The US needs to take urgent action to cut its debt in order to prevent the next financial crisis, which may start in Washington, Sheila Bair, chair of the Federal Deposits Insurance Corp. (FDIC) wrote ....
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Comment: Don't waste money speculating against the euro, better get ready for the big one.
Tuesday, November 30, 2010
Silly bets based on silly propaganda bring bad results
Trichet Says EU Determination to Shore Up Euro Region Being Underestimated
By - Nov 30, 2010 2:44 PM GMT-0200
European Central Bank President Jean-Claude Trichet said investors are underestimating policy makers’ determination to shore up the euro region’s stability as contagion spreads through the bloc’s bond markets. “I don’t believe that financial stability in the euro zone could really be called into question,” Trichet told lawmakers in Brussels today. Observers “are tending to underestimate the determination of governments.”
European leaders are struggling to contain a worsening sovereign debt crisis that forced Ireland last week to follow Greece and ask for an international bailout. While European Union governments on Nov. 28 agreed to give Ireland an 85 billion-euro ($110 billion) rescue package, Spanish and Italian bonds then dropped on concern they may also need to need help as they try to get budgets under control.
The selloff is reminiscent of the declines that preceded the EU’s decision in May to set up a 750 billion-euro bailout fund to rescue the euro. On the same day, the ECB took the unprecedented step of agreeing to buy government bonds.
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Comment: Those who bet on the demise of the euro have fallen victim to their own propaganda and to the nonsense pronounced by the ruling class of incompetent economists.
Wrong again
Brendan Moynihan from Bloomberg gets it all wrong:
"... The European Union’s sovereign debt crisis has markets predicting another default. Credit default swaps for Ireland, Portugal and Spain resemble those for Greece earlier this year.
The problem is that European countries can’t depreciate their way out of debt problems -- they forfeited that option when they joined the euro..."
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Comment: Devaluation is not a solution. It is excacerbates the problem. Just look at Argentina, Brendan.
"... The European Union’s sovereign debt crisis has markets predicting another default. Credit default swaps for Ireland, Portugal and Spain resemble those for Greece earlier this year.
The problem is that European countries can’t depreciate their way out of debt problems -- they forfeited that option when they joined the euro..."
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Comment: Devaluation is not a solution. It is excacerbates the problem. Just look at Argentina, Brendan.
And it is getting worse
Source
Monday, November 29, 2010
Down we go
The euro weakened, global stocks extended losses into a fourth week and Spanish and Portuguese bonds dropped as Ireland’s 85 billion-euro ($113 billion) bailout failed to ease concern the region’s most-indebted nations will need further aid.
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New bellweather bond
For the first time since the 1990s the U.S. 30-year Treasury bond is becoming the benchmark for the world’s biggest debt investors.
The Federal Reserve’s plan to buy $600 billion of U.S. government debt will focus about 86 percent of its purchases in notes due in 2.5 years to 10 years, leaving the so-called long bond as the security that most closely reflects market expectations for inflation. Since the Fed’s Nov. 3 announcement, the 30-year yield rose 0.28 percentage point, suggesting growing investor confidence in the central bank’s efforts to avoid deflation as the economy expands.
“The 30-year, with minimal Fed involvement, will become the bellwether issue for the bond market’s outlook on the economy and inflation,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York.
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The Federal Reserve’s plan to buy $600 billion of U.S. government debt will focus about 86 percent of its purchases in notes due in 2.5 years to 10 years, leaving the so-called long bond as the security that most closely reflects market expectations for inflation. Since the Fed’s Nov. 3 announcement, the 30-year yield rose 0.28 percentage point, suggesting growing investor confidence in the central bank’s efforts to avoid deflation as the economy expands.
“The 30-year, with minimal Fed involvement, will become the bellwether issue for the bond market’s outlook on the economy and inflation,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York.
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Nothing quiet at the Western front
European governments’ 85 billion- euro ($113 billion) bailout package for Ireland failed to quell the market turmoil menacing the euro as stocks, bonds and the currency declined.
Irish 10-year bonds slid after an early advance, Spanish bonds slid by the most since the euro’s launch and European shares sank 1.4 percent. The euro slid against 15 of its 16 major counterparts and the cost of insuring the debt of Spain and Portugal against default soared to records.
“The notion that a rescue package for Ireland would create a firewall and stop the fear of contagion is clearly discredited,” said Preston Keat, director of research at Eurasia Group, a political consultancy, in London. “Portugal and Spain are already facing pressures in the markets.”
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Comment: Playing the "I am righ card" is foolish when it comes to life and the markets.
Irish 10-year bonds slid after an early advance, Spanish bonds slid by the most since the euro’s launch and European shares sank 1.4 percent. The euro slid against 15 of its 16 major counterparts and the cost of insuring the debt of Spain and Portugal against default soared to records.
“The notion that a rescue package for Ireland would create a firewall and stop the fear of contagion is clearly discredited,” said Preston Keat, director of research at Eurasia Group, a political consultancy, in London. “Portugal and Spain are already facing pressures in the markets.”
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Comment: Playing the "I am righ card" is foolish when it comes to life and the markets.
Sunday, November 28, 2010
New bailout rules for eurozone countries
EU agrees on new rules for future bailouts
, On Sunday November 28, 2010, 6:58 pmThe plan falls short of demands from Germany, which had insisted that private creditors -- rather than taxpayers -- should shoulder the costs of any future government bailouts.
The new European Stability Mechanism, which will be launched in mid-2013, could force investors such as banks or hedge funds to take losses if a country runs out of money -- but only after other eurozone nations have unanimously agreed that the country is indeed insolvent.
If a country is deemed to merely face a crisis of liquidity -- that is, it can't access funds quickly enough to repay its debts -- it will get emergency loans similar to those signed off on Sunday for Ireland.
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Russia may join eurozone one day
Putin says Russia might one day join the eurozone
By JUERGEN BAETZ
BERLIN
Russian Prime Minister Vladimir Putin said Friday he was confident in the euro despite Europe's debt crisis and said his country might even join the currency block itself one day.
Putin also sharply criticized the dollar's dominance as a world reserve currency.
Despite the problems in some heavily indebted eurozone countries, the euro has proven itself "a stable world currency," Putin said.
Read more
By JUERGEN BAETZ
BERLIN
Russian Prime Minister Vladimir Putin said Friday he was confident in the euro despite Europe's debt crisis and said his country might even join the currency block itself one day.
Putin also sharply criticized the dollar's dominance as a world reserve currency.
Despite the problems in some heavily indebted eurozone countries, the euro has proven itself "a stable world currency," Putin said.
Read more
Loan to Ireland
Annex : Distribution of the Loan to Ireland
Total Programme Volume (Billions of euro)
Contribution by Ireland 17.5
External support 67.5
Total 85.0
External Support Breakdown
IMF (One-Third)* 22.5
Europe (Two-Thirds) 45.0
Total 67.5
European Breakdown
EFSM 22.5
EFSF (Plus Bilaterals) 22.5
Total 45.0
EFSF (Plus Bilaterals) Breakdown
EFSF (Effective) euro area 17.7
United Kingdom 3.8
Sweden 0.6
Denmark 0.4
Total 22.5
*Subject to the IMF Board’s approval
Source
Total Programme Volume (Billions of euro)
Contribution by Ireland 17.5
External support 67.5
Total 85.0
External Support Breakdown
IMF (One-Third)* 22.5
Europe (Two-Thirds) 45.0
Total 67.5
European Breakdown
EFSM 22.5
EFSF (Plus Bilaterals) 22.5
Total 45.0
EFSF (Plus Bilaterals) Breakdown
EFSF (Effective) euro area 17.7
United Kingdom 3.8
Sweden 0.6
Denmark 0.4
Total 22.5
*Subject to the IMF Board’s approval
Source
Irish bailout
Following is a statement issued today in Brussels by European Union finance ministers:
“Ministers unanimously agreed today to grant financial assistance in response to the Irish authorities’ request on 22 November 2010. Ministers concur with the Commission and the ECB that providing a loan to Ireland is warranted to safeguard financial stability in the euro area and the EU as a whole. ...
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“Ministers unanimously agreed today to grant financial assistance in response to the Irish authorities’ request on 22 November 2010. Ministers concur with the Commission and the ECB that providing a loan to Ireland is warranted to safeguard financial stability in the euro area and the EU as a whole. ...
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Lifeline for the Irish
European governments threw debt- strapped Ireland an 85 billion-euro ($113 billion) lifeline and scaled back proposals to saddle bondholders with losses in future budget crises, seeking to reverse the market selloff menacing the euro.
European finance ministers backed a Franco-German compromise on post-2013 bailouts that watered down calls by German Chancellor Angela Merkel for investors to be forced to take losses to share the cost with taxpayers. The ministers agreed that a future crisis-management system won’t automatically cut the value of bond holdings, easing away from a proposal that led investors to dump assets of Portugal, Spain and Italy.
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European finance ministers backed a Franco-German compromise on post-2013 bailouts that watered down calls by German Chancellor Angela Merkel for investors to be forced to take losses to share the cost with taxpayers. The ministers agreed that a future crisis-management system won’t automatically cut the value of bond holdings, easing away from a proposal that led investors to dump assets of Portugal, Spain and Italy.
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Friday, November 26, 2010
Inflation
Inflation in Germany, Europe’s largest economy, accelerated more than economists forecast in November after food and energy prices rose.
The inflation rate, calculated using a harmonized European method, increased to 1.6 percent from 1.3 percent in October, the Federal Statistics Office in Wiesbaden said today.
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Comment: They get what they wanted. Yet it is us who will pay the price.
The inflation rate, calculated using a harmonized European method, increased to 1.6 percent from 1.3 percent in October, the Federal Statistics Office in Wiesbaden said today.
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Comment: They get what they wanted. Yet it is us who will pay the price.
Monday, November 22, 2010
Why the Fed is as bad as it is
Mark A. Calabria explains:
"... The law also requires that the president’s choice of board members “have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.”
Interestingly enough, the Federal Reserve Act makes no specific mention of adequate representation for academia. With Diamond’s appointment, a majority of the governors will be former academics. At best only one governor, Virginia banker Elizabeth Duke, has ever been in the position of having to make a payroll.
The current board lacks any representation at all for “agricultural, industrial, and commercial interests.” We have gotten to the point where the Fed Board is entirely composed of bankers and left-leaning academics. This isn’t a board that Carter Glass, who wrote the 1913 Federal Reserve Act as chairman of the House Committee on Banking and Currency, would even recognize.
Not Science
There is an argument for having an academic, or at most two, sit on the Board. After all, there is a considerable amount of scholarly work on monetary theory. There also is considerable disagreement among monetary scholars. And in spite of all the self-congratulations that academics were giving one another prior to the financial crisis, it is now obvious that monetary economics is far from a reliable set of scientific guidelines.
What is sorely needed at the Fed is the perspective of individuals who have actually worked in the real world. As someone with a doctorate in economics, it pains me to say it, but the last thing the Fed needs is another Ph.D. in economics. The central bank has a staff of thousands of Ph.D.s.
It is hard to make the case that the shift toward packing the Fed board with economists, orchestrated by Walter Heller during his time as chairman of Kennedy’s Council of Economic Advisors, has improved monetary policy. In fact, we largely had price stability in the days when the Fed board lacked academics.
If anything, this era of a “scientific” Fed has been characterized by rampant inflation. That shouldn’t be surprising since it was academics who came up with the notion that you can debase your way to prosperity..."
Read full text
"... The law also requires that the president’s choice of board members “have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.”
Interestingly enough, the Federal Reserve Act makes no specific mention of adequate representation for academia. With Diamond’s appointment, a majority of the governors will be former academics. At best only one governor, Virginia banker Elizabeth Duke, has ever been in the position of having to make a payroll.
The current board lacks any representation at all for “agricultural, industrial, and commercial interests.” We have gotten to the point where the Fed Board is entirely composed of bankers and left-leaning academics. This isn’t a board that Carter Glass, who wrote the 1913 Federal Reserve Act as chairman of the House Committee on Banking and Currency, would even recognize.
Not Science
There is an argument for having an academic, or at most two, sit on the Board. After all, there is a considerable amount of scholarly work on monetary theory. There also is considerable disagreement among monetary scholars. And in spite of all the self-congratulations that academics were giving one another prior to the financial crisis, it is now obvious that monetary economics is far from a reliable set of scientific guidelines.
What is sorely needed at the Fed is the perspective of individuals who have actually worked in the real world. As someone with a doctorate in economics, it pains me to say it, but the last thing the Fed needs is another Ph.D. in economics. The central bank has a staff of thousands of Ph.D.s.
It is hard to make the case that the shift toward packing the Fed board with economists, orchestrated by Walter Heller during his time as chairman of Kennedy’s Council of Economic Advisors, has improved monetary policy. In fact, we largely had price stability in the days when the Fed board lacked academics.
If anything, this era of a “scientific” Fed has been characterized by rampant inflation. That shouldn’t be surprising since it was academics who came up with the notion that you can debase your way to prosperity..."
Read full text
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