World Bank released some nasty projections, while the world's second-most dangerous man announced that he would like to run it. IMF came up with a new bazooka rumor of a nice, round 1 trillion dollars that nobody believes anymore. PSI negotiations are still going on. I'm planning putting together couple of specials, current ideas are:
- Nuclear / Middle East review
- Greek default primer
- Euro Breakup reads
- ECB in the End-Game.
Any other ideas or wishes? - MoreLiver
Joke of the Day: Papademos asked Greeks to put their sacrifices in perspective. If all goes well, he said, they could expect “an end to austerity” next year
To the links:
News evening – BTH
Recap – GMT
Press Digest by Reuters: WSJ
FX option vols – Saxo
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
EURO CRISIS: GENERAL
IMF Said to Seek $1 Trillion Resource-Boost Amid Euro Crisis – TF Market Advisors
Yesterday we rallied on news that China remains weak enough to need stimulus, yet here they are on the list of countries expected to make the IMF savior of the world.
IMF Proposes Trillion Dollar Lending Expansion – Mish’s
This one again… ok, who is able and willing to lend the money to IMF, so that they can lend it to Europeans?
This crude old eurozone crisis – alphaville / FT
Germany’s export surplus is effectively financing the rest of the Eurozone’s oil deficit
Here’s how much Austrian banks are on the sovereign debt hook for – Credit Writedowns
Austrian banks have a lot of sovereign debt- and private lending exposure in crisis countries, especially Poland and Hungary.
Collateral shifts in the eurozone – alphaville / FT
European Repo Council released a bi-annual repo market survey and note that use of Italian and German bonds have decreased.
EURO CRISIS: GREECE
Must-read probable outcome from the negotiations. In short: they will announce an agreement, and then spend a month making it so – the governments and the central banks are too scared of a default.
ISDA Updates Greek Sovereign Debt Q&A – Alea
The possibility of retrospectively applying Collective Action Clauses (CACs) to existing Greek debt has been discussed of late. Would the inclusion or activation of a CAC trigger a Credit Event?
Absurd Threat by Greek Prime Minister: "Hand Over Your Wallet or I Will Give You a Million Dollars" – Mish’s
In short, the moment Greece does what Papademos illogically threatens to do, there would be a "credit event" on Greek bonds, exactly what Papademos does not want, and exactly what hedge funds with CDS on Greek bonds do want.
Greek Bond Talks Edge Toward 68% Haircut Deal; Will the Deal Be Accepted? – Mish’s
The key to understanding the negotiation mess is private investors (hedge funds) who bought bonds at a steep discount and at the same time bought credit default swaps for protection have everything to gain by forcing a credit event. Tchir suggests they will be bought out. Certainly they will have to be bought out or the deal will collapse.
Greece Poised to Default – naked capitalism
Greece Poised to Default – naked capitalism
Generic euro crisis summary. Euro elite seems to understand austerity is not working, but what will the Portuguese and Irish think after Greece is forgiven?
Chronology of the Greek Debt Crisis – The Big Picture
Nice timeline.
WORLD BANK
World Bank joins the gloomfest – alphaville / FT
In particular, the willingness of markets to finance the deficits and maturing debt of high-income countries cannot be assured. Should more countries find themselves denied such financing, a much wider financial crisis that could engulf private banks and other financial institutions on both sides of the Atlantic cannot be ruled out.
Falling beneath the threshold – Free exchange / The Economist
It's quite difficult to read the World Bank report and not conclude that more downward revisions of expectations are likely to occur. It's chock full of looming risks.
Don’t send Summers to the World Bank – Felix Salmon / Reuters
The only way to be an effective World Bank president is to be an effective diplomat… Summers, of course, lives in a world of ideas and debate — a world in which, it must be said, he invariably and loudly considers his own opinion to be correct.
OTHER
The unexplained part of public debt – voxeu.org
Usually irresponsibility but also: Measurement errors that lead to an underestimation of the deficit are more important in some countries than in others… the importance of contingent liabilities that lead to debt explosions varies across countries and that the control variables included in the statistical exercise described above do not capture all the possible sources of contingent liabilities.
Does Austerity Promote Economic Growth? – Robert J. Shiller / Project Syndicate
Policymakers cannot afford to wait decades for economists to figure out a definitive answer, which may never be found at all. But, judging by the evidence that we have, austerity programs in Europe and elsewhere appear likely to yield disappointing results.
Nomura Skeptical On Bullish Consensus – ZH
N takes apart the main bullish themes: easier policy from emerging markets, ECB’s QE and US decoupling.
The great Australian bond run – alphaville / FT
Foreign ownership of Australian government bonds now stands at 80.4 per cent of the market – a record amount.
Roundup of views and a very nice graph.
DIVERSION
A real market economy ensures that greed is good – John Kay
Our intuition is that a centrally planned allocation of resources will be more efficient than an uncoordinated one. In a market economy, that error constantly leads us to overestimate the economic advantages, and longevity, of large companies.
Stephen Hawking - A Brief History of Time – Youtube
1h20min documentary