So we wait the end of the week and news from Spain. Meanwhile, Merkel to
meet Draghi and Lagarde in closed meetings in the coming 2 days. They are not going to be talking about golf. My conspiracy theory du jour is that the eurocrats want to prepare the leverage of the ESM because of Greece. They will kick out Greece after the US elections, and need to have enough of nominal backstoppage in place for Spain and Italy. Bond market support from the ECB, bank loans from the ESM?
Some commentators believe that while the eurocrats are clearly worried and prepared to act, they miss the original point - too much debt, too little bank capital. The need for sovereign restructurings and bank recaps either through credit or equity injections is critical. Banks are not stupid, and prefer to wait for the eventual bailouts, instead of accumulating the funds by themselves. Why dilute yourself when you can beg?
From an
outside source: the officials of a major nation (off-the-record, of course)
believe ECB’s previous governor Mr. Trichet was "a clown, dangerous and
destroyed the continent’s economy". They also see the odds of euro surviving
very low – around 1 in 3. My domestic readers are probably happy to know that Finland’s economy is expected to crash
around 20% if it stays in the eurozone, but stay unchanged if it leaves.
Previously on MoreLiver’s:
22.9. Disregard This Post (links to euro breakup analysis)
21.9. Weekender: Weekly Support (weekly reviews and previews)
Roundups and Commentary
News –
Between The Hedges
Markets – Between
The Hedges
Roundup – A View From My Screens
USD Posts
Gains as Dow Drifts Lower – BNY
Mellon
Summing
up the state of play in Greece
The T
Report: I Love It When a Plan Comes Together – TF
Market Advisors
Reference
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EUROPE
Buiter on good news, bad news – alphaville
/ FT
Good: ECB’s
OMT, ESM agreements, pro-Europe election results. Bad: banking union talks. PIIGS.
Viva España? Spain’s other crisis – alphaville
/ FT
There’s nothing like a financial crisis to
bring out a surge of nationalism. In Spain’s case the situation
is especially serious and seemingly getting worse. So much so that some argue
that the growing constitutional crisis could soon eclipse the country’s fiscal
problems. The two, you see, are very closely entwined.
Turning German (or trying to) – alphaville
/ FT
Credit Suisse’s charts of trade balances. The PIIGS trade deficit is narrowing, but mostly because of decreased imports (they’re broke, after all). Also, goods are and services are a minor part of Spain’s current account balance.
Credit Suisse’s charts of trade balances. The PIIGS trade deficit is narrowing, but mostly because of decreased imports (they’re broke, after all). Also, goods are and services are a minor part of Spain’s current account balance.
Proposal to Leverage ESM to 2 Trillion Euros;
Is Merkel's Rubber Stamp Ready? – Mish’s
The ESM is supposed to have €500 billion of
firepower of which Germany's contribution is €190 billion. The nannycrats want to leverage that to
€2 trillion. If they do, losses of 25% will wipe out the entire ESM.
The euro zone economy may be doing far worse
than most economists want to believe. That’s not good news for a central bank
trying to rescue the single currency through a hotly-contested bond purchasing
programme that has yet to get started.
USA
Excuses Not To Do More – Tim
Duy’s Fed Watch
I think the story here is that fiscal stimulus
is only a temporary measure, not a long-run solution. The long-run solution is dealing with the
debt overhang, which can be addressed with more aggressive monetary policy.
Geopolitics and the Dollar – Marc to
Market
The confrontation with Iran is widely perceived
as the most worrisome geopolitical event on the horizon…face-off between Japan and China over the disputed
islands.
Remarks before the Harvard Club of New York City Sep-19-2012
STOCK MARKETS
Global Equity Markets: Returns and Composition – The
Big Picture
Couple of
charts and tables from JP Morgan
Quick
calculations pointing to higher stock prices during this decade, assuming Fed
keeps its word on unemployment targeting.
OTHER
Chart of the week: EM fx reserves – beyondbrics
/ FT
After years of accumulation, emerging markets
are not stockpiling the dollars as they once were. Currency depreciation
worries, slowing exports, a possible end to the commodity supercycle – there
are various reasons why overflowing reserves might hold less appeal. But some
countries are bucking the trend.
Carrying liquidity as far as you can – alphaville
/ FT
BoaML takes
a look at the interest rate differentials as exchange rate drivers.
The Roots of Chinese/Japanese Rivalry – Project
Syndicate
Much like in Germany in the 1840’s, when appeals to private enterprise converted the entire
middle class to nationalism, China’s capitalist
restoration has awakened mass nationalism. Hundreds of millions now see
themselves as sharing in the nation’s dignity, and are eager both to contribute
to it and to defend it from insult.
IN FINNISH
Urpilainen: Suomi ei
hyväksy kriisirahaston kasvattamista – YLE
Valtiovarainministeri
Jutta Urpilaisen mukaan EU:n pysyvän kriisirahaston kasvattaminen ns.
vivuttamalla oli hiljattain esillä euroryhmän kokouksessa Kyproksessa. (otsikko
virheellinen: Urpilainen ei tämmöistä luvannut. Hienoa touhua taas
suojatyölaitokselta...)
Nordea: "EVM:n
vivuttaminen lisäisi julkisen rahan riskiä" – TalSa
EVM:n vivuttaminen
olisi ristiriidassa Suomen politiikan kanssa. Nyt on haettu vakuuksia omille
lainarahoille, mutta vivuttamisen jälkeen sanottaisiin suoraan, että näillä
rahoilla oltaisiin valmiita ottamaan vastaan ensimmäiset tappiot, jotta
yksityiset sijoittajat välttyisivät omiltaan, von Gerich sanoo. Vastustamista
on helppo perustella. Vivuttaminen toisi julkisille rahoille lisää riskiä ja
voisi muuttaa sijoittajien kannustimia väärään suuntaan, hän toteaa.
Stubb: Suomelle
tarjoillaan eurokeskustelussa mustaapekkaa – MTV3
Stubbin (kok) mielestä
kansainvälisessä mediassa on nyt halukkuutta hämmentää eurokeskustelua tuomalla
esiin kantoja, jotka eivät todellisuudessa edusta Suomen linjaa. (=olkaa
hiljaa!)
Talousnobelisti: Euroalueelle pankkiunioni, talletussuoja ja yhteiset velat – TalSa
Talousnobelisti: Euroalueelle pankkiunioni, talletussuoja ja yhteiset velat – TalSa
Talousnobelisti Joseph
Stiglitzin mukaan euroalueelle tarvitaan pankkiunionia, talletussuojarahastoa
ja yhteisiä velkoja – ja nopeasti. Muuten kriisi uhkaa repiä koko järjestelmän
hajalle.