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| Kiel Institute did some calc for Der Spiegel |
Weekend's main discussion topics were German demands for Greece to give up its fiscal sovereignity. This would be meaningless in the real world, where Greece has been completely reliant on foreign aid for centuries. The real signal that commentators are reading from this is that...
Germany is admitting that the Greeks cannot solve the situation as it is, and there is speculation that the demands were made just to push Greece to exit the euro zone. By demanding the impossible, Germany will receive a 'no' and shall have a perfect excuse to cut off further funding to the messy southern state. Last weekend, I've posted Blue Horseshoe Loves Portugal, Best of The Week, Press Digest, and Weekly Support. I've gone through 207 feed subscriptions three times, scanned the headlines of hundreds of articles and selected and summarized only these few for your eyes. I do this every day. If you feel this is high-quality work, spread the word. You can follow me on Twitter or Facebook and email me for suggestions and requests.
-MoreLiver
News – BTH
News – The Trader
Key Events – Goldman Sachs via ZH
Morning Briefing – BNY Mellon
While the PSI talks appear to be drawing closer to a resolution, the latest developments in the Greek bailout negotiations provide fresh cause for concern.
Daily – Danske (pdf)
Market Preview – Saxo
FX option vols – Saxo
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
EURO CRISIS: GENERAL
LTRO dramatically eased financial market tensions throughout Europe, revealing the important role of a lender of last resort. But underneath those tensions exist some very real and deep economic and political fractures in the European economy. And unless those fractures are quickly healed via a real fiscal union - not just an agreement to balance budgets, but a union in which rich countries transfer, not lend, resources to poor - the Euro experiment will be torn asunder.
Mario Draghi, the Latin Bloc’s monetarist avenger – Evans-Pritchard / The Telegraph
The eurozone money supply is contracting at an accelerating pace on all fronts. The broad M3 gauge has fallen for the last three months in a row. A slump is already baked in the pie.
Contraction in Eurozone's repo markets is driving M3 decline – Sober Look
An obvious question here is whether this broad money supply decline is similar to the US during 2008-2010. One key component of M3 driving this contraction in money stock is the amount of repo (secured) lending. The Eurozone repo loan balances have declined materially in Q4 - an issue that is quite different from what had occurred in the US.
Fiscal Adjustment: Too Much of a Good Thing? – iMFdirect
The very high public debt ratios in many advanced economies should be brought down to safer levels through a gradual and steady process. Doing either too little or too much both involve risks: not enough fiscal adjustment could lead to a loss of market confidence and a fiscal crisis, potentially killing growth; but too much adjustment will hurt growth directly.
Hollande Vows to Tax the Rich, Take Pay Cut; Sarkozy Promises German-Style Reforms; Merkel Cannot Save Sarkozy, But She Can Hurt Herself Trying – Mish’s
Hollande's economic plan does not have to make any sense, and it does not have to be any better than Sarkozy's. Rather, Hollande's plan merely has to resonate with voters. A 20-point lead in second-round polls shows he has done just that. I do not believe Merkel can save Sarkozy. Moreover and if she doesn't, her political stunt will hurt her own chances down the road.
EURO CRISIS: GREECE
USD 963 million according to Jan 2012 BIS statistics
Greek private sector involvement: So what? – Credit Writedowns
Greece’s PSI not enough to lower the debt to sustainable levels, Greece presented with a list of must-do’s, German demands for concessions from Greece.
It's Official: German Economy Minister Demands Surrender Of Greek Budget Policy, Says It Is First Of Many Such Sovereign "Requests" – ZH
And some bad news for our Portuguese (and then Spanish) readers: you are next.
Whether the document was actually intended to be enacted or was just some sort of strategic leak as a final test on what should be done about Greece is an outstanding question, but it certainly didn’t take long for the EU to respond in support of Greece
Anschluss Economics – The Germans Launch a Blitzkrieg on the Greek Debt Negotiations – naked capitalism
Is this too harsh an assessment? Well, when their national interests are at stake, the Germans are perfectly prepared to shed the “good European” persona and play hardball. Think back to how the Bundesbank engineered the departure of Britain from the ERM back in the early 1990s, and you’ve got the template for today.
Private Investors Near Deal On Greek Debt – TF Market Advisors
Banks probably have no choice. For them this negotiation is a sham because they rely so much on the ECB they will do what they are told.
If eurozone banks have as much access to cheap, three-year ECB funding as their collateral allows, perhaps Germany and the troika have decided that eurozone banks can survive a Greek default. Greece is clearly insolvent and must leave the eurozone to eventually return to growth. The German proposal may have accelerated the inevitable.
Greeks Reject German Plan for EU Budget Commissioner; On the Verge of a Deal, Yet Again; Political Reality – Mish’s
Europe has been on the "verge" of a deal for two weeks. However, a deal is meaningless if Germany insists on budget controls. Actually a deal now is meaningless even if Germany does back down because at some point Greek politicians will have had enough.
EURO CRISIS: OTHER PIIGS
SocGen Answers: "Is Greece Unique?" – ZH
Will Portugal follow Greece? If the reforms and austerity fail, only choices are either a second official bailout package or PSI.
Will Portugal follow Greece? If the reforms and austerity fail, only choices are either a second official bailout package or PSI.
DAVOS
Davos 2012: Another Monumental Failure? – Pension Pulse
…all this talk about "debt crisis" is completely misplaced. The developed world has an unemployment crisis and a retirement crisis, not a debt crisis, two themes that were largely ignored at this World Economic Forum.
Davos Post Mortem – Zero Hedge
But when you read the bios you’ll probably draw the conclusion that the elite go to Davos to serve their interest—not ours.
OTHER
The Eternal Triangle – Krugman / MIT
Because of the threat of currency speculation, you can't get everything you want. More specifically, insisting on having any one of the three desired attributes in an international regime forces the abandonment of one of the others. As a result, there is a limited menu of possible regimes - and each item on that menu is unsatisfactory in some important way.
The Truth About Hedge Fund Risk – Simon Kerr
The industry should rethink the role of risk in the hierarchy of investment decisions, embrace universally valid measures of hedge fund performance, and inject responsibility into the system for screening hedge funds.
A Word of Caution on the Modified Distribution – allaboutalpha.com
Unfortunately the Cornish Fisher modification suffers from two rather serious drawbacks that some users may not be fully aware of. Firstly it is not strictly monotone with respect to the confidence level and skewness being used. This means that it is possible to get a VaR number at a higher confidence (e.g. 99%) level that is lower than one at a lower confidence level (e.g. 95%.)
Top Secret – The Chinese Envoy’s Briefing Paper On Australia’s Economy (Part I) – Satyajit Das / naked capitalism
The European crisis has affected Australian public finances. Falls in income and capital gains have reduced tax revenue. The government is cutting expenditure and tightening taxes to offset the reduction in revenue. Falls in income on retirement savings, reduced business investment and general loss of confidence is likely to adversely affect the domestic economy. Australia may not escape the possible European tsunami.
Goldman's Tom Stolper Conducts Sunday Hitfest On The USD – ZH
FX comments from Goldman Sachs
FX comments from Goldman Sachs
DIVERSION
A Curated Linkfest For The Smartest People On The Web! – Simoleon Sense
Iran is holding terrorist leaders as an act of defense – so long as it has them, al Qaeda will likely refrain from attacking Iran. But the strategy also has a defensive component – if the United States or Israel bombed the country, it could employ al Qaeda in responding.
The one percent war – The Reuters Magazine
The recent revolutions are also the rebellion of the millionaires against the billionaires. The actual businessmen everywhere are tired of well-connected crony capitalists at the top.
Something about naive liberal humanitarianism often bugs and irritates me more than correspondingly naive reactionary beliefs