Category Archives: Currencies

Satyajit Das: Europe’s The Road to Nowhere, Part I – Fiscal Bondage

Yves here. As much as the image of Frau Merkel decked out as a domme is more than my tender sensibilities can take, the metaphor seems to apt for writers like Das to pass it by.

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Financially futile, economically erroneous, politically puzzling and socially irresponsible, the December 2011 European summit was a failure. Only the attending leaders and their acolytes believe otherwise. German Chancellor Angela Merkel’s post-summit homilies about the “long run”, “running a marathon” and “more Europe” rang hollow.

Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part IV

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives

I have set out a simplified model of a monetarily sovereign government. But near the end of the previous section, I began to suggest that the United States government is indeed a monetary sovereign by this kind. The reader might now suspect that I have yielded my rational mind over to a simplistic fiction of my own creation. And by this point, the reader is probably thinking that however interesting it might be to imagine this fictional entity, the so-called monetary sovereign, such fictions have nothing to do with the complexities of the real world, because actual governments maintain accounts that are indeed constrained by the amount of money in those accounts and by the external sources of funding to which they have access. After all, can’t a government default on its debt? What about the recent debt ceiling debate in the US? What about what is happening in Europe with the sovereign debt crisis? Also, if a government like the United States government was a monetary sovereign of the kind I have described, the consequences would seem to be enormous. Surely if a democratic government possessed this kind of power, we would make much more use of it than we do. In short, monetary sovereignty as described seems both too simple to be real and too good to be true.

These skeptical intuitions are reasonable, so they need to be addressed.

Wray: Krugman has shined the headlights on the crucial currency issuer-currency user difference

Edward Harrison here. The post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone. While I have an Austrian bias overall, for me, MMT is the best way […]

Europe Braces for Long Winter

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.

Well, it looks like Santa finally stuck his head out of the dark cave for a look around. It is yet to be seen if he rams it straight back in again because he doesn’t like the weather, but at least he has appeared for one night.

Wolf Richter: Political Realities Threaten To Split The Eurozone

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

Nicolas Sarkozy will be the only French president since World War II with two recessions under his watch, if the forecast by the National Institute of Statistics and Economics (Insee) turns out to be correct. Recessions are rare in France: between the end of the war and the beginning of the financial crisis, there were two. Then came the four negative quarters of 2008/2009. Now, Insee forecasts another contraction: -0.2% in the fourth quarter of 2011 and -0.1% in the first quarter of 2012.

After an uptick over the summer, economic indicators have gone south.

ECB Success and Folly

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.

Yet another interesting night in Europe. Spain managed to over sell as it latest auction with €6.03 billion sold versus €3.5 billion targeted which in the current environment is seen as a good result.

Hallelujah Corporations

Some holiday black humor. I have to point out that doing a choral piece with only four voices is pretty impressive. Hat tip reader Helaine.

Eurocrisis Solutions For Whom?

This Real News Network segment was recorded before the supposed “this time we’re really gonna fix it” Eurozone deal was announced today. Nevertheless, it is a useful discussion of the political dynamics that drove the pact.

Central Banks Plan for Possible Euro Breakup as Merkel Focuses on Wrong Issues

The denial about the existential nature of the Eurozone crisis seems to be lifting. The press has featured reports of companies and banks doing contingency planning for the possibility of a Euro dissolution or exits by some member states.

In keeping, the Wall Street Journal tonight reports that even central banks are starting to contemplate what had heretofore been unthinkable:

On the Austerity and Rule by Big Finance in Greece

This Real News Network interview nominally is about whether Greece should leave the Euro. But it is really about the struggle between the bondholders, who are crushing Greek democracy and society, versus the population. The interviewee Costas Lapavitsas makes an forceful case why defying the banks is the best route for Greek society, even thought the transition will also be difficult.

Alan Grayson on GAO Report on the Fed

Yves here. There has been a lot of press, deservedly so, on the information that Bloomberg managed to pry out of the Fed on its emergency lending programs during the crisis. The Fed again is in crisis mode, again in a controversial and arguably compromised position in extending currency swaps to the ECB to provide dollar liquidity to European banks. They are having difficulty securing funding because US money market funds are no longer keen about parking money with them and US regulators have been discouraging banks from extending credit lines to them. As a consequence, another set of important revelations about Fed conduct, namely, the release of the results of a GAO review of crisis related Fed operations, is not getting the attention it warrants.

David Apgar: Could Germany Be Right about the Euro?

By David Apgar, co-founder of GoalScreen, a web app still in trials that lets investors test alternative price drivers of specific securities (free though the end of the year at www.goalscreen.com. He has been a manager at the Corporate Executive Board, McKinsey, the Office of the Comptroller of the Currency, and Lehman, and writes at www.goalscreen.com/blog.

What if there are good reasons for the preternatural calm of German Chancellor Merkel’s inner circle as the English-language media (based, after all, in the investor capitals of London and New York) light their collective hair on fire about the euro’s imminent immolation? Surprisingly, you can make a decent argument that the euro zone is at no risk of breakup – unless someone secretly switches its purpose from facilitating European trade to providing investors an implicit guarantee against losses.

ContagionEx is For You!

I’m in the middle of a serous shredding which is taking longer than I’d like. But for your viewing pleasure in the meantime, Mark Ames has found this tidbit:

Rob Johnson on Real News Network on the Fed’s Lifeline to Eurobanks, and the Rationale for Austerity

Rob Johnson brings a wide ranging perspective (from politics, as a former Senate staffer; from markets, as a former hedge fund manager; and an economist, by training and via his current role as head of the Institute for New Economic Thinking) to this interview on the immediate and deeper implications of the central bank intervention on behalf of the Eurozone earlier this week. Johnson is deeply skeptical both of the near and longer-term approaches taken to rescue the Euro. This talk has a particularly clear and layperson friendly discussion of the rationale for and failings of austerity.