As financial markets around the world start to clock up losses the size of which haven’t been seen since the Lehman crisis, chances of the euro’s survival are falling rapidly.”
“ECB will buy Spanish and Italian bonds. Italy is also announcing a balanced budget amendment. The comedy of errors continues. We’ve seen these movies before and we know exactly how they end.” Europe Pulls Out Another Pellet Gun – Pragmatic Capitalism
Stocks Rally on News ECB to Buy Italian Bonds; Italy Seeks Constitutional Amendment to Require Balanced Budget; Ball in Germany's Court – Mish’s Global Economic Trend Analysis
If Italy and Spain end up in the bail-out gang, Daiwa’s Lewis says “France, Germany contribution to EFSF’s capital would increase to 80%”. Do you think Germany would accept this?
Explaining How The Just Announced ECB Market Rescue Pledged 133% Of German GDP To Cover All Of Europe's Bad Debt – Zero Hedge
“But what is left of the political capital needs to be spent on these three areas (an appropriate ECB target, a differentiated monetary policy and a central banking authority) and not on a fiscal union that is bound to make things worse.”
More historical lessons for Europe – Kantoos Economics
FINANCIAL CRISIS
Live blog of the breaking news on the global credit crisis
Debt crisis: live – The Telegraph
Long article touches many topics from QE3 to euro end game. A good, sound view of the underlying situation.
WHAT A WEEK! Jobs, Macroeconomics, Markets and More – Alpert / EconoMonitor
FOMC meeting coming up, JPM does not see QE3, but something else..
What Will The Fed Do Next Week? JP Morgan Answers – Zero Hedge
Also Mr. Smith does not believe in QE3, but thinks Fed is completely powerless
Don't Bet On The Fed – of two minds
How and why the short-term liquidity is suffering.
EMERGING
Is Brazil The Next Italy? – BRIC Breaker / Forbes
OTHER
landing page has a link
Interviews of older traders, who have seen this before
In Volatile Markets, Jaded Traders Ask "What, Another Crisis?" – Advanced Trading
How Facebook handles the lifecycle of its server hard drives, given their sensitive user data
Privacy: Mad crush – Babbage / The Economist