Category Archives: Currencies

EuroCrisis Intensifies as Spain Spirals Downward, Greek Impasse Nigh

It is increasingly difficult to find metaphors adequate to describe the pathological dysfunction among European leaders as their rigidities and biases make a full blown crisis look inevitable.

Spain Slides

By Delusional Economics, a regular blogger at MacroBusiness and a consulting editor at the Macro Investor newsletter. He 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

It was an all round horrible night for Spain, starting with a bond auction that went a little wrong:

Yanis Varoufakis: It is Now Official – The Eurozone’s Monetary Transmission System is Broken

By Yanis Varoufakis, Professor of Economics at the University of Athens. Cross posted from his blog

Under normal conditions, the interest rates that you and I must pay on a home loan, a car loan, our credit card, a business loan are pegged onto two crucial rates. One is the rate that banks charge one another in order to borrow from each other. The other is the Central Bank’s overnight rate. Alas, neither of these interest rates matter during this Crisis. While such ‘official’ rates are tending to zero (as Central Banks try to squeeze the costs of borrowing to nothing), the interest rates people and firms pay are much, much higher and track indices of fear and subjective estimates of the Eurozone’s disintegration.

Marshall Auerback: The Pain in Spain

By Marshall Auerback, a hedge fund manager and portfolio strategist. Cross posted from New Economic Perspectives.

Just when you think that things can get no worse in Spain, they do. Take a look at this chart, courtesy of Credit Suisse via FT’s Alphaville

The Eurozone: A Twenty Year Crisis?

As markets quickly shrugged off the news including that of further central bank rate cuts. Spanish bond yields rose over 7%, as Mr. Market clearly wanted a resumption of bond buying or some other decisive action, rather than a mere reduction of its benchmark rate to 0.75%.

Some commentators, such as Edward Hugh, are a bit flummoxed, since the supposed clarification of key points of the deal, most importantly, how and when Spanish banks will get money, has not answered these basic questions. Wolfgang Munchau argues in his current column, “Eurozone crisis will last for 20 years” that the Europatchup of last week wasn’t simply underwhelming, but was a major step backwards.

Roubini Warns a Crisis in 2013 Would Be Worse Than 2008

Nouriel Roubini, the dour seer who was early (too early in the minds of some) to warn of possible financial crisis prior to the Great Upheaval, has been more cautious in his calls since having ascended to official pundit status. Nevertheless, he’s been warning of a possible crisis in 2013 for some time and is not backing off from that call as the date approaches.

Marshall Auerback: All Roads Lead to the ECB

By Marshall Auerback, a hedge fund manager and portfolio strategist. Cross posted from New Economic Perspectives

We’ve always been a fan of Professor Paul De Grauwe from University of Leuven, who has consistently pointed out the structural flaws inherent in the original structures of the EU. Recently, Professor de Grauwe wrote an excellent analysis explaining why the latest “rescue plan” cobbled together by the Eurozone authorities is destined to fail.

Why the EU Summit Decisions may Destabilise Government Bond Markets

By Paul De Grauwe, Professor of international economics, University of Leuven, member of the Group of Economic Policy Analysis, advising the EU Commission President Manuel Barroso, and former member of the Belgian parliament. Cross posted from VoxEU

Among the questions still remaining since last week’s summit of European leaders is whether the new measures will stabilise government bond markets. This column’s answer is ‘no’.

Satyajit Das: “Super Brussels” Saves The World, Again, Maybe!

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011). Jointly posted with Roubini Global Economics

The Pavlovian response of financial markets to the European leaders’ summit of 28 and 29 June 2012 was remarkable. The frugal communiqué of 322 words fired the “animal spirits” of financial markets, which now believe that the European debt crisis has been “solved”. As comedian Robin Williams joked: “reality is just a crutch for people who can’t handle drugs.”

Currency Ideals

By Sell on News, a global macro equities analyst. Cross-posted from Macrobusiness.

The slow motion train wreck that is the Euro is grinding relentlessly on. Commentators are smugly, if not gleefully, announcing the currency’s imminent demise, enjoying their triumphant occupancy of the moral high ground. The European elites are just as determinedly asserting that the currency will survive, looking for some sand to stick their heads in. The financial markets are looking to exploit the situation to best advantage, gloriously mixing self righteousness with hyper venality. It is quite a soap opera, a sort of financial Groundhog Day.

Europe Has No Levers for Growth

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 http://www.macrobusiness.com.au/2012/06/the-european-summit-is-a-write-off/“>MacroBusiness.

It’s the eve of the 19th EU summit and as I type Angela Merkel and Francois Hollande should be getting started on their pre-summit meeting. I don’t think there is doubt in anyone’s mind that although we have seen 18 before it, this summit is of particular importance. Hollande and Merkel had a few words to say before their meeting:

The European Summit is a Write Off

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.

Spain took a beating overnight after Moody’s downgraded the long term debt and deposit ratings of 28 Spanish banks on the back of the sovereign downgrade earlier in the month. Yields on short term debt spiked at auction:

Yanis Varoufakis: Greece is Finished

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:

Europe Takes a First Step

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.

It’s another week and another summit for Europe. The latest EU summit will be held in Brussels on Thursday and Friday and once again it is a ‘summit to end all summits’. Last Friday saw the leaders of the four largest Eurozone economies meet in Rome and the outcome was relatively positive: