Category Archives: Currencies

German Paper Says AIG May Have Sold CDS on Greece

From FAZ,. Note the text below, translated by EuroSavant, replaces an earlier GoogleTranslate version. You can read an English version of the entire article here. In the larger scheme of things, this example shows how AIG could have, and probably did, serve to channel funds from the public at large to speculators. London investment bankers […]

Thinking the Unthinkable: What if China Devalues the Renminbi?

By Marshall Auerback, a fund manager and investment strategist who writes for New Deal 2.0 and Yves Smith Conventional wisdom holds that the Chinese are due (as in overdue) for a revaluation of their currency, the renminbi. For instance, a recent report from Goldman argues that China will raise the value of the RMB against […]

When is a Fraud Not a Fraud? (Greece-Goldman Edition)

The short answer to the question in the headline is “When there are no rules.” A headline in a current Bloomberg story illustrates the problem: “Goldman Sachs, Greece Didn’t Disclose Swap, Investors ‘Fooled’.” “Fooled” is an unusual choice of words, particularly when applied to to presumed grown-ups like institutional investors and international overseers. Bloomberg seems […]

EU Showdown With Greece Looming

The latest move in the “so what are we gonna do about Greece?” EU vs. Greece drama was that Greece was playing non-negotiable, saying it had agreed to reduce its fiscal deficit by 4% of GDP (from over 12.7% to 8.7%) and it was premature to talk about doing more at this juncture. That posture […]

Unwinding Global Imbalances

Several readers pointed to a recent post by Michael Pettis, which mainly discussed how expected wage increases in China are a hopeful sign that China is taking steps to become more consumption-oriented. But as much as this is a move forward, changing the mix of China’s composition of demand is at least a decade-long project […]

Greece Rescue Collides With the Policy Trilemma

A fair number of policy commentators are hewing to the view that somehow the EU will cobble together some sort of solution to the Greek fiscal mess because the alternatives look vasty worse. As Paul Krugman noted: Now what? A breakup of the euro is very nearly unthinkable, as a sheer matter of practicality. As […]

Open Source Inquiry Opportunity: Some of Goldman’s Greece Swaps Made Public

In a New York Times op-ed late last year, Bill Black, Frank Partnoy, and Eliot Spitzer called for an open source investigation: we know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers, as well as in the key internal accounting documents and financial models generated […]

Can Eurobanks Take a Greek Default?

The markets did not react well to the Friday combo plate of weaker than expected European growth, Chinese tightening ahead of the anticipated schedule, and less than convincing remarks regarding what if anything the EU intends to do about its little looming sovereign debt crisis. And top it off by having Greece PM Papandreou launch […]

Devaluing Currencies May Not Be Such a Great Economic Cure After All

Reader Swedish Lex points out an important implication of a recent VoxEU post on the Nordic economic model and how it fared in the crisis: The Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are champions of free trade and open markets… The Nordics have all had different monetary regimes since the euro. […]

China’s Burgeoning Local Debt Means Debt, Banking System Risk Understated

Victor Shih has done some serious analytical work to try to get a handle on the magnitude of China’s local debt. His post, which included extracts from his op-ed in the Asian Wall Street Journal, shows that some of the narratives about China are woefully incomplete. The whole post is very much worth reading, but […]

Wray: The Federal Budget is NOT like a Household Budget – Here’s Why

By L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City who also writes for New Deal 2.0 Whenever a demagogue wants to whip up hysteria about federal budget deficits, he or she invariably begins with an analogy to a household’s budget: “No household can continually spend more than its income, and […]

Goldman Helped Greece Disguise Deficit

Readers may know that one point of contention in the worries about Greece’s deficits is that it had hidden the fact that it violated Maastricht rule that fine eurozone countries whose fiscal deficits exceed 3% of GDP. How was this subterfuge achieved? While the Greek government engaged in some bogus accounting on its own, it […]

Germany Backs Greek Rescue to Save German Banks (Update: Germany Says No Decision Made)

Equities and commodities markets rallied on the belief that Greece would be rescued, and that notion is increasingly looking accurate. The Telegraph provides an update (hat tip Swedish Lex): Wolfgang Schäuble, Germany’s finance minister, has asked officials to prepare a plan in time for a summit of EU leaders on Thursday, according to reports in […]

Are Greek Sovereign Debt Tremors a Start of a New Phase of the Crisis?

After the months of buoyant markets, a return to crisis-type headlines seems troublingly familiar, even though the perturbations of the last day or so are a pale shadow of the worst months of the crisis. And some are making the bull case. For instance, a headline at Clusterstock trumpetss, “Yesterday’s Bloodshed Sent The VIX Soaring […]