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Thursday, September 22

22nd Sep Late - Carnage

Vols, Risk Reversals & Pin Risktradingfloor
FX option vols 22nd Sep 12:30 GMT

Europe’s Triple ThreatProject Syndicate
Michael Boskin: simultaneous sovereign-debt, banking and currency crises. Everyone knows how to proceed – debt restructuring and selecting which banks are worth saving – and saving them.

Rumor of Fed Cutting Rates on FX Swap Lines to EuropeMarketBeat / WSJ
Just a rumor, and would not have much effect anyhow.

European Liquidity UpdateZH
Libor dispersion continues, and the rates are not even workable.

** The Sovereign Risk Dislocation Trade Means Big, Black Clouds Coming To "Risk Free"ZH
Given the amount of market manipulation and even lack of activity, CDS prices are better indicators for the risk-free rate, than the bond yields themselves.

“Disturbing” ChartsThe Trader
Good European bond yield vs. CDS spread charts

When Italian bonds trade as risk assetsalphaville / FT
During risk-off, Ita bonds trade unchanged, suggesting the ECB tries to keep the bond yield from moving with risk

The Stability and Growth Pact - crisis and reformECB (pdf)

(pdf) Beyond the economics of the euro - analysing the institutional evolution of EMU 1999-2010ECB (pdf)

Europe’s Debt Fix Just Got HarderThe Source / WSJ

Soros: We are in a double dip recessionPragmatic Capitalism

Financial Markets Tumble on Endless Flow of Bad NewsThe Source / WSJ

Storm Clouds Send Investors to DollarThe Source / WSJ

Markets are signaling an economic downturnHumble Student of The Markets
Bond yields to new low, copper breaks below support, banks relatively weaker than market, USD stronger, next will be S&P breaking to new low?
The SNB presents…alphaville / FT
Fresh data from Swiss National Bank shows the extent of intervention, and recent market activity shows that the franc is no more a safe haven.

** More Causal Confusion: The FOMC Decision and the Market ReactionEconoMonitor
Very good post listing plenty of reasons for what happened before, at and after.

The Fed's "Operation Twist"The Capital Spectator
Summaries of six articles on the FOMC outcome. Also see my Super Fed Aftermath.

The Twist in the Fed's Stimulus Plan: BanksThe Curious Capitalist / TIME
While lower interest rates are good, it does not matter, as banks are not lending.

Twist? We want moreButtonwood’s / The Economist
With the twist priced in by the market, gloomy statement and no hint at extra action, markets tumbled

Look Out Below, Post FOMC VersionEconoMonitor

Twist and YawnEconoMonitor

The Fed seemingly disappoints everyoneFree exchange / The Economist

The not-so-fearless Fed?alphaville / FT

The Fed Disappointed… The Great Collapse Is HereGains Pains & Capital

Taming the banks: long overdue or utter folly?John Kay
Ring-fencing is the only way. The only job losses the bankers are warning are their own.

Don’t listen to the lobbyists: they never go awayJohn Kay
The UBS-case came at a perfect time, and maybe the ring-fencing has a chance. Bank lobbying is just like record company lobbying – money from the majority to a minority.

Economics fails to resolve exceptions to the ruleJohn Kay
A dynamic reflexive system is hard to model.
Economics Debunked: Chapter Two for Sixth Gradersnaked capitalism
Long interesting essay on economics as science.

(reg) UBS Trader Faces New ChargeWSJ

Is Oswald Grubel leaving UBS?Money Is The Way

UBS Trader to Remain in CustodyDealBook / NYT