See comments by Frank Shostak
Monday, May 31, 2010
Sunday, May 30, 2010
Euro shorties take care
Being still short on the euro is high risk. Indeed, an exchange rate of 1.25 is much more likely than 1.15 and 1.30 is more likely than 1.10. For the shorties it is time to pack and go home and search another prey. The euro will survive, the shorties won't. A sound analysis of the fundamentals clearly shows that the euro's external position does not warrant its demise. The eurozone has no current account deficit and no net external debt and the global competitive position of many euro countries is strong. Even more so: the highly indebted "Club Med" countries along with Ireland have implemented the measures to get clean. This by itself is a global rarity.
Demise of the euro is out of the question
May 27 (Bloomberg) -- Former Bundesbank President Helmut Schlesinger said the euro’s slide hasn’t left it at an unnaturally low level and the breakup of Europe’s 16-nation currency union is out of the question.
“The euro isn’t in danger,” ... While the pace of the currency’s decline “did give cause for concern,” its level “is by no means catastrophically low,” he said.
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Comment: Indeed, the stakes are so high for the euros that the consensus among the authorities to maintain the common currency indeed is very high. Let's remember that Schlesinger was a staunch inflation fighter at his time at the Budensbank and he received a heck of criticism from the American Keynesians who now praise the German central bank in retrospect more than it ever deserved. What a silly world we live in.
“The euro isn’t in danger,” ... While the pace of the currency’s decline “did give cause for concern,” its level “is by no means catastrophically low,” he said.
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Comment: Indeed, the stakes are so high for the euros that the consensus among the authorities to maintain the common currency indeed is very high. Let's remember that Schlesinger was a staunch inflation fighter at his time at the Budensbank and he received a heck of criticism from the American Keynesians who now praise the German central bank in retrospect more than it ever deserved. What a silly world we live in.
America’s Unconstitutional Money and Banking System
Posted by Michael S. Rozeff on May 29, 2010 07:54 AM at LewRockwell.com
Now available here and here for free is Part 12 of The U.S. Constitution and Money. This article pinpoints and explains 4 reasons why the money we use is unconstitutional and 3 more reasons why the Federal Reserve is unconstitutional. How do Federal Reserve Notes differ from United States Notes issued by the U.S. Treasury? Are the latter constitutional? This kind of issue is also addressed in this article. I am summarizing Edwin Vieira Jr.’s two-volume out-of-print cult classic Pieces of Eight: The Monetary Powers and Disabilities of the U.S. Constitution. We are nearing the end. After this come his recommendations for reform.
Now available here and here for free is Part 12 of The U.S. Constitution and Money. This article pinpoints and explains 4 reasons why the money we use is unconstitutional and 3 more reasons why the Federal Reserve is unconstitutional. How do Federal Reserve Notes differ from United States Notes issued by the U.S. Treasury? Are the latter constitutional? This kind of issue is also addressed in this article. I am summarizing Edwin Vieira Jr.’s two-volume out-of-print cult classic Pieces of Eight: The Monetary Powers and Disabilities of the U.S. Constitution. We are nearing the end. After this come his recommendations for reform.
Future backwards
May 28 (Bloomberg) -- U.S. stocks slid, capping the worst May for the Dow Jones Industrial Average since 1940, while the euro slumped and Treasuries rose as a downgrade of Spain’s debt rating and escalating tensions on the Korean peninsula triggered a flight from riskier assets.
The Dow tumbled 122.36 points, or 1.2 percent, to 10,136.63 at 4 p.m. in New York and lost 7.9 percent this month. The Standard & Poor’s 500 Index sank 1.2 percent to 1,089.41, led by financial shares on the Spanish downgrade and energy companies after U.S. President Barack Obama extended a moratorium on new deep-water drilling. Oil erased gains after rallying as much as 1.6 percent to more than $75 a barrel. Ten-year Treasury yields decreased 7 basis points to 3.3 percent. The euro slipped 0.7 percent to $1.2273.
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Comment: It will be tough work to dismantle all the wrong moves of the past weeks. Anyway, it looks as if the week ahead will bring even more turbulence and false entanglements. The market can only be as smart as its players. When looking at today's great majority of players in the market, sound judgement is the least to hope for.
The Dow tumbled 122.36 points, or 1.2 percent, to 10,136.63 at 4 p.m. in New York and lost 7.9 percent this month. The Standard & Poor’s 500 Index sank 1.2 percent to 1,089.41, led by financial shares on the Spanish downgrade and energy companies after U.S. President Barack Obama extended a moratorium on new deep-water drilling. Oil erased gains after rallying as much as 1.6 percent to more than $75 a barrel. Ten-year Treasury yields decreased 7 basis points to 3.3 percent. The euro slipped 0.7 percent to $1.2273.
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Comment: It will be tough work to dismantle all the wrong moves of the past weeks. Anyway, it looks as if the week ahead will bring even more turbulence and false entanglements. The market can only be as smart as its players. When looking at today's great majority of players in the market, sound judgement is the least to hope for.
Bad advice
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.--
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Comment: The extent of the Greek, Spanish and Portuguese debt problem gets highly exaggerated by these "experts". It is also rather ridiculous to suggest that a default would save the Greek economy. The contrary is the case. Only by maintaining the common currency and implementing an adaptation program can Greece save its economy. Both ways come with high costs. In the end, however, the option to hold on to the euro will prove to be the better way. The problem with Greek debt is not just German and French banks. A breakdown of the euorzone would have negative effects across the Atlantic and Chanell as well. Maybe the "experts" of CEBR believe that a new great depression will come anyway and the earlier it comes, the better, and the easiest way to trigger a depression would be a Greek default with its consquent contagion.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.--
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Comment: The extent of the Greek, Spanish and Portuguese debt problem gets highly exaggerated by these "experts". It is also rather ridiculous to suggest that a default would save the Greek economy. The contrary is the case. Only by maintaining the common currency and implementing an adaptation program can Greece save its economy. Both ways come with high costs. In the end, however, the option to hold on to the euro will prove to be the better way. The problem with Greek debt is not just German and French banks. A breakdown of the euorzone would have negative effects across the Atlantic and Chanell as well. Maybe the "experts" of CEBR believe that a new great depression will come anyway and the earlier it comes, the better, and the easiest way to trigger a depression would be a Greek default with its consquent contagion.
Instutionalization of currency swaps
By Eunkyung Seo May 30 (Bloomberg) -- South Korea proposed a permanent arrangement for central banks to swap foreign currencies to help address the type of funding shortages that emerged during the global financial crisis.
The “broadening and institutionalization” of the measures could help establish “a global financial safety net,” Bank of Korea Governor Kim Choong Soo said in the text of a speech to be delivered tomorrow in Seoul at a conference of central bankers.
Kim’s proposal comes five days before Group of 20 finance chiefs gather to discuss strengthening efforts to prevent financial crises. Federal Reserve Chairman Ben S. Bernanke, who’s among officials due to speak to the Korean forum, has opposed swaps as a “permanent service,” seeking instead to pressure banks into better managing their funding needs across different currencies.
South Korea’s Kim said his proposal could cut the need for emerging economies to hold large quantities of foreign-exchange reserves as insurance at a “substantial” economic cost. His comments were for a two-day forum, hosted by his bank, on “The Changing Role of Central Banks.” ---
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Comment: It is high time to find a way out of the absurdity that in order to gain a safety net, emerging market economies need to accumulate foreign exchange, mainly in US dollars, and thus inadvertently finance the American debt orgy.
The “broadening and institutionalization” of the measures could help establish “a global financial safety net,” Bank of Korea Governor Kim Choong Soo said in the text of a speech to be delivered tomorrow in Seoul at a conference of central bankers.
Kim’s proposal comes five days before Group of 20 finance chiefs gather to discuss strengthening efforts to prevent financial crises. Federal Reserve Chairman Ben S. Bernanke, who’s among officials due to speak to the Korean forum, has opposed swaps as a “permanent service,” seeking instead to pressure banks into better managing their funding needs across different currencies.
South Korea’s Kim said his proposal could cut the need for emerging economies to hold large quantities of foreign-exchange reserves as insurance at a “substantial” economic cost. His comments were for a two-day forum, hosted by his bank, on “The Changing Role of Central Banks.” ---
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Comment: It is high time to find a way out of the absurdity that in order to gain a safety net, emerging market economies need to accumulate foreign exchange, mainly in US dollars, and thus inadvertently finance the American debt orgy.
Friday, May 28, 2010
Best cities to live
City rankings
Top 50 cities: Quality of living ranking
Base City: New York, US (=100)| Rank 2010 | City | Country | Qol index 2010 |
| 1 | VIENNA | AUSTRIA | 108.6 |
| 2 | ZURICH | SWITZERLAND | 108 |
| 3 | GENEVA | SWITZERLAND | 107.9 |
| 4 | VANCOUVER | CANADA | 107.4 |
| 4 | AUCKLAND | NEW ZEALAND | 107.4 |
| 6 | DUSSELDORF | GERMANY | 107.2 |
| 7 | FRANKFURT | GERMANY | 107 |
| 7 | MUNICH | GERMANY | 107 |
| 9 | BERN | SWITZERLAND | 106.5 |
| 10 | SYDNEY | AUSTRALIA | 106.3 |
| 11 | COPENHAGEN | DENMARK | 106.2 |
| 12 | WELLINGTON | NEW ZEALAND | 105.9 |
| 13 | AMSTERDAM | NETHERLANDS | 105.7 |
| 14 | OTTAWA | CANADA | 105.5 |
| 15 | BRUSSELS | BELGIUM | 105.4 |
| 16 | TORONTO | CANADA | 105.3 |
| 17 | BERLIN | GERMANY | 105 |
| 18 | MELBOURNE | AUSTRALIA | 104.8 |
| 19 | LUXEMBOURG | LUXEMBOURG | 104.6 |
| 20 | STOCKHOLM | SWEDEN | 104.5 |
| Mercer survey |
Thursday, May 27, 2010
Plenty of bad advice
May 27 (Bloomberg) -- Investors should sell the euro versus the dollar on concern that Europe’s liquidity crisis isn’t over and investors will continue to flee European assets, Nomura International Plc and Citigroup Inc. said...
....“Fears of a widespread liquidity crisis continue to linger in the background,” Steven Englander, head of Group of 10 currency strategy at Citigroup in New York, wrote in a report today. “Against this backdrop, we anticipate that downward pressure on the euro will persist.”..
... Nomura recommended selling the euro at $1.2177, with a stop at $1.2880. The firm earlier recommended selling the currency after it broke $1.25 on May 14 and at $1.2350 on May 19.
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....“Fears of a widespread liquidity crisis continue to linger in the background,” Steven Englander, head of Group of 10 currency strategy at Citigroup in New York, wrote in a report today. “Against this backdrop, we anticipate that downward pressure on the euro will persist.”..
... Nomura recommended selling the euro at $1.2177, with a stop at $1.2880. The firm earlier recommended selling the currency after it broke $1.25 on May 14 and at $1.2350 on May 19.
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A trillion here, a trillion there
The U.S. national debt has passed the $13 trillion mark, according to USDebtClock.org, an independent website that tracks the real-time growth of U.S. revenues and spending.
From China with love
May 27 (Bloomberg) -- Stocks and U.S. futures surged and the euro snapped a three-day decline against the dollar as China said it remains a long-term investor in Europe, damping concerns that the region’s debt crisis will worsen. Commodities rallied.--
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Comment: Imagine China without any alternative to the dollar left.
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Comment: Imagine China without any alternative to the dollar left.
Wednesday, May 26, 2010
Germany defies the markets
May 26 (Bloomberg) -- Germany won’t wait for European Union or international consent before curbing speculation and making banks contribute to the cost of the financial crisis, Finance Ministry spokesman Michael Offer said.The ministry yesterday proposed legislation to expand a partial ban on naked short-selling to all German stocks and certain euro-currency derivatives in a move that would replace a temporary ruling by the BaFin regulator...
“We want to give a clear signal, to markets too, that we will act nationally whenever we can to put a stop to the speculators’ game,” Offer said at a regular government press conference in Berlin today. Germany will go it alone and act nationally “whenever possible,” and will do so either via BaFin or by means of legislation, he said.
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Comment: I'm curious myself how this will work out. There is certainly a populist element in the move. On the other hand, as said before here, there is an element of fierce resistence among leading euro politicians to maintain their single currency and defend it against speculative attacks.
“We want to give a clear signal, to markets too, that we will act nationally whenever we can to put a stop to the speculators’ game,” Offer said at a regular government press conference in Berlin today. Germany will go it alone and act nationally “whenever possible,” and will do so either via BaFin or by means of legislation, he said.
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Comment: I'm curious myself how this will work out. There is certainly a populist element in the move. On the other hand, as said before here, there is an element of fierce resistence among leading euro politicians to maintain their single currency and defend it against speculative attacks.
Tuesday, May 25, 2010
Victimology
May 25 (Bloomberg) -- China is under growing pressure from Asia, Europe and the U.S. to revalue its currency. Until recently, it even looked like we were about to embark on a sustained process of yuan revaluation fairly soon.
The Greek crisis may have changed that. The 15 percent slide in the euro’s value against the yuan over the past six months has eroded Chinese competitiveness in the market of its largest trading partner: the European Union.
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Comment: Along with global stockholders, the hardest hit victims of the Greek comedy appear to be US and Chinese exporters. There won't be a recovery in the US and the Chinese export boom is coming to an end as long as the pressure on the euro will continue.
The Greek crisis may have changed that. The 15 percent slide in the euro’s value against the yuan over the past six months has eroded Chinese competitiveness in the market of its largest trading partner: the European Union.
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Comment: Along with global stockholders, the hardest hit victims of the Greek comedy appear to be US and Chinese exporters. There won't be a recovery in the US and the Chinese export boom is coming to an end as long as the pressure on the euro will continue.
A trillion here, a trillion there
May 25 (Bloomberg) -- Global banks may have a capital deficit of more than $1.5 trillion by the end of next year and some may require state support, according to a study by Independent Credit View, a Swiss rating company.
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Wake-up call to contrarians
“We can’t find anyone who’s bullish on the euro -- period,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The market was already quite unstable and you get a few shocks going through and it accelerates the machine.”
Bloomberg News
Bloomberg News
A new wave of distrust hits financial markets
May 25 (Bloomberg) -- The rate banks say they pay for three-month loans in dollars climbed for an 11th day as concern mounted that Europe’s debt crisis will prompt financial institutions to question one another’s creditworthiness.
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Comment: Their is too much focus on the euro when in fact the whole financial system is fake and corrupt to the bone. My analysis that "the financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation..." is still as true today as it was in September 2008, and I still have no reason to discard my statement of March 2010 that "the recent improvement of the global economy... is just one more deception in a long series of deceptions that have plagued policy makers and investors..."
Read more:
"What's behind the financial market crisis?"
"The Stimulus Scam"
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Comment: Their is too much focus on the euro when in fact the whole financial system is fake and corrupt to the bone. My analysis that "the financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation..." is still as true today as it was in September 2008, and I still have no reason to discard my statement of March 2010 that "the recent improvement of the global economy... is just one more deception in a long series of deceptions that have plagued policy makers and investors..."
Read more:
"What's behind the financial market crisis?"
"The Stimulus Scam"
The great battle
May 25 (Bloomberg) -- Euro-area governments breached their own fiscal rules more than half of the time since they began trading the single currency..
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Interactive graphics on euro zone's fiscal history
http://www.bloomberg.com/insight/euro-breach.html
Comment: The euro was born with false promises, it grew up in a web of lies and now the common European currency faces its pubertarian encounter with truth.
Like any other fiduciary means of payment, the euro is a fake currency, as face as the yen or the dollar or any other of modern "state money".
Yet the current battle at the foreign exchange markets envolves more than just the exchange value of currencies. For the Europeans the fight has gained the dimension of a battle for survival. There is a strong feeling among a wide band of European leaders that a failure of the euro means a collapse of the European Union. This may be right or it may be wrong. However, it is clear what kind of implication this judgment entails: The euros will fight "until the last man" to keep their currency. Only total defeat will make them abandon the common currency. This is why it is highly probable that the speculative attacks on the euro that have been going on for months will, in the end, lead to a showdown when the short positions will have to be liquitated at high costs for the funds involved in this game. I fear to say that in the end politics will win -- which does not mean that such a victory is good.
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Interactive graphics on euro zone's fiscal history
http://www.bloomberg.com/insight/euro-breach.html
Comment: The euro was born with false promises, it grew up in a web of lies and now the common European currency faces its pubertarian encounter with truth.
Like any other fiduciary means of payment, the euro is a fake currency, as face as the yen or the dollar or any other of modern "state money".
Yet the current battle at the foreign exchange markets envolves more than just the exchange value of currencies. For the Europeans the fight has gained the dimension of a battle for survival. There is a strong feeling among a wide band of European leaders that a failure of the euro means a collapse of the European Union. This may be right or it may be wrong. However, it is clear what kind of implication this judgment entails: The euros will fight "until the last man" to keep their currency. Only total defeat will make them abandon the common currency. This is why it is highly probable that the speculative attacks on the euro that have been going on for months will, in the end, lead to a showdown when the short positions will have to be liquitated at high costs for the funds involved in this game. I fear to say that in the end politics will win -- which does not mean that such a victory is good.
Next round in a fight that won't end without a knock-out
May 25 (Bloomberg) -- Germany’s Finance Ministry proposed legislation extending a ban on naked short selling adopted last week to all German stocks and certain euro currency derivatives.
The plan would ban naked short selling in stocks off all German companies listed on a domestic exchange and would also outlaw naked credit default swaps of some euro-zone bonds as well as certain euro currency derivatives, the ministry said in draft legislation distributed to banks and industry groups.
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The plan would ban naked short selling in stocks off all German companies listed on a domestic exchange and would also outlaw naked credit default swaps of some euro-zone bonds as well as certain euro currency derivatives, the ministry said in draft legislation distributed to banks and industry groups.
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What's going on in the world
Today the leading Austrian economic think tank, the Ludwig von Mises Institute held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future...
Read more
Read more
Monday, May 24, 2010
Approaching nervous breakdown again
May 24th 2010 | From The Economist online
THE clearest measure of recent investor uncertainty is the VIX or volatility index, traded on the Chicago Board Options Exchange. The index shows the price investors are willing to pay to insure themselves against substantial market moves. Having declined pretty steadily since the middle of 2009, the VIX has more than doubled in May and hit its highest level for over a year last week as it became clear that the euro-zone's rescue package on May 10th had not steadied government-bond markets as much as was hoped. Another concern for investors is fiscal policy. While they want governments to cut their deficits, they also worry about the impact of many developed countries doing so at once.Source
The case for hyperinflation
InflationUS — May 13, 2010 — The beginning of a U.S. currency crisis and hyperinflation - a one-hour feature about the coming of hyperinflation and the dollar crash:
Youtube video InflationUS
Youtube video InflationUS
Sunday, May 23, 2010
States in trouble: fall of revenues
more than 20 % revenue shortfall
Less than 20 % revenue shortfall
No revenue shortfall up to now
Saturday, May 22, 2010
Compare and decide
May 22 (Bloomberg) -- The euro rose the most in eight months against the dollar amid speculation traders who bet on its decline amid Europe’s sovereign-debt crisis had to buy back the currency as it strengthened to a one-week high. --
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Comment: Compare what you have read on this blog about the euro with that what the media pundits in the US have said and decide whether you will continue to lose money or win. Check postings below.
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Comment: Compare what you have read on this blog about the euro with that what the media pundits in the US have said and decide whether you will continue to lose money or win. Check postings below.
Monday, May 17, 2010
Euro comeback in the making?
May 17 (Bloomberg) -- U.S. stocks rose, with the Dow Jones Industrial Average reversing a 184-point drop, as the euro’s rebound from a four-year low bolstered optimism that the shared European currency will weather the region’s debt crisis.--
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Comment: The wake-up call for the euro didn't go unnoticed. It looks as if the euros got their act together.
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Comment: The wake-up call for the euro didn't go unnoticed. It looks as if the euros got their act together.
Sunday, May 16, 2010
Washington, we have a problem
Sorry to say it: but America will pay dearly for lending an ear to this selected group of false prophets.
More hate than reason
Posted by Charles Burris on May 16, 2010 01:51 PM
from LewRockwell blog May 17, 2010:
Ambrose Evans-Pritchard’s excellent article, “Europe’s fiscal Fascism brings British withdrawal ever closer,” posted on this weekend’s edition of LRC prompts the ever-curious reader to inquire further into the roots of the European Union and the source of the financial tsunami spreading throughout that continent. Evans-Pritchard himself provided a key piece of the puzzle with this important expose’ article tracing the covert planning, manipulation, and financing of post-WWII European federalism to top tiers of the American intelligence establishment (which interlocked with key Wall Street investment banks and financial institutions, the major foundations which acted as covert funding mechanisms for these projects, the elite mainstream media which provided disinformation and cover for the endeavor, and entities of the foreign policy establishment such as the Council on Foreign Relations and the Atlantic Council).
Other respected researchers have presented their evidence, which on the mundane surface level appears to be contradictory, as to the roots of “the European Idea,” European federalism, and the EU. Most notably, I am referring to former Soviet dissidents Vladimir Bukovsky and Pavel Stroilov and their compact book, EUSSR: The Soviet Roots of European Integration, and British Euro-Skeptic (and classical liberal) John Laughland and his The Tainted Source: The Undemocratic Origins of the European Idea, which traces this collectivist impetus to its National Socialist and Fascist origins. But as I pointed out in an earlier LRC article, the ideological roots of collectivism, whether in its communist, fascist, or national socialist variations, have a common origin themselves. The EU superstate is only the latest manifestation of this two hundred year old reactionary philosophy.
Other respected researchers have presented their evidence, which on the mundane surface level appears to be contradictory, as to the roots of “the European Idea,” European federalism, and the EU. Most notably, I am referring to former Soviet dissidents Vladimir Bukovsky and Pavel Stroilov and their compact book, EUSSR: The Soviet Roots of European Integration, and British Euro-Skeptic (and classical liberal) John Laughland and his The Tainted Source: The Undemocratic Origins of the European Idea, which traces this collectivist impetus to its National Socialist and Fascist origins. But as I pointed out in an earlier LRC article, the ideological roots of collectivism, whether in its communist, fascist, or national socialist variations, have a common origin themselves. The EU superstate is only the latest manifestation of this two hundred year old reactionary philosophy.
Greece considers legal action against financial market operators
May 16 (Bloomberg) -- Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said...
“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here."...
In the days leading up to the May 10 announcement of a loan package worth almost $1 trillion to halt the spread of Greece’s fiscal woes, European Union regulators were examining whether speculators manipulated the prices of bonds and equities and contributed to the crisis.
The Committee of European Securities Regulators said on May 7 it was investigating “exceptional volatility” in the markets and would work with other regulators, including the U.S. Securities and Exchange Commission, as part of a coordinated clampdown.
European Central Bank President Jean-Claude Trichet said May 6 that he was concerned about speculation in bond markets using credit default swaps. “By first buying the CDS and then trying to affect market sentiment by going short on the underlying bond, investors can make large profits,” he said.
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Comment: My dear friends in the speculating community all too often have a false sense of power. Let's call it the "Master-of-the-Universe-Syndrome". Yet when it comes to power, the triumph of politics does still hold. It is not my task to lament, it is not my task to please, it is my task to tell the truth as I see it. From the beginning I felt that the attack on Greece and then on the euro lacks fundamentals and is evil-spirited. Even more importantly: I feel that this speculation won't succeed for the players and in the end we shall have a blow-back with more regulation, stiffer controls and not less but more political influence. What we will get is a hugs setback for liberty and free markets.
“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here."...
In the days leading up to the May 10 announcement of a loan package worth almost $1 trillion to halt the spread of Greece’s fiscal woes, European Union regulators were examining whether speculators manipulated the prices of bonds and equities and contributed to the crisis.
The Committee of European Securities Regulators said on May 7 it was investigating “exceptional volatility” in the markets and would work with other regulators, including the U.S. Securities and Exchange Commission, as part of a coordinated clampdown.
European Central Bank President Jean-Claude Trichet said May 6 that he was concerned about speculation in bond markets using credit default swaps. “By first buying the CDS and then trying to affect market sentiment by going short on the underlying bond, investors can make large profits,” he said.
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Comment: My dear friends in the speculating community all too often have a false sense of power. Let's call it the "Master-of-the-Universe-Syndrome". Yet when it comes to power, the triumph of politics does still hold. It is not my task to lament, it is not my task to please, it is my task to tell the truth as I see it. From the beginning I felt that the attack on Greece and then on the euro lacks fundamentals and is evil-spirited. Even more importantly: I feel that this speculation won't succeed for the players and in the end we shall have a blow-back with more regulation, stiffer controls and not less but more political influence. What we will get is a hugs setback for liberty and free markets.
Saturday, May 15, 2010
The euros are the first to mend
And finally: What is the rest of the world doing? Most of them continue to burn their furniture and call that an economic recovery and dare to call that economic growth. Currency speculators of the world wake up!
Friday, May 14, 2010
Right before a short squeeze to come
Bets on Euro Decline at a Record on Concern Bailout May Fail
By Ben Levisohn
May 14 (Bloomberg) -- Futures traders increased bets to a record that the euro will fall against the dollar a day after European leaders announced a 750 billion-euro ($928 billion) bailout package in an effort to contain a sovereign-debt crisis that threatens to shatter confidence in the shared currency.
The number of wagers by hedge funds and other large speculators for a decline in the 16-nation currency rose on May 11 to 113,890 contracts more than those anticipating a gain, according to Commodity Futures Trading Commission data. It was the third consecutive week that the amount climbed to a record.
“No one wants to buy the euro,” said John Doyle, a strategist at currency-trading firm Tempus Consulting Inc. in Washington.
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Comment: A perfect constellation for a coming short squeeze. Contrarians take your chance!
By Ben Levisohn
May 14 (Bloomberg) -- Futures traders increased bets to a record that the euro will fall against the dollar a day after European leaders announced a 750 billion-euro ($928 billion) bailout package in an effort to contain a sovereign-debt crisis that threatens to shatter confidence in the shared currency.
The number of wagers by hedge funds and other large speculators for a decline in the 16-nation currency rose on May 11 to 113,890 contracts more than those anticipating a gain, according to Commodity Futures Trading Commission data. It was the third consecutive week that the amount climbed to a record.
“No one wants to buy the euro,” said John Doyle, a strategist at currency-trading firm Tempus Consulting Inc. in Washington.
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Comment: A perfect constellation for a coming short squeeze. Contrarians take your chance!
Euro with Greek letters
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Comment: I still believe that what is currently happening at the currency markets is pretty irrational and not backed-up by the fundamentals.
Gold surge
From The Business Insider, May 13, 2010:
JP Morgan's John Bridges believes the latest breakout for gold was a huge positive sign for the metal.
Euro weakness fears, coupled with dollar weakness fears, could lead to an enormous amount of demand:
JP Morgan:
Read more
JP Morgan's John Bridges believes the latest breakout for gold was a huge positive sign for the metal.
Euro weakness fears, coupled with dollar weakness fears, could lead to an enormous amount of demand:
JP Morgan:
A German banker once told us that gold normally trades like a commodity. However, when investors lose confidence in currencies, because the pool of gold is so much smaller than the pool of currencies, demand for gold can effectively become unlimited. We believe the European version of “QE” is generating serious currency worries and led today to the breakout of the gold price above the previous intraday high at $1,226/oz.
We see this breakout as significant: The market might have welcomed the European’s latest solution to the Greek crisis with a weaker gold price. If the gold price had fallen, bears could have pointed to a “double top” in the chart, and this could have contributed to a period of weakness for the metal.
They're recommending exposure both through gold and gold-related stocks, as insurance, since despite the fact that gold is a record price levels, they believe that it could feasibly go far higher. Read more
Dollar and Dow
From Charting Stocks: "... Why is the dollar surging? Europe. The real reason (in my view) that our stock market has been so effected by European issues is the dollar dynamic. The US Dollar Index measures the US Dollar against a basket of foreign currencies, the largest of which is the Euro. As the Euro (The largest component of the basket) drops, the Dollar will rise.
For the record, the Dollar-Stock phenomena is not quite normal. During periods of strong economic expansion (such as the ’90s) both rose together as money flooded into our markets and pushed up demand for both. Since 2002, however, our economy has been reliant on excess liquidity to prop up our asset valuations. Assets did rise but only as the value of the currency used to buy them in fell.
Bottom Line: The VIX and US Dollar could mean trouble for stocks..." Read more
For the record, the Dollar-Stock phenomena is not quite normal. During periods of strong economic expansion (such as the ’90s) both rose together as money flooded into our markets and pushed up demand for both. Since 2002, however, our economy has been reliant on excess liquidity to prop up our asset valuations. Assets did rise but only as the value of the currency used to buy them in fell.
Bottom Line: The VIX and US Dollar could mean trouble for stocks..." Read more
Thursday, May 13, 2010
The euro got a French face
Charlemagne from The Economist explains:
"I think that the politics have shifted dramatically in the last few days, and that the euro is looking less German and more French..."
read more
Comment: Is it really so? If it were so, it is more than justified that the euro should go down the drain. But the point is not only France vs. Germany, the point is, in how much the PIIGS are able to get their act together, and here many news show that the earnestly try to do so.
"I think that the politics have shifted dramatically in the last few days, and that the euro is looking less German and more French..."
read more
Comment: Is it really so? If it were so, it is more than justified that the euro should go down the drain. But the point is not only France vs. Germany, the point is, in how much the PIIGS are able to get their act together, and here many news show that the earnestly try to do so.
Euro knows only one way as of now: down
May 14 (Bloomberg) -- The euro headed for a fourth weekly decline, breaking through the 14-month low reached against the dollar last week, on concern European nations’ debt-cutting measures will undermine economic growth.--
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Comment: I'm surprised. I didn't expect that the euro would fall that much. I'd be doubly surprised it the exchange rate could go down below 1.25, but as of now nothing can be excluded. The mutual misunderstandings between the euro authorities and the market operators continue. As of now it looks as if both groups are digging their financial graves.Not much intelligence on both sides yet a lot of stubbornness.
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Comment: I'm surprised. I didn't expect that the euro would fall that much. I'd be doubly surprised it the exchange rate could go down below 1.25, but as of now nothing can be excluded. The mutual misunderstandings between the euro authorities and the market operators continue. As of now it looks as if both groups are digging their financial graves.Not much intelligence on both sides yet a lot of stubbornness.
Record US budget deficit
WASHINGTON (AP) -- The federal budget deficit hit an all-time high for April as the government kept spending to aid the recovery while revenue fell sharply.
The Treasury Department said Wednesday the April deficit soared to $82.7 billion. That was significantly higher than last year's April deficit of $20 billion and the largest imbalance for that month on record.
The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of the recession which has pushed millions of people out of work. --
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Comment: With a downfall like that in April, the outlook for the rest of the year is catastrophic.
The Treasury Department said Wednesday the April deficit soared to $82.7 billion. That was significantly higher than last year's April deficit of $20 billion and the largest imbalance for that month on record.
The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of the recession which has pushed millions of people out of work. --
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Comment: With a downfall like that in April, the outlook for the rest of the year is catastrophic.
Wednesday, May 12, 2010
Krugman got competition
May 12 (Bloomberg) -- New York University professor Nouriel Roubini said Greece and other “laggards” in the euro area may be forced to abandon the common currency in the next few years to spur their economies.
A “real depreciation” in the euro is needed to restore competitiveness in nations including Spain, Portugal and Italy, he said in an interview on Bloomberg Television today. The euro will remain the currency for a smaller number of countries that have “stronger fiscal and economic fundamentals,” Roubini said.--
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Comment: It seems as if Roubini has joined the race in the competition with Krugman to be the most foolish US commentator on international finance. It was only a few days ago when Roubini foretold a break-up of the euro zone within a couple of days. Now he has extended his forecast to a couple of years. Smart guy.
A “real depreciation” in the euro is needed to restore competitiveness in nations including Spain, Portugal and Italy, he said in an interview on Bloomberg Television today. The euro will remain the currency for a smaller number of countries that have “stronger fiscal and economic fundamentals,” Roubini said.--
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Comment: It seems as if Roubini has joined the race in the competition with Krugman to be the most foolish US commentator on international finance. It was only a few days ago when Roubini foretold a break-up of the euro zone within a couple of days. Now he has extended his forecast to a couple of years. Smart guy.
Greek drama is over
May 12 (Bloomberg) -- U.S. and European stocks rose to the highest levels in more than a week as earnings from A.P. Moeller-Maersk A/S to ING Groep NV topped estimates and Europe’s economy expanded more than forecast. Greek bonds rose for a third day and gold climbed to a record.
The Stoxx Europe 600 Index climbed 1.1 percent at 9:34 a.m. in New York as all 19 of its industry groups gained and the Standard & Poor’s 500 Index rose 0.5 percent, with both reaching the highest levels since May 10. Morgan Stanley retreated on a report the bank is being probed for misleading investors in collateralized debt obligations. Greek two-year notes rose, sending their yield below 7 percent, following the near $1 trillion bailout announced by the European Union over the weekend. Gold advanced to a record for a second day. --
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Comment: The Greek part of the global debt drama is over. But the show will go on. Next stages will be California, Japan, China crash with the final act taking place in the core countries of Europe and in the United States.
The Stoxx Europe 600 Index climbed 1.1 percent at 9:34 a.m. in New York as all 19 of its industry groups gained and the Standard & Poor’s 500 Index rose 0.5 percent, with both reaching the highest levels since May 10. Morgan Stanley retreated on a report the bank is being probed for misleading investors in collateralized debt obligations. Greek two-year notes rose, sending their yield below 7 percent, following the near $1 trillion bailout announced by the European Union over the weekend. Gold advanced to a record for a second day. --
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Comment: The Greek part of the global debt drama is over. But the show will go on. Next stages will be California, Japan, China crash with the final act taking place in the core countries of Europe and in the United States.
The PIIGS on the hook to Germany
Debt owed to Germany in billion of euros
clockwise from top: Ireland, Greece, Italy, Spain, Portugal
Source
A flood of red ink
May 11 (Bloomberg) -- California Governor Arnold Schwarzenegger will seek “terrible cuts” to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011, his spokesman said.
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Comment: From Greece to California, from Portugal to Japan, a flood of red ink is drowning the world.
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Comment: From Greece to California, from Portugal to Japan, a flood of red ink is drowning the world.
Tuesday, May 11, 2010
US Government Debt in per cent of GDP 1970-2040
United States Government Debt in per cent of GDP 1970-2040
Baseline Scenario
Small fiscal restraint
Small fiscal restraint and constant old age spending
Source: BIS
Interest rate payments on government debt 2010-2040 (in per cent of GDP)
Italy - Japan - Netherlands - Spain - UK - USA
Source: BIS
Confidence game lost
ECB May Kiss Credibility Goodbye:
Commentary by Daniel Gros and Thomas Mayer
May 11 (Bloomberg) -- There is an old saying among central bankers that credibility is earned in years of hard work, but can be lost overnight. On Sunday night, the European Central Bank may have said goodbye to its credibility when it agreed to buy the government bonds of euro nations in trouble.
This casts a dark shadow over the euro area’s 750 billion- euro ($980 billion) stability package, which was dressed to impress, and seems to have worked so far. Markets will probably advance in the near term as short positions need to be covered.
A major casualty of the emergency decisions was the ECB. With its move to prop up the failing bonds of governments in financial distress, it has allowed itself to be transformed into an agent of fiscal policy. The intention to sterilize bond purchases means, in effect, that it taxes euro-area private borrowers to support governments in difficulty. In the long run, this is likely to undermine confidence in the ECB and the euro. --
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Comment: Indeed, the euro is nothing but another fiat currency, a hybrid created by politicians for political aims. The euro will go the same way as the dollar will go. Both march in tandem towards hyperinflation which will crush both currencies. What will remain after the devastation? Maybe there is hope that the people wake up and demand a currency of their own, a currency that is beyond the reach of politicians. Let us assume that two, three or four major currencies emerge from the private sector. They can have a global use and reach like nowadays one can use the major credit cards all over the world. Free banking won't have a chance before state money will be totally destroyed and absolutely discredited. We're on our way for this to happen.
Commentary by Daniel Gros and Thomas Mayer
May 11 (Bloomberg) -- There is an old saying among central bankers that credibility is earned in years of hard work, but can be lost overnight. On Sunday night, the European Central Bank may have said goodbye to its credibility when it agreed to buy the government bonds of euro nations in trouble.
This casts a dark shadow over the euro area’s 750 billion- euro ($980 billion) stability package, which was dressed to impress, and seems to have worked so far. Markets will probably advance in the near term as short positions need to be covered.
A major casualty of the emergency decisions was the ECB. With its move to prop up the failing bonds of governments in financial distress, it has allowed itself to be transformed into an agent of fiscal policy. The intention to sterilize bond purchases means, in effect, that it taxes euro-area private borrowers to support governments in difficulty. In the long run, this is likely to undermine confidence in the ECB and the euro. --
Full text
Comment: Indeed, the euro is nothing but another fiat currency, a hybrid created by politicians for political aims. The euro will go the same way as the dollar will go. Both march in tandem towards hyperinflation which will crush both currencies. What will remain after the devastation? Maybe there is hope that the people wake up and demand a currency of their own, a currency that is beyond the reach of politicians. Let us assume that two, three or four major currencies emerge from the private sector. They can have a global use and reach like nowadays one can use the major credit cards all over the world. Free banking won't have a chance before state money will be totally destroyed and absolutely discredited. We're on our way for this to happen.
Monday, May 10, 2010
Big bang for the euro raiders
May 10 (Bloomberg) -- European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Stocks surged around the world, the euro strengthened and commodities rallied.--
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Comment: Once in a while over the past couple of months I felt like the only man left who would hold on to the euro, be sure that there would be a bailout and that the European authorities would do all they can to save their common currency. This does not mean that I like what has has been done. In fact, what has been done strengthens the likelihood that the other scenario is about to unfold: global hyperinflation, and, of course, I don't like that very much either.
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Comment: Once in a while over the past couple of months I felt like the only man left who would hold on to the euro, be sure that there would be a bailout and that the European authorities would do all they can to save their common currency. This does not mean that I like what has has been done. In fact, what has been done strengthens the likelihood that the other scenario is about to unfold: global hyperinflation, and, of course, I don't like that very much either.
Sunday, May 9, 2010
Newsflash
BRUSSELS – Spain's Finance Minister says an agreement has been reached on a defense package of up to euro720 billion for the embattled euro involving the EU and the International Monetary Fund.
Elena Salgado said early Monday that under the aid plan, the EU Commission make euro 60 billion ($75 billion) available while countries from the 16-nation eurozone would promise bilateral backing for euro 440 billion ($570 billion). The IMF would contribute an additional sum of up to 220 billion euros. --
Full story
Comment: For more than a decade Americans have been taught by their ill-informed armchair warriers that the euros are mainly cheese-eating creatures from Venus who lack guts and conviction, while equally mal-informed economic pundits spread the gospel that the euro zone lacks the preconditions for a monetary union (as if the US would). In this perspective, the euro currency seemed like easy prey. Now the raiders will get fleeced and will have to pay for their gullibility and ignorance.
Elena Salgado said early Monday that under the aid plan, the EU Commission make euro 60 billion ($75 billion) available while countries from the 16-nation eurozone would promise bilateral backing for euro 440 billion ($570 billion). The IMF would contribute an additional sum of up to 220 billion euros. --
Full story
Comment: For more than a decade Americans have been taught by their ill-informed armchair warriers that the euros are mainly cheese-eating creatures from Venus who lack guts and conviction, while equally mal-informed economic pundits spread the gospel that the euro zone lacks the preconditions for a monetary union (as if the US would). In this perspective, the euro currency seemed like easy prey. Now the raiders will get fleeced and will have to pay for their gullibility and ignorance.
The triumph of politics
May 9 (Bloomberg) -- European Union finance ministers pledged to stop a sovereign debt crisis from shattering confidence in the euro as they held an emergency summit to hammer out a lending mechanism for deficit-stricken nations....
Plans for a European credit-rating authority are already under consideration at the European Commission, the bloc’s Brussels-based executive agency. It also is investigating whether ratings companies such as Standard & Poor’s wield too much power over investors’ perceptions of governments.
Asked whether steps to stem speculation against government bonds would include restrictions on short sales or credit default swaps, European Commission President Jose Barroso said “some of the points you have mentioned will be contemplated.”---
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Comment: The Euros are going to play hardball.
Plans for a European credit-rating authority are already under consideration at the European Commission, the bloc’s Brussels-based executive agency. It also is investigating whether ratings companies such as Standard & Poor’s wield too much power over investors’ perceptions of governments.
Asked whether steps to stem speculation against government bonds would include restrictions on short sales or credit default swaps, European Commission President Jose Barroso said “some of the points you have mentioned will be contemplated.”---
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Comment: The Euros are going to play hardball.
Euros pledge up to 600 billion euros
Preliminary news say that the EU meeting will result in a gigantic safety net for euro countries amounting to 600 billion euros. Definite plans are to be announced before midnight.
Euros pledge to defend their common currency
May 8 (Bloomberg) -- European leaders agreed to set up an emergency fund to halt the spread of Greece’s fiscal woes, seeking to prevent a sovereign debt crisis from shattering confidence in the 11-year-old euro.
Jolted into action by the sliding currency and soaring bond yields in Portugal and Spain, leaders of the 16 euro countries said the workings of the financial backstop will be hammered out before Asian markets open late tomorrow European time.
“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters early today after the leaders met in Brussels.
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Comment: The ring is open for the fight between finance and politics. Whether we like it or not, in the end it will be, like so many times before, the triumph of politics. Instead of becoming an Armageddon for the common European currency, most likely the Greek drama will turn out to be an Armageddon for the euro raiders.
Jolted into action by the sliding currency and soaring bond yields in Portugal and Spain, leaders of the 16 euro countries said the workings of the financial backstop will be hammered out before Asian markets open late tomorrow European time.
“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters early today after the leaders met in Brussels.
Full text
Comment: The ring is open for the fight between finance and politics. Whether we like it or not, in the end it will be, like so many times before, the triumph of politics. Instead of becoming an Armageddon for the common European currency, most likely the Greek drama will turn out to be an Armageddon for the euro raiders.
The euro-dollar exchange rate 2000 -2010
Interactive graphics dollar per euro:
http://www.spiegel.de/flash/flash-23314.html
http://www.spiegel.de/flash/flash-23314.html
Saturday, May 8, 2010
The case for an "Hyper-Inflationary Great Depression"
ShadowStats' John Williams has done his math and believes his numbers tell the truth. He explains why the U.S. is in a depression and why a "Hyper-Inflationary Great Depression" is now unavoidable.
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Comment: For quite some time I have been unsure what lies ahead: a deflationary an inflationary depression. Over the past couple of months my bias has grown to opt more for the chances of an inflationary depression. Nevertheless, my conviction is not yet hundred per cent. Nevertheless, I wouldn't touch, as of now, debt instruments, including bunds and treasuries.
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Comment: For quite some time I have been unsure what lies ahead: a deflationary an inflationary depression. Over the past couple of months my bias has grown to opt more for the chances of an inflationary depression. Nevertheless, my conviction is not yet hundred per cent. Nevertheless, I wouldn't touch, as of now, debt instruments, including bunds and treasuries.
Euros form front against currency speculators
May 9 (Bloomberg) -- European Union finance ministers meet today to hammer out the details of an emergency fund to prevent a sovereign debt crisis from shattering confidence in the 11- year-old euro.
Jolted into action by last week’s slide in the currency to the lowest in 14 months and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed to the financial backstop at a May 7 summit. They assigned finance chiefs to get it ready before Asian markets open later today European time.
“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters in the early hours yesterday after the leaders met in Brussels. --
Full text
Comment: The current financial crisis has left the stages of a game of wits and entered the stage of a primitive power game.
Jolted into action by last week’s slide in the currency to the lowest in 14 months and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed to the financial backstop at a May 7 summit. They assigned finance chiefs to get it ready before Asian markets open later today European time.
“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters in the early hours yesterday after the leaders met in Brussels. --
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Comment: The current financial crisis has left the stages of a game of wits and entered the stage of a primitive power game.
Friday, May 7, 2010
Good Paul, why not think a little bit deeper?
Paul Krugman again shows that he is brilliant at rhetoric but deficient in analytics. He writes:
".. What remains seems unthinkable: Greece leaving the euro. But when you’ve ruled out everything else, that’s what’s left. If it happens, it will play something like Argentina in 2001, which had a supposedly permanent, unbreakable peg to the dollar. Ending that peg was considered unthinkable for the same reasons leaving the euro seems impossible: even suggesting the possibility would risk crippling bank runs. But the bank runs happened anyway, and the Argentine government imposed emergency restrictions on withdrawals. This left the door open for devaluation, and Argentina eventually walked through that door..."
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Comment: Now just see what happened to Argentina after they cut the peg: Indeed, Argentina, as Krugman rhetorically says, "walked through the door", yes, but where to? Surely Argentina did not walk through the door towards prosperity. On the contrary. So why does Krugman insinuate nonsense and almost proudly show his ignorance? I do not know. All I know is that Krugman knows little about Europe, he knows little about Latin America and he knows little about economics except of a tiny bit, all the rest with him is much more rhetorical than analytical.
".. What remains seems unthinkable: Greece leaving the euro. But when you’ve ruled out everything else, that’s what’s left. If it happens, it will play something like Argentina in 2001, which had a supposedly permanent, unbreakable peg to the dollar. Ending that peg was considered unthinkable for the same reasons leaving the euro seems impossible: even suggesting the possibility would risk crippling bank runs. But the bank runs happened anyway, and the Argentine government imposed emergency restrictions on withdrawals. This left the door open for devaluation, and Argentina eventually walked through that door..."
Full text
Comment: Now just see what happened to Argentina after they cut the peg: Indeed, Argentina, as Krugman rhetorically says, "walked through the door", yes, but where to? Surely Argentina did not walk through the door towards prosperity. On the contrary. So why does Krugman insinuate nonsense and almost proudly show his ignorance? I do not know. All I know is that Krugman knows little about Europe, he knows little about Latin America and he knows little about economics except of a tiny bit, all the rest with him is much more rhetorical than analytical.
A shift of global proportions
The Economist is right: "America’s economy will undergo one of its biggest transformations in decades. This macroeconomic shift from debt and consumption to saving and exports will bring microeconomic changes too: different lifestyles, and different jobs in different places. This special report will describe that transformation, and explain why it will be tricky..."
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Comment: It is basic macroeconomics that calls for a dramatic shift. Please note that this shift is much more than purely economics. The Economist is right in pointing out that the massive change ahead affects lifestyles, jobs, and places, and maybe even calls for a profound cultural change.
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Comment: It is basic macroeconomics that calls for a dramatic shift. Please note that this shift is much more than purely economics. The Economist is right in pointing out that the massive change ahead affects lifestyles, jobs, and places, and maybe even calls for a profound cultural change.
Thursday, May 6, 2010
What's going on here?
May 6 (Bloomberg) -- U.S. stocks tumbled the most in a year as waves of computerized trading exacerbated a selloff triggered by Europe’s debt crisis, sparking a slide in Asian shares. The rout briefly erased more than $1 trillion in U.S. market value as the Dow Jones Industrial Average fell almost 1,000 points, a 9.2 percent plunge that was its biggest intraday percentage loss since 1987 and largest point drop ever, before paring the drop.
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It was only a few days ago that we announced the turning point to come. I didn't expect that the prophecy would become reality that quickly. From now on there is only way for the stock market: to go down. US financial market operators have played with fire in Greece and now their own house is in flames.
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It was only a few days ago that we announced the turning point to come. I didn't expect that the prophecy would become reality that quickly. From now on there is only way for the stock market: to go down. US financial market operators have played with fire in Greece and now their own house is in flames.
Wednesday, May 5, 2010
Forget about Greece - have a look at America and beyond
"... There are, in fact, big differences between Greece and America, which makes it easy to refute direct comparisons. Greece has a huge underground economy, a dysfunctional tax system, and a nepotistic public sector that makes American-style crony capitalism look virtuous. By western standards, Greece's economy is uncompetitive and its workers are overpaid.
But there's also an alarming similarity between the two indebted nations: Both are run by feckless politicians who seem incapable of addressing problems of their own creation..."
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Comment: Yes, admitted, Greece is a basket case, but even though it is unimportant to the world economy. The US is basket case but it's impact on the world economy is brutal, and then comes China, another brutal factor to count with. Thus forget about the silly game to bring Greece down. What threatens to bring all us of down is not Greece but the US and China.
But there's also an alarming similarity between the two indebted nations: Both are run by feckless politicians who seem incapable of addressing problems of their own creation..."
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Comment: Yes, admitted, Greece is a basket case, but even though it is unimportant to the world economy. The US is basket case but it's impact on the world economy is brutal, and then comes China, another brutal factor to count with. Thus forget about the silly game to bring Greece down. What threatens to bring all us of down is not Greece but the US and China.
A battle of ideas
From the German weekly "Der Spiegel":
Savvas Robolis is one of Greece's most distinguished economics professors. He advises cabinet ministers and union bosses. He is also a successful author and a frequent guest on the country's highest-rated talk shows. But for several days now, it has been clear to Robolis, 64, the elder statesman of Greece's left-wing academia, that he no longer has any influence.
His opposite number, Poul Thomsen, the Danish chief negotiator for the International Monetary Fund (IMF), is currently something of a chief debt inspector in the virtually bankrupt Mediterranean country. He recently took three-quarters of an hour to meet with Robolis and Giannis Panagopoulos, the president of the powerful trade union confederation GSEE. At 9 a.m. on Tuesday of last week, the men met behind closed doors in a conference room in the basement of the Grande Bretagne, a luxury hotel in Athens. The mood, says Robolis, was "icy."
Robolis told the IMF negotiator that radical wage cuts would be toxic for Greece's already comatose economy. He said that the Greeks, given their weak competitive position, primarily needed innovation and investment, and that a one-sided fixation on cleaning up the national budget would destroy the last vestiges of economic strength in Greece. The IMF, according to Robolis, could not make the same mistake as it did in Argentina in the early 1990s. "Don't put Greece on ice!" the professor warned.
But the tall Dane was not very impressed. He has negotiated aid packages with Iceland, Ukraine and Romania in the past, and when he and his 20-member delegation landed in Athens on April 18, they had come to impose a rigorous austerity program on the Greeks, not to devise long-term growth programs.
Thomsen's mandate is to save the euro zone. And any Greek resistance is futile.
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Comment: There is little to disagree with this analysis. Indeed, reality has finally caught up with those (private and public) figures who believe or made believe that permanent prosperity could be built on debt. Now the bill has come due, too late, though, we feel. In the meantime too much damage has been done to hope for swift recovery. For decades the warnings of the more sensible economists were shed into the wind, their ideas were relegated to the bin. A different academic crowd had their say: pop economists, populist academic economists, professorial demagogues.
His opposite number, Poul Thomsen, the Danish chief negotiator for the International Monetary Fund (IMF), is currently something of a chief debt inspector in the virtually bankrupt Mediterranean country. He recently took three-quarters of an hour to meet with Robolis and Giannis Panagopoulos, the president of the powerful trade union confederation GSEE. At 9 a.m. on Tuesday of last week, the men met behind closed doors in a conference room in the basement of the Grande Bretagne, a luxury hotel in Athens. The mood, says Robolis, was "icy."
Robolis told the IMF negotiator that radical wage cuts would be toxic for Greece's already comatose economy. He said that the Greeks, given their weak competitive position, primarily needed innovation and investment, and that a one-sided fixation on cleaning up the national budget would destroy the last vestiges of economic strength in Greece. The IMF, according to Robolis, could not make the same mistake as it did in Argentina in the early 1990s. "Don't put Greece on ice!" the professor warned.
But the tall Dane was not very impressed. He has negotiated aid packages with Iceland, Ukraine and Romania in the past, and when he and his 20-member delegation landed in Athens on April 18, they had come to impose a rigorous austerity program on the Greeks, not to devise long-term growth programs.
Thomsen's mandate is to save the euro zone. And any Greek resistance is futile.
Full text
Comment: There is little to disagree with this analysis. Indeed, reality has finally caught up with those (private and public) figures who believe or made believe that permanent prosperity could be built on debt. Now the bill has come due, too late, though, we feel. In the meantime too much damage has been done to hope for swift recovery. For decades the warnings of the more sensible economists were shed into the wind, their ideas were relegated to the bin. A different academic crowd had their say: pop economists, populist academic economists, professorial demagogues.
Forget about Greece, have a look at the UK
The British Daily Mail writes ".. The UK budget deficit will outstrip any other country in the EU this year and will be even worse than Greece, according to figures from the European Commission today.
The group's spring forecast puts UK borrowing at 12 per cent of GDP for 2010 - more than that of any of the 27 other EU countries and far worse than Greece's 9.3 per cent.
The gloomy prediction will mean that it is even more important that any incoming government reacts quickly to tackle Britain's mountain of debt..."--
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There are many potential victims out there which deserve to get devoured by the financial markets but it is the nature of predator to go for the weakest among the herd.
The group's spring forecast puts UK borrowing at 12 per cent of GDP for 2010 - more than that of any of the 27 other EU countries and far worse than Greece's 9.3 per cent.
The gloomy prediction will mean that it is even more important that any incoming government reacts quickly to tackle Britain's mountain of debt..."--
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There are many potential victims out there which deserve to get devoured by the financial markets but it is the nature of predator to go for the weakest among the herd.
Death comes to the streets of Athens
Greece gained its entrance into the European Union because of its symbolic qualities. It became a member of the eurozone based on tricks and false numbers. It would be the epitome of a Greek tragedy if now Greece should provide the catalyst to bring the euro and the European Union down, a structure which has served as an essential promoter for peace and prosperity in Western Europe and to extend it to Eastern Europe.
This ain't funny anymore
The irrationality has become systemic: first in the financial markets, now with the crowds. Between both of these sit the so-called authorities as dumb as ever. Meanwhile the politicians see their day coming and it is up to them to turn the game of wits and emotions into a power struggle. Either the euro will go under or the financial markets will receive a deadly blow. The fight has begun.
Tuesday, May 4, 2010
Europe's Web of Debt
From The WSJ: Banks and governments in these five shaky economies owe each other many billions of euros — converted here to dollars — and have even larger debts to Britain, France and Germany. Arrow widths are proportional to debt amounts. Full text
Comment: Madness, thy name is modern finance.
Comment: Madness, thy name is modern finance.
Madness with method in it
May 5 (Bloomberg) -- Investors are already testing the euro region’s efforts to contain the Greek crisis.
Greek bond yields yesterday rose above their level before the government agreed on a European Union-led bailout on May 2 as escalating protests cast doubt on its ability to drive through austerity measures. Spanish and Portuguese bonds also renewed last week’s slide as investors question their ability to cut budget deficits that are among the highest in the euro area...
Investors are speculating that Spain and Portugal may also eventually need assistance, prompting Spanish Prime Minister Jose Luis Rodriguez Zapatero to dismiss such talk as “complete madness.” --
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Comment: What we observe is a game that has gone out of control because of mutual misunderstandings. The authorities have not correctly understood the financial markets while the financial markets have thoroughly misunderstood the authorities. It is quite a task now for both of these two group to disentangle. Along the way we may expect more absurdities.
Greek bond yields yesterday rose above their level before the government agreed on a European Union-led bailout on May 2 as escalating protests cast doubt on its ability to drive through austerity measures. Spanish and Portuguese bonds also renewed last week’s slide as investors question their ability to cut budget deficits that are among the highest in the euro area...
Investors are speculating that Spain and Portugal may also eventually need assistance, prompting Spanish Prime Minister Jose Luis Rodriguez Zapatero to dismiss such talk as “complete madness.” --
Full text
Comment: What we observe is a game that has gone out of control because of mutual misunderstandings. The authorities have not correctly understood the financial markets while the financial markets have thoroughly misunderstood the authorities. It is quite a task now for both of these two group to disentangle. Along the way we may expect more absurdities.
The euro - going the way of all fiat currencies
May 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet, who capitulated on a January pledge not to relax lending rules for the sake of one country, may have to sacrifice more principles to prevent Greece from bringing down the euro.
Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The central bank may have to extend that to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt if the 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro’s slide, economists said.--
Full text
Comment: The way how modern states work implies an inexorable move towards the destruction of currencies. By not allowing that a financial meltdown would run its course with a (relatively short) deflationary depression, modern governments opt for stagflation and produce a hyperinflationary depression.
Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The central bank may have to extend that to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt if the 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro’s slide, economists said.--
Full text
Comment: The way how modern states work implies an inexorable move towards the destruction of currencies. By not allowing that a financial meltdown would run its course with a (relatively short) deflationary depression, modern governments opt for stagflation and produce a hyperinflationary depression.
Finding a new place in the grid - with moderate results
Benchmark Currency Rates
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Markets still in panic moode
May 4 (Bloomberg) -- The cost of insuring against default on sovereign bonds rose on concern that the $144 billion aid package for Greece may not solve the nation’s deficit crisis or prevent contagion to Europe’s debt-ridden economies.
Credit-default swaps on Greece surged 84.5 basis points to 731, according to CMA DataVision prices, implying an almost 45 percent probability of default over five years. Contracts on Portugal, Spain, Italy and Ireland also rose.--
Full text
Comment: Like stubborn kids, many market operators (including some of the big shots) still refuse to accept that they have bet on the wrong horse.
Credit-default swaps on Greece surged 84.5 basis points to 731, according to CMA DataVision prices, implying an almost 45 percent probability of default over five years. Contracts on Portugal, Spain, Italy and Ireland also rose.--
Full text
Comment: Like stubborn kids, many market operators (including some of the big shots) still refuse to accept that they have bet on the wrong horse.
Monday, May 3, 2010
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No more alone
May 3 (Bloomberg) -- The euro may rally above $1.35, a level last reached almost two weeks ago, on speculation the bailout of Greece will bring more stability to Europe than many investors anticipate, according to Citigroup Inc.
The 16-nation currency will advance as investors realize that the pullback in the currency during Greece’s deficit crisis has been overdone, New York-based Citigroup strategist Steven Englander wrote in a research report today.--
Full story
Comment: For months it seemed as if I were alone in this world with my currency prediction. I never had doubt that a bailout of Greece would happen and I never had doubt that the euro will survive the Greek comedy. I'm glad that Englander is joining in and dares to stick out his clear-minded head.
The 16-nation currency will advance as investors realize that the pullback in the currency during Greece’s deficit crisis has been overdone, New York-based Citigroup strategist Steven Englander wrote in a research report today.--
Full story
Comment: For months it seemed as if I were alone in this world with my currency prediction. I never had doubt that a bailout of Greece would happen and I never had doubt that the euro will survive the Greek comedy. I'm glad that Englander is joining in and dares to stick out his clear-minded head.
Forget about Greece - the next bust is China
May 3 (Bloomberg) -- Investor Marc Faber said China’s economy will slow and possibly “crash” within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst..."
Full text
Comment: China's bust is overdue. It will be a nightmare for the world economy and wreak havoc in the international capital markets. Forget about Greece and hurry up to prepare for a disaster that can wipe out all of us irrespective of asset allocation and degrees of diversification.
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Comment: China's bust is overdue. It will be a nightmare for the world economy and wreak havoc in the international capital markets. Forget about Greece and hurry up to prepare for a disaster that can wipe out all of us irrespective of asset allocation and degrees of diversification.
No reason for jubilation
May 3 (Bloomberg) -- German Chancellor Angela Merkel said she was right to demand International Monetary Fund involvement in the Greek bailout over the objections of her European peers, wringing previously “unthinkable” budget cuts from Greece.
“This is an ambitious program that contains tough savings measures and on the other hand seeks to improve the efficiency of the Greek economy,” Merkel told reporters in Bonn yesterday. “Three months ago it would have been unthinkable that Greece would accept such tough conditions.”--
Full text
Comment: The question, however, remains, whether Greece will stick to its promises. Past experience doesn't bode well. Nevertheless, the Greek drama may have strengthened those in the rest of PIIGS that advocate more drastic measures of austerity. In the long run, the sovereign debt problem is not solved and won't be solved anytime soon. It has become a global phenomenon and goes way beyond Europe. It is inherent to the mechanism of modern politics to move towards the very limit and beyond of debt capacity. When the financial system is at the verge of breakdown, politicians will step in with bailouts so that the necessary adaptation gets postponed again and again. Instead of a deep but short recession, we get a prolonged stagnation which in the end will become stagflation with the risk of turning into hyperinflation.
“This is an ambitious program that contains tough savings measures and on the other hand seeks to improve the efficiency of the Greek economy,” Merkel told reporters in Bonn yesterday. “Three months ago it would have been unthinkable that Greece would accept such tough conditions.”--
Full text
Comment: The question, however, remains, whether Greece will stick to its promises. Past experience doesn't bode well. Nevertheless, the Greek drama may have strengthened those in the rest of PIIGS that advocate more drastic measures of austerity. In the long run, the sovereign debt problem is not solved and won't be solved anytime soon. It has become a global phenomenon and goes way beyond Europe. It is inherent to the mechanism of modern politics to move towards the very limit and beyond of debt capacity. When the financial system is at the verge of breakdown, politicians will step in with bailouts so that the necessary adaptation gets postponed again and again. Instead of a deep but short recession, we get a prolonged stagnation which in the end will become stagflation with the risk of turning into hyperinflation.
![[GREECE]](http://sg.wsj.net/public/resources/images/P1-AV007_GREECE_NS_20100502190037.gif)
Sunday, May 2, 2010
Next in line: Ireland, Portugal, Spain, Italy
Ireland maturity profile of public debt
Portugal: maturity profile of public debt
Spain: maturity profile of public debt
Italy: maturity profile of public debt
Source
Portugal: maturity profile of public debt
Spain: maturity profile of public debt
Italy: maturity profile of public debt
Source
Bailout of Greece
Greece: maturity profile of public debt (in billions of euros)
May 2 (Bloomberg) -- Greece accepted an unprecedented bailout from the European Union and International Monetary Fund valued at more than 100 billion euros ($133 billion) to prevent default, agreeing to budget cuts that unions called “savage.”
The measures are worth 30 billion euros, or 13 percent of gross domestic product, and include wage cuts and a three-year freeze on pensions, Finance Minister George Papaconstantinou said in Athens today. Greece’s main sales tax rate will rise to 23 percent from 21 percent. The exact bailout amount will be announced later, he said. Euro-region finance ministers meet at 4 p.m. in Brussels. Germany will provide 28 percent of the euro region’s contribution.--
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Comment: No surprise to the readers of this blog.
Saturday, May 1, 2010
Bailout package for Greece
May 2 (Bloomberg) -- Greece is poised to announce an agreement with euro-region allies and the International Monetary Fund on a 120 billion-euro ($159 billion) bailout as protests mount against budget cuts that are a condition for the rescue of the debt-stricken nation...
Papandreou’s government may have agreed to additional budget cuts worth 24 billion euros, or around 10 percent of GDP, to secure the second and third year of the aid, Greece’s NET Radio said. Measures may include a three-year wage freeze for public workers and the elimination of two of their 14 annual salary payments, the ADEDY union said after a briefing with Papandreou on the talks..." --
Full text
Comment: The bailout package is on its way. Now it is up to the Greek to tighten their belts. Won't be fun at first. Yet after a while, if they manage to do it, a miracle is in the making. Imagine: a drastic downsizing of government by a government! That is what the plan calls for. And if the Greek people manage to do it, growth and prosperity will come to Greece sooner and larger than most expect. Then it becomes clear how wrong those (mainly US) economists are who in their Keynesian blindness prophesize that downsizing of government would cause recession and unemployment. They'll be proven wrong much sooner than they think, given that the Greek are smart enough (and most of them are) that the time has come to change the game.
Papandreou’s government may have agreed to additional budget cuts worth 24 billion euros, or around 10 percent of GDP, to secure the second and third year of the aid, Greece’s NET Radio said. Measures may include a three-year wage freeze for public workers and the elimination of two of their 14 annual salary payments, the ADEDY union said after a briefing with Papandreou on the talks..." --
Full text
Comment: The bailout package is on its way. Now it is up to the Greek to tighten their belts. Won't be fun at first. Yet after a while, if they manage to do it, a miracle is in the making. Imagine: a drastic downsizing of government by a government! That is what the plan calls for. And if the Greek people manage to do it, growth and prosperity will come to Greece sooner and larger than most expect. Then it becomes clear how wrong those (mainly US) economists are who in their Keynesian blindness prophesize that downsizing of government would cause recession and unemployment. They'll be proven wrong much sooner than they think, given that the Greek are smart enough (and most of them are) that the time has come to change the game.
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