Yves here. Yanis just posted an interview with ABC (Australia’s BBC) which describes how Greece cannot be salvaged. Its fate will be determined at the eurozone level, and its possible outcomes range from bad to awful. You can watch the conversation here. Transcript below:
Read more...By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data
… how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…
– Alan Greenspan, Dec. 5, 1996
In any context except a Gay Pride parade grown men wearing short skirts and carrying pom-poms look out of place. But if they’re cheering the artificial rise of housing prices we’ve seen lately, they seem to be not only accepted but welcome.
Read more...John Dizard of the Financial Times gives an early warning of a potential flashpoint later in the year: that of the Fed’s currency swap lines.
Read more...I’m surprised it has taken this long for Someone Serious to make the argument set forth in a new article by Simon Johnson at Bloomberg, which in short form says “You are dreaming if you think a European financial crisis stays in Europe.”
Johnson somewhat undercuts the urgency and importance of his article by working from the assumption that the eurozone dissolves back into its earlier configuration of one currency per nation. Economists and analysts have discussed other scenarios, such as a exit by Greece, which has the potential to precipitate contagion in Portugal, Spain, and Italy; an exit by Germany; a split into more economically homogeneous sub-groups (most likely north v. south). And Bloomberg refrains from putting the real sizzler in the headline: Johnson considers JP Morgan to be vulnerable and explains why.
Read more...By Michael Hudson and Jeffery Sommers, a distinguished professor at the University of Missouri-Kansas City and associate professor at the University of Wisconsin-Milwaukee respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Cross posted from the Financial Times by permission of the authors
Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in the country to understand what happened.
Read more...Yves here. Mr. Market is in a tizzy today over, per Bloomberg, “concerns over the slowdown of growth”. Cynics might note that journalists have to attribute motives to market moves, when their waxing and waning often defies logic. Nevertheless, we’ve had disappointing reports out of China, a bad Philly Fed manufacturing report, a less than stellar initial jobless claims report, and not so hot housing data this AM, and more and more signs of inability to bail out the sinking Titanic of the Eurozone (a meaningless announcement compounded by continued focus on ongoing German court challenges to more aggressive support of rescues. Even if these cases lose, any uncertainty and delay has the potential to accelerate the ongoing bank run out of periphery countries).
This post from VoxEU is a good short form summary of how the Eurozone got into this fix.
Read more...“When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master— that’s all.”-Lewis Carroll, Alice in Wonderland
The House Financial Services Committee hearings on the losses in JP Morgan’s Chief Investment Office were an improvement over the Senate version, in that there was comparatively little fawning over Jamie Dimon and more earnest, even if not very successful, efforts to pry information from him.
Read more...Bloomberg has a useful piece up tonight describing how markets are reacting in no consistent way to ratings agency actions on sovereign debt. The story is long and prominent enough that it looks to be an indicator of shifting stances in the media on deficit cutting.
Read more...You too can be an IMF success story if you grind your population into penury by wearing the austerian hairshirt. And this little video (hat tip Nathan) has to skip over capture some of the extreme measures operating in Latvia, such as bankers taking souls as collateral for loans.
Read more...It’s feeling like 2007 all over again. The New York Times has a bizarre and prominent story (now the lead item on its business page) on how the lack of integrated bank supervision in Europe is causing a breakdown in interbank lending. The New York Times (and the Wall Street Journal) getting it wrong when the FT gave straightforward, informed accounts was a frequent feature in the early phases of the crisis (both US papers upped their game considerably as the bad financial news increased).
Read more...In case you haven’t had enough of Congresscritters lobbing softballs at Jamie Dimon, the JP Morgan CEO is appearing before the House Financial Services Committee on Tuesday. There have been a number of suitably scathing accounts of how members of the Senate Banking Committee fawned over Dimon.
As we wrote, Dimon took what is actually an indefensible position: that any bank risk taking should be permitted, so long as it will arguably do well when there is a crisis (watch for this to be broadened to merely be a bet to improve bank profits when its regular businesses are under stress). We pointed out that this logic would justify engaging in systemically destructive activities like the Magnetar trade, and that with government backstopping behind it to boot. And that is a bigger risk than it might seem at first blush.
Read more...By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
As I type about 75% of the vote in the second Greek election in a month has been counted and the leaderboard looks like this.
Read more...All eyes in finance are on Greece…
Read more...The Wall Street Journal reports that a key element of Basel III rules, its provisions on liquidity buffers, are about to be watered down.
Read more...Having sold out the possibility of getting a decent settlement for homeowners for a seat in Michelle Obama’s box at the State of the Union address and a star turn on a Potemkin mortgage fraud task force, Schneiderman appears to be an adept student of the Obama strategy of preferring empty gestures to substance, since they generate good PR and take a lot less effort.
Read more...