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.
Read more...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.
Read more...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’.
Read more...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.”
Read more...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.
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 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:
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.
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:
Read more...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 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:
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...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...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...All eyes in finance are on Greece…
Read more...Yves here. Das’ post has a lot of useful information, but like a lot of finance people, he is hostage to a conventional markets-driven reading of the issues. Governments are not households or businesses. When the private sector delevers, unless a country is running a big surplus (as Germany is) you can’t have government delever at the same time. So Germany’s notion of virtue (that governments and private citizens should wear an austerity hair shirt) works only for Germany.
There are also ways to prevent an Euro train wreck that don’t involve using German’s balance sheet, such as having the ECB issue bonds, or do revenue sharing (say on a per capita basis, as Marshall Auerback suggested in a NC post). Or the ESM could be given a banking licence via the ECB so that it has the ability to deploy unlimited capital to sort out the solvency issue (as France has suggested). Yanis Varoufakis’ “Modest Proposal” is another approach. But if Germany continues to oppose having the ECB take a much more aggressive stance, Das’ concerns are germane.
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