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Monday, November 28

28th Nov - Check, please mate.

FT's death sentence - will the governor call print in time?

The posts are getting increasingly massive. I did not find a single optimistic view on the EZ crisis, anywhere. This is this.

– MoreLiver
 
News (Mon evening) – BTH
FX option vols – Saxo
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT

EURO CRISIS
European rumourthon misses the markmacrobusiness.com
very nice roundup

The Euro Area Is Coming to an EndView / BB
Peter Boone and Simon Johnson: Tragedy awaits. European politicians are likely to stall until markets force a chaotic end upon them. Let’s hope they are planning quietly to keep disorder from turning into chaos.

Euro Zone on the BrinkSpiegel
Fear is spreading through the financial markets as investors pull their money out of the crisis-stricken euro-zone countries. With Chancellor Angela Merkel opposed to using the ECB's firepower to solve the crisis, the monetary union appears increasingly in danger of breaking apart. Some economists are even arguing for Germany to reintroduce the deutsche mark. Part 2 and Part 3.

A Minsky moment in the eurozone? alphaville / FT
Nomura: Financial institutions sometimes have to sell their stronger assets rather than their lower-quality assets since these can provide greater liquidity and may enable the booking of a profit. (The full report “Endgame - Absent a policy response, a euro break-up looks probable not possible” is worth the read and available on FT’s long room.)

The Euro area has just days to avoid collapseWolfgang M√ľnchau / FT

Thinking the unthinkable on a euro break-upGavyn Davies / FT
It is hard to imagine the 17 members of the eurozone going through an orderly, decade-long process in which national currencies would first be reintroduced, then gradually allowed to deviate against each other within narrow bands, then ultimately allowed to float freely.

Wonkbook: Is Europe finally at the endgame?Ezra Klein / WP
There are signs that we really could be at a tipping point for the European Union. The contagion has spread to
Germany and France. The market seems increasingly uninterested in half measures. They're likely to keep pulling back from Eurozone debt as long as the Eurozone's future remains in doubt. And so European leaders and Eurozone observers are considering more radical, final solutions.

Guest post: Thinking the unfolding — the break-up of monetary unionalphaville / FT
…there seem to be only two sensible solutions to the current predicaments. The first is economic, fiscal and budgetary union… it is doubtful that there is now sufficient time to implement it (even assuming each nation were democratically to approve of it). The other solution is an organised dismantlement of the euro as we know it and to introduce a dual currency system.

Of bonds and automobilesalphaville / FT
Deutsche Bank: First, the ongoing deterioration in the Eurozone debt crisis combined with accelerated bank balance sheet reduction is likely to see a decline in market makers’ willingness to warehouse risk and accommodate large transactions into year end.

Here Comes the Trade of the Decade in EuropeMarketBeat / WSJ
If the euro holds together, shorting German and French 10-year bonds …Every lurch Europe has taken toward unity has been accompanied by yield convergence

Why a German downgrade is the next logical step in the euro crisisThe Telegraph
Once the credit rating agencies catch on to the market's nervousness, then a downgrade, or threat of one, becomes more likely. It has happened to the US and France is being threatened too. There is no hiding place from the bond vigilantes, not even in Berlin, as this past week has shown.

‘PLANS’
Grand Plan 2 Or Grasping At Straws?Peter Tchir / ZH
A big reason the market wants to rally on any positive noise is the firm conviction that default or break-up is the equivalent of Armageddon.  The belief is that without a bazooka or magic bullet, the markets and economies will basically cease to exist, so the only logical conclusion is that the bazooka or magic bullet will be given.  That is incredibly extremely, and for banks, incredibly self-serving.

Last Days Of Pompeii?A Fistful of Euros
Very long, extensively linked blog post Cutting through all the foam and wrapping here, the key question is who is going to sign the cheques and who is going to pay?

Europe’s grand bargainalphaville / FT
Published in September, the authors of this Occasional Paper, who include Jurgen Stark, spell out their ideas for the future of widely abused Stability and Growth Pact. Article includes comments from J.P. Morgan’s Mr. Barr.

The euro crisis: Could this be the plan?Free exchange / The Economist
(Merkozy) are said to be putting together a framework for a rapid move toward greater fiscal integration.. Hope is not yet dead. But markets will soon turn sceptical again as they wait for details to materialise. Unless euro-zone leaders can deliver the goods and fast, it won't be long—mere days, perhaps—before panic is once again ripping the single currency apart.

Euro Zone Pact: One Step Forward, Two Steps BackThe Source / WSJ
Does anyone really think that a fiscal union, directed by Germany will somehow manage to make Italians, Greeks, Spanish and Portuguese more German? How will the union be enforced? How will it stop tax cheating and official deception? Will Germans accept permanent moderate losses as the cost of a European union? Or will the rest of the euro-zone periphery accept the price of a loss of sovereignty to
Germany as the price of financial and currency stability?

Is a European debt management agency what’s really needed?alphaville / FT
Among the countries in the Stability Pact, there would be a treaty spelling out strict deficit rules and control rights for national budgets…Would anyone in the eurozone agree to the creation of a European debt management agency and sign over legal authority to it to issue debt? Probably not.

Don’t leave Plan B too lateHugo Dixon / Reuters
Given all this, pressing ahead with Plan A might suggest that the decision makers in Frankfurt and Berlin are indeed stupid. That would be true if they were sure it would work. But they don’t seem to be.

Report: Germany wants 'elite' bonds for six euro-countrieseuobserver.com
The 'elite' bonds would be issued by Germany, France, Finland, the Netherlands, Luxembourg and Austria - all with triple A assessments from credit rating agencies - in a bid to raise more money at low interest rates for themselves and, under strict conditions, for the troubled southern euro-countries

Thinking About the Approaching “Quantum Leap” in Euro Area Integration - PIIE
As always, numerous trial balloons will ahead of the summit (9-Dec) be floated strategically in the media by policymakers in order to for their own advantage increase or decrease the financial market panic.

How Could China and the BRICs Support the EurozoneDan Steinbock / EconoMonitor
1) Instead of paper assets, make it easier to acquire hard assets 2) recognize China as market economy in WTO 3) give up European over-representation in WTO, IMF and World Bank

Why the ECB refuses to be a Lender of Last ResortPaul De Grauwe / voxeu.org
The euro has a matter of weeks to save itself, with several institutions now preparing for its collapse. Given this, why does the ECB still refuse to bail out Europe’s heavily indebted countries? This column provides an explanation. It says that the ECB may well be behaving rationally but adds that such behaviour is also foolish – and dangerous.

Factbox: What the ECB could do short of all-out bond buyingReuters
ultra-long loans to banks, fix loan prices, relax lending rules, rate cuts, bank debt purchases, fund an IMF vehicle, lend to EFSF,

OECD REPORT
The OECD’s Grim Assessment of the Euro ZoneThe Source / WSJ
The OECD expects the euro-zone economy to contract 1% in the current quarter and another 0.4% in the first three months of next year, which makes its use of the term “mild recession” something of an understatement.

OECD Gets Off the Fence, for OnceThe Source / WSJ
OECD’s directness says a lot about how alarmed it has become, as have most of the other international financial institutions that are supposed to advocate the policies needed to set the world to rights. Usually, IFI reports have a bit of this and a bit of that–they try not to come down too hard on any one of the major global economies, fearing that would jeopardize a necessary reputation for independence.

OECD calls for urgent action to boost ailing global economyOECD
Decisive policies must be urgently put in place to stop the euro area sovereign debt crisis from spreading and to put weakening global activity back on track

Economic OutlookOECD
Presentation files, full doc in pdf, webcast, press handout, excel files.

OTHER
Chart of the day, Morgan Stanley bailout editionFelix Salmon / Reuters
In 2008 Morgan Stanley owed Federal Reserve at peak 107 bn dollars, something for the ECB to think about. The Fed’s argument against publishing the data was that it “would create a stigma”, and make it less likely that banks would tap similar facilities in future. But I can assure you that at the height of the crisis, the last thing on Morgan Stanley’s mind was the worry that its borrowings might be made public three years later. When you need the money, and the Fed is throwing its windows wide open, you don’t look that kind of gift horse in the mouth.

Examining the big lie: How the facts of the economic crisis stack upThe Big Picture
The lie that the crisis was government’s, not banks’ fault. The facts point otherwise.

Another Asian Wake-Up CallStephen S. Roach / Project Syndicate
With the US, and now Europe, facing long roads to recovery, Asia’s emerging economies can no longer afford to count on solid growth in external demand from the advanced countries to sustain economic development.

Zacks, The Handbook of Equity Market AnomaliesReading the Markets
Book review.

DIVERSION
Athens, 9 November”. Very nice taste and feel of Greece.

The FP Top 100 Global ThinkersForeign Policy
“a unique portrait of 2011's global marketplace of ideas and the thinkers who make them.”

Secrets of the Boiler Rooms Part 1The Reformed Broker
This broker, who is referred to as "John" for purposes of anonymity, provides valuable insights seldom spoken outside the doors of today's prominent brokerage firms.

Disruptions: Fliers Must Turn Off Devices, but It’s Not Clear WhyBits / NYT