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Monday, May 28

28th May - "US Open": Memorial Day

Here are the “US Open” regulars and some select article links. The US is closed for the Memorial Day.

Earlier on MoreLiver's:

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Daily US Opening – RanSquawk / ZH

Frontrunning – ZH
The Lunch Wrap – FT
EM New York headlines – FT
Overnight Summary – ZH
Today’s Front Pages – presseurop
Daily Press Summary – Open Europe
  New German opinion poll shows majority believe euro membership carries more disadvantages than advantages; Lagarde faces backlash over comments that Greeks not worthy of sympathy

Morning MarketBeat: Headline-Driven Markets Make Comeback – WSJ
Broker Note Briefing – WSJ
US Open: Memorial Day Update  – Marc to Market

Debt crisis: live – The Telegraph
The Euro Crisis Blog – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank
European 10yr Yields and Spreads – MTS indices

If Greece Was California...ZH
The Euro monetary system is flawed. It is a system that was cobbled together for political purposes; and sadly it was set up in such a way that each member state retained significant sovereign powers - most importantly the ability to exit the system and default on debts in times of stress. There is virtually NO federal power in the Union, as witnessed by the complete breakdown of the Maastrict and Lisbon treaties.

What fiscal union and joint euro bond entailASA
In other words, those governments with surpluses will have to give the money away in order to sustain their surplus and others’ deficit, and it has to continue to do so forever, or else the economies of both surplus and deficit countries will contract.  Ask Germany if they would like to see this happening, and I doubt if they would say “yes”.

The Fairness TrapThe New Yorker
Rationally, then, this standoff should end with a compromise—relaxing some austerity measures, and giving Greece a little more aid and time to reform. And we may still end up there. But the catch is that Europe isn’t arguing just about what the most sensible economic policy is. It’s arguing about what is fair.

After Eurovision Comes The Euroscramble: Europe's Latest "Silver Bullet", "Secret" Bail Out PlanZH
"The bank scheme would see all eurozone lenders forced to pay an annual levy to a deposit guarantee scheme set up as a separate company. The company would be back-stopped with cash from the EU, the ECB or the new ESM." Bottom line: the "silver bullet" plan is "secret? because it is a total farce, and nobody could possibly present it with a straight face for one simple reason - there is no source of money. No hold on, there is - Germany. And as Merkel made it very clear, Germany will not fund it. Why? Because once it starts, it won't end.

German taxpayers face re-denomination loss from TARGET2Sober Look
…what would actually happen with these claims should a periphery nation exit. The exit would simply result in a re-denomination of some claims. There is no other way to do this. As loans to Greek banks become drachma denominated, so will the claim on the Bank of Greece (BoG), with the central bank separating from the Eurosystem. The Eurosystem was never designed for an exit of a central bank, so this process would need to be cobbled together on the fly - sort of the way the Greek restructuring was done. The "exercise" may potentially set up a process for other nations exiting the EMU.

Biz Daily: A stronger Eurozone?BBC (mp3)
Whose idea was this single currency anyway? We speak to Graham Bishop, one of the founding architects of the euro, who believes reports of its demise are greatly exaggerated. We hear from the brewer SAB Miller on the role of big business in managing scarce global resources. And Lucy Kellaway of the Financial Times reflects on parting shots; when quitting your job, what's the best way to abuse your ex-employer?

The President of the Bundesbank Lashes OutTestosterone Pit
“Governments must take on their responsibilities and not subcontract them out to monetary policy.” Aiming squarely at Paul Krugman, he said, “In the US, certain people believe that the ECB should buy more sovereign debt like the American Federal Reserve. But we’re not a federal state, and the Fed doesn’t buy the debt of California or Florida.” And he vetoed in advance any new Long Term Refinancing Operations (LTRO)

Entwined, with Bankiaalphaville / FT
The ECB’s cooperation would have to be solicited for this…The plan, viewed as highly unorthodox by analysts, involves Madrid issuing Spanish government guaranteed debt to Bankia in return for equity, with the bank then able to deposit the bonds with European Central Bank as collateral for cash…Spain has not yet made any approach to the ECB on how its capital-raising plan would work, according to an official familiar with the situation.

Spain's Plans to Recapitalize Bankia Will Put Germany, ECB at Risk; When Does the Ponzi Scheme Collapse?Mish’s
A Spanish government source says the plan is float what amounts to junk bonds, pawn them off to the ECB and use the proceeds to "recapitalize" Bankia. Of course the ECB (bankrolled by Germany) is at enormous risk were this preposterous scheme to actually happen. This is what I want to know: When does Germany say it has had enough of these preposterous schemes?

Euro zone ying and yangMacroScope / Reuters
Sources told us last night that Spain may recapitalize stricken Bankia with government bonds in return for shares in the bank…The ECB’s view of this will be crucial since the plan seems to involve the bank depositing the new bonds with the ECB as collateral in return for cash.

Bankia going GUBU … but what about the rest?alphaville / FT
Is Bankia, Spain’s fourth largest bank, so unique? Nomura: only BBVA, Santander and Sabadell (based on the buffer provided by the asset protection scheme) would avoid needing to strengthen capital.

A Spanish Farce Macro Man
[Outside a Spanish restaurant] Spanish Government [patting pockets] - "Hang on... Has anyone seen my credit rating? I can't seem to find it"

Martin Wolf: Lunch with the FT: Paul KrugmanFT

Is Chinese real estate nearing a tipping point?alphaville / FT
China’s property developers — who last year contributed a collective 13 per cent of GDP — seem determined to hang on.  Despite months of falling prices in most cities, completions are powering ahead…

Focus on China, not EuropeHumble Student
I am more concerned about the news flow out of China, which is likely to deteriorate over the next few months - and none of the negative news has been discounted by the market.

Australia and the Iron Ore conundrumMacronomics
Australia’s and China’s connection

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