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| Correlations again picking up Source: WSJ/Barclays |
Couple of days to go before another big pow-wow to end the crisis. IMF fund raising going smoothly, more room to lower rates in euroland according to IMF and growth is expected to pick up, again according to IMF. These are the bullish drivers. As far as I can tell, all the bullish elements seem to have the three-letter acronym attached to them. My best guess is that the next week will not be pretty.
News – Between The Hedges
Markets – Between The Hedges
Recap – Global Macro Trading
The Closer – alphaville / FT
Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
FX Options Analytics – Saxo Bank
EURO CRISIS: GENERAL
Eurosystem TARGET balance deviations call for cautious changing of the EU banking landscape – voxeu.org
Ossi Leppänen: Since the start of the crisis the Eurosystem balance sheet has grown from €1200 billion in June 2007 to around €2900 billion in March 2012. But this is spread unevenly among different central banks within the Eurozone, raising the thorny issue of intra-area (TARGET) balances. This column argues that these balances signal a need for change and restructuring in the Eurozone banking sector.
The Eurozone dumbbell trap – re-define
Many feel that it’s only after the crisis becomes real for it that Germany’s willingness to do more would increase. The problem is that it’s ability to do more and help rescue the Eurozone would have already diminished by then.
A number of euro zone countries and senior officials at the ECB would like to see the euro bailout fund changed so that it can provide direct aid to banks. This could help Spain, which has emerged in recent days as a new center of the euro crisis, but Germany is opposed.
Why you can't inflate away the eurozone's troubles – The Telegraph
What happens after the initial boost in demand, as the transfer is, per definition, time limited?... If the perception is that the ECB is really turning into a “bad bank” that actively pursues inflation, that would be one of the few scenarios under which German support for the entire euro project really could evaporate.
Austerity is not the problem in the eurozone – the euro is – The Telegraph
These are genuine problems. But they are problems created intrinsically by the euro and reflecting the banking crisis. Austerity alone is unlikely to be a sufficient answer. But it is a mistake to claim that austerity is the problem – no-austerity wouldn't be the answer, either.
EURO CRISIS: FRANCE & PIIGS
With high labor costs and leverage greater than Italy's, is France moving toward the periphery? – Sober Look
As the core nations apply pressure on the periphery to improve labor laws and reduce labor costs in order to become more competitive, the periphery nations would be able to point their finger back at France. The nation clearly needs to deregulate some of its labor laws, but with the new Socialist government likely to win the upcoming election, France will hardly be in a position to do so.
The Complete And Annotated "Hollande Victory" Matrix – ZH
Hopeless Situation in Spain: New Wave of Defaults as Home Prices Crash; Bad Loans Highest Since Oct '94 – Mish’s
Competitiveness adjustment in euro-area periphery – bruegel
A lot of the discussions surrounding competitiveness and rebalancing have focused on divergent unit labour costs. But in reality, competiveness is not simply a question of prices and it could be improved through non-price as well. The former typically takes a long time. Progress in the latter is shown by the figure below.
IMF
Global Financial Stability Report: The Quest for Lasting Stability – IMF
The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.
The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.
Global Financial Stability: What’s Still To Be Done? – iMFdirect
The quest for lasting financial stability is still fraught with risks. The latest Global Financial Stability Report has two key messages: policy actions have brought gains to global financial stability since our September report; but current policy efforts are not enough to achieve lasting stability, both in Europe and some other advanced economies, in particular the United States and Japan.
IMF to CEE: risks of a credit freeze – beyondbrics / FT
IMF’s report warns of massive deleveraging by European banks – The Big Picture
(also other comments in this daily roundup)
IMF fears $3.8 trillion forced asset sale by eurozone banks – The Telegraph
An escalation of the eurozone debt crisis could force European banks to sell assets worth up to $3.8 trillion by the end of 2013 with damaging consequences for the global economy
IMF: Cuts in European bank lending to drag growth – The Telegraph
The IMF has warned that European banks are under pressure to preserve capital and could cut back sharply on lending over the next two years, slowing the region's growth.
EU would like to see the IMF provide billions in additional funds to help relieve the debt crisis. However, a number of emerging economies are resisting the plans, accusing the West of abusing its power within the organization and creating a "North Atlantic Monetary Fund".
IMF Chief Jackass Calls for Taxpayer-Funded Bank Recapitalisations to Avoid Painful Deleveraging; Mish Says Fire the Parasites and Disband the IMF – Mish’s
IMF Forecast – Graphic of the Day – Thomson Reuters
OTHER
Stock Correlations Coming Back to Life – MarketBeat / WSJ
The risk on/risk off trading that dominated markets last year may be poised for a comeback.
The risk on/risk off trading that dominated markets last year may be poised for a comeback.
OFF-TOPIC
The Limits of The Limits to Growth – reason
Contemplating 1972 predictions of environmental doom, just in time for Earth Day
Bubble Web Resources – The Bubble Bubble
Dutch tulips, South Sea, Mississippi, Railway Mania, Roaring Twenties, 90’s Asia, US housing, European housing
3D printers could create customised drugs on demand – BBC
Scientists are pioneering the use of 3D printers to create drugs and other chemicals at the University of Glasgow.