Today's headline wordplay simply means that veterans of challenging situations need not be quality-controlled. They already know their business. On that note, I take the time to thank the veterans of all sides and hope that European leaders will in future come up with better ideas to ensure peace than a common currency. Happy independence day, Finland!- MoreLiver
News (Tue morning) – The Trader
Recap (5-Dec) – Global Macro Trading
Morning Briefing – BNY Mellon
Market Preview – Saxo Bank
Danske Daily – Danske Bank (pdf)
FX option vols – Saxo
Markets Live – alphaville FT
Debt crisis: live – The Telegraph
EZ crisis Live blog – The World / FT
The eurozone’s terrible mistake – Felix Salmon / Reuters
The worst case scenario is that the EU kicks the can down the road with one new bailout facility after another, until it eventually gives up throwing good money after bad and imposes the restructuring which was inevitable all along. In that case, as one hedge fund manager was explaining to me last week, private sector creditors get devastated: because the EU and the ECB and the IMF won’t take any losses on their loans, all of the haircut, pretty much, will have to be borne by a private sector which accounts for only a fraction of the debt
Many moving parts to this Grand Plan – Humble Student of the Markets
We may be in a situation reminiscent of 2008, as described by Kyle Bass, where the markets do not respond until it actually goes over the cliff.
The Eurozone – we want it all – Pragmatic Capitalism
Summit agenda’s 3 main items: IMF-backed by an ECB loan, fiscal discipline, EFSF leveraging. Markets are pricing in at least one, possibly two – especially the IMF part… In the next 6 months Italy will need to roll $276 bn of bonds and Spain $150 bn. That means should the summit fail to achieve its goals this Friday (and the “track record” isn’t great), the sovereign bond sell-off will be rapid and violent. Global equity markets would follow.
“What constantly rescues me makes me weaker” – Hussman / Pragmatic Capitalism
The EMU sovereign debt crisis, however, is a direct result of a currency system that was built by politicians who never understood that the single currency would inevitably result in this situation where revenue constrained countries would require some form of external aid as trade imbalances led to debt imbalances. This was the only way this currency union could end as was originally constructed.
The Euro debate gets philosophical – John Mauldin / Pragmatic Capitalism
Now there are of course many reasons behind the hostility of the Bundesbank to the Euro. The first is obvious enough: the Euro was thrust on an unwilling Bundesbank by Mitterrand and Delors as a compromise to France accepting German re-unification. So the Euro’s very birth was an unhappy one to start with.
Eurozone Treaty Changes to be Finalized in March, Then a Vote in May, Then Country-Specific Referendums, Then? – Mish’s
We suspect therefore that Sarkozy agreed to these measure in the full knowledge that this will never be implemented. If you subtract the treaty change proposals, one is left with a shallow agenda.
Decade-Long European Recession Coming Up; Reflections on the Un-Level Playing Field – Mish’s
What could possibly be more un-level than guaranteeing banks and bondholders will never take losses? When there are more losses, and there will be, the only way to guarantee banks do not take them, is to have someone else take them, namely taxpayers.
Mario Monti’s Last Bet – Paolo Manasse / EconoMonitor
Can the Monti plan achieve all this? The market seems to thinks so, as the BTP-Bund spread collapsed from 473 yesterday to 375 bp today. They may be right.
there seems to be a broader debate in Europe between those who think the euro zone should be structured more like the United States — a fiscal union in which money flows from strong states to weak ones — and, on the other side, those like Germany, who believe that hard, enforceable budget rules can prevent the need for transfers.
S&P Warns on 15 Euro-Zone Nations – WSJ
S&P Drops 15 European Shoes – MarketBeat / WSJ
Here Comes The S&P Downgrade Barrage - Full Statement – ZH
OTHER
Yes! We have no collateral today – alphaville /FT
Seems the fast diminishing pool of ‘risk-free’ assets is a big enough issue to have the Basel Committee on Banking Supervision completely change its mind on the role of government bonds in its new banking rules.
Seems the fast diminishing pool of ‘risk-free’ assets is a big enough issue to have the Basel Committee on Banking Supervision completely change its mind on the role of government bonds in its new banking rules.
Will CCPs be forced to echo the committee’s move by diversifying the range and type of collateral they accept for haircuts and initial margin? We imagine so. Eventually.
1. China is not monolithic and speaks in different voices. In terms of help for Europe, the politicos and diplomats seem more sympathetic than the finance folks. 2. China is unlikely to be the knight that rescues the euro zone. 3. China, as many other countries, may find it difficult to leverage its financial prowess for significant political gain.
DIVERSION
The long and winding road to cannabis legalization – Jan van Ours / voxeu.org
In many Western countries, between one quarter and one third of the population admit to having used cannabis at least once in their lives – according to the official statistics. This column provides an in-depth review of existing economic, social, and media evidence for and against legalisation. It concludes that although there is of course uncertainty surrounding the long-term implications, prohibition is not working and it is time to legalise.
Milton Friedman: Why Drugs Should Be Legalized – Carpe Diem
8 minute video interview