FT: Mass selloff in Eurozone bonds

[Winehole23]

http://www.ft.com/intl/cms/s/0/c9efa9fe-0fb5-11e1-a36b-00144feabdc0.html#axzz1dt9Vx6jY

[Winehole23]

Italian default is in the picture and the core may not be able to bail out the periphery if its borrowing costs rise by too much.

[boutons_deux]

sell off?

who is buying?

[Winehole23]

[/URL]



Traders said there were few buyers in many bond markets, with only the European Central Bank active in Italy and Spain. “It is really scary,” said one at a US bank. “Everyone is liquidating in the eurozone bond markets ... Everyone is heading for the door.”[URL]http://www.ft.com/cms/s/0/c9efa9fe-0fb5-11e1-a36b-00144feabdc0.html#ixzz1dtEPbvS9 (http://www.ft.com/cms/s/0/c9efa9fe-0fb5-11e1-a36b-00144feabdc0.html#ixzz1dtEPbvS9)

ECB, apparently.

[coyotes_geek]

Looking like the ECB gets to hold one big bomb instead of everyone else having a bunch of smaller ones. Can't decide whether or not that's a good thing, "good" being a relative term of course..............

[Winehole23]

The yield on French government bonds climbed to 3.63 per cent. With the German equivalent at just 1.75 per cent, the difference between what it costs Paris and Berlin to borrow is at its highest level since the euro was established in 1999.
And an influential report added to market nerves with a claim that the French economy is the 17-member eurozone's second biggest but only the 13th healthiest.


The Lisbon Council think tank and Germany's Berenberg Bank rates France one rank above Italy, and one below Spain.


'Alarm bells should be ringing for France,' said Holger Schmieding, Berenberg's chief economist.


Those bells might also ring, however, for the triple-A rated countries Austria, Finland and the Netherlands, which also saw bond yields worryingly.
http://www.dailymail.co.uk/news/article-2061789/Fears-French-economy-study-ranks-13th-17-eurozone-countries.html#ixzz1dtXELvMs

[boutons_deux]

Stocks take a hit after Fitch warnings on US bank exposure

The Dow dropped 190.57 points to close at 11905 after Fitch ratings released a report saying that US banks could be "greatly affected" if Europe's debt crisis continues to spread

http://www.csmonitor.com/Business/Latest-News-Wires/2011/1116/Stocks-take-a-hit-after-Fitch-warnings-on-US-bank-exposure?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+feeds%2Fcsm+%28Christian+Scie nce+Monitor+|+All+Stories%29

[Winehole23]

http://www.reuters.com/article/2011/11/17/ecb-imf-eurozone-idUSL5E7MH2MW20111117

[Winehole23]

The six biggest U.S. banks -- JPMorgan Chase & Co. (JPM) (http://www.bloomberg.com/apps/quote?ticker=JPM:US), Bank of America Corp. (BAC) (http://www.bloomberg.com/apps/quote?ticker=BAC:US), Citigroup Inc. (C) (http://www.bloomberg.com/apps/quote?ticker=C:US), Wells Fargo & Co. (WFC) (http://www.bloomberg.com/apps/quote?ticker=WFC:US), Goldman Sachs Group Inc. and Morgan Stanley (MS) (http://www.bloomberg.com/apps/quote?ticker=MS:US) -- had $50 billion in risk tied to the GIIPS on Sept. 30, Fitch said. So-called cross-border outstandings to France (http://topics.bloomberg.com/france/) for all except Wells Fargo were $188 billion, including $114 billion to French banks. Risk to Britain and its banks was $225 billion and $51 billion, respectively. http://www.bloomberg.com/news/2011-11-16/banks-in-u-s-facing-serious-risk-on-contagion-from-europe-fitch-says.html

[Winehole23]

The Fitch report is a worst-case scenario and is "oddly out of step" with the rating company’s previous reports, analysts at HSBC Holdings Plc said today. U.S. banks may even benefit as investors shift money to the U.S. from Europe, HSBC said.



Investor demand for the relative safety of Treasuries during the European debt crisis has sent the difference between U.S. short-term yields and bank rates surging to levels not seen in more than two years.
ibid

[Winehole23]

While U.S. banks have hedged some of their risk with credit-default swaps, those may not be effective if voluntary debt forgiveness becomes “more prevalent” and the insurance provisions of the instruments aren’t triggered, Fitch said in the report. The top five U.S. banks had $22 billion in hedges tied to stressed markets, according to Fitch.
Disclosure practices also make it difficult to gauge U.S. banks’ risk, Fitch said. Firms including Goldman Sachs and JPMorgan don’t provide a full picture of potential losses and gains in the event of a European default, giving only net numbers or excluding some derivatives altogether.
ibid

[Winehole23]

Guarantees provided by U.S. lenders on government, bank and corporate debt in Greece (http://topics.bloomberg.com/greece/), Italy, Ireland, Portugal and Spain rose by $80.7 billion to $518 billion in the first half of 2011, according to the Bank for International Settlements.

[MannyIsGod]

Part of me is hoping so much that big banks eat it hard on the CDS side. I have no idea the large picture ramifications of that, I just want it to happen.

[Winehole23]

creative destruction is both

[101A]

Part of me is hoping so much that big banks eat it hard on the CDS side. I have no idea the large picture ramifications of that, I just want it to happen.

:toast

Welcome to the dark side.

[MannyIsGod]

:toast

Welcome to the dark side.

I want to see them fall and fall hard. I really am so angry at what that group of companies did to the world and I think the only way to stop them is through their own doing. Even if it means we all suffer I think its better in the long run.

When I supported the bailouts, I did so under the hope (and maybe the extremely naive hope) that there would be large scale changes done through forced legislation as a result. Now that I see that is simply an impossibility, I just want to see them fall flat on their face so we can move on.

[Winehole23]

Part of me is hoping so much that big banks eat it hard on the CDS side. I have no idea the large picture ramifications of that, I just want it to happen.For my part I hope it goes down like this: insolvent banks go into receivership, get reorganized, and are sold off, regardless of size. Like The S&Ls in the '90s.

[CosmicCowboy]

For my part I hope it goes down like this: insolvent banks go into receivership, get reorganized, and are sold off, regardless of size. Like The S&Ls in the '90s.

The problem is there is only like four major banks now and they are all at risk. Who is going to do the buying?

[Winehole23]

The banks get parted out into manageable pieces (or shuttered as necessary.) Isn't that basically what a resolution authority does?

[CosmicCowboy]

The banks get parted out into manageable pieces (or shuttered as necessary.) Isn't that basically what a resolution authority does?

Unfortunately in practice it works opposite of that. Just look at the shotgun weddings the Fed arranged in 2008. (example, JP Morgan and Chase, Wells Fargo and Wachovia, BOA and Countywide, etc.)

[Winehole23]

Hastily concluded mergers to promote market stabilty don't really compare to an RTC-like bridge corporation laying about with hammer and tongs. How we dealt with it in the 1990's is still relevant.

[Winehole23]

lol @ CC thinking there'll be no buyers for American banking

[Winehole23]

:rollin

[Winehole23]

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-23112011-AP/EN/4-23112011-AP-EN.PDF

[Winehole23]

http://hosted.ap.org/dynamic/stories/E/EU_BELGIUM_DOWNGRADE?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-11-25-14-16-41

[TDMVPDPOY]

lol USBANKS dont give a shit, too big to fail, they will continue what they were doing in risky investments knowing the govt and taxpayers will continue to bail their asses...

fck this...

lol euro bonds % fail, not even worth buying when ur local bank are giving better deposit rates...

lol italy

[Wild Cobra]

lol USBANKS dont give a shit, too big to fail, they will continue what they were doing in risky investments knowing the govt and taxpayers will continue to bail their asses...

fck this...

lol euro bonds % fail, not even worth buying when ur local bank are giving better deposit rates...

lol italy
That's the problem all along.

Nobody is too big to fail. If there is such a consensus, then maybe instead, we need to never let them get that big.

[boutons_deux]

Banks Build Contingency for Breakup of the Euro

PARIS — For the growing chorus of observers who fear that a breakup of the euro zone might be at hand, Chancellor Angela Merkel of Germany has a pointed rebuke: It’s never going to happen.

But some banks are no longer so sure, especially as the sovereign debt crisis threatened to ensnare Germany itself this week, when investors began to question the nation’s stature as Europe’s main pillar of stability.

While European leaders still say there is no need to draw up a Plan B, some of the world’s biggest banks, and their supervisors, are doing just that.

“We cannot be, and are not, complacent on this front,” Andrew Bailey, a regulator at Britain’s Financial Services Authority, said this week. “We must not ignore the prospect of a disorderly departure of some countries from the euro zone,” he said.

Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports this week examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.

Major British financial institutions, like the Royal Bank of Scotland, are drawing up contingency plans in case the unthinkable veers toward reality, bank supervisors said Thursday. United States regulators have been pushing American banks like Citigroup and others to reduce their exposure to the euro zone. In Asia, authorities in Hong Kong have stepped up their monitoring of the international exposure of foreign and local banks in light of the European crisis.

But banks in big euro zone countries that have only recently been infected by the crisis do not seem to be nearly as flustered.

Banks in France and Italy in particular are not creating backup plans, bankers say, for the simple reason that they have concluded it is impossible for the euro to break up. Although banks like BNP Paribas, Société Générale, UniCredit and others recently dumped tens of billions of euros worth of European sovereign debt, the thinking is that there is little reason to do more.

http://www.nytimes.com/2011/11/26/business/global/banks-fear-breakup-of-the-euro-zone.html?_r=1&adxnnl=1&partner=rss&emc=rss&adxnnlx=1322320565-ryFrc4rz0+o+prwKIM60HA

[Winehole23]

Wolfgang Münchau thinks it may already be too late (http://www.ft.com/intl/cms/s/0/d9a299a8-1760-11e1-b00e-00144feabdc0.html#axzz1exdrg1Q9) for Germany to rescue the pinnacle (the euro) of its entire post-Hitler project, (the European Union). It's not hard (http://www.businessweek.com/ap/financialnews/D9R7R5J81.htm) to see why Merkel has resisted essentially paying for the profligacy of her largely Southern neighbors:
The ZDF television poll released Friday found that 79 percent of respondents opposed eurobonds and only 15 percent backed them. It said 63 percent thought Merkel was doing a good job in the crisis and 29 percent disagreed. That figure has improved steadily since early October -- when 45 percent thought she was doing a good job and 46 percent disagreed.
If Merkel is gaining by refusing to budge, then the odds of a successful, swift resolution - essentially a quantum leap in European financial governance - are small. Which means we may actually have passed the moment when this unraveling could have been raveled.http://andrewsullivan.thedailybeast.com/2011/11/a-critical-week-for-the-euro.html

[MannyIsGod]

:lol Of course he's gaining in polls. Nationalism is going to win out. Isn't he basically telling everyone else to gfy?

[Winehole23]

Angela Merkel? Yes.

[MannyIsGod]

D'oh. I should pay closer attention to leaders genders.

[boutons_deux]

Angelia to you Luck_The_Fakers_Luck_The_Fakers_Luck_The_Fakers_Lu ck_The_Fakers_Luck_The_Fakers_Luck_The_Fakers_s. :lol

[Winehole23]

In reports issued Monday, Moody’s Investors Service said all of Europe’s sovereign ratings are being threatened by the “rapid escalation” of the crisis, and the Organization for Economic Cooperation and Development warned that the region faces the prospect of further massive economic disruption and said policymakers should be “prepared to face the worst.”http://www.washingtonpost.com/business/economy/obama-hosts-european-leaders-as-debt-crisis-escalates/2011/11/28/gIQAvnBZ4N_story.html?hpid=z1

[Winehole23]

Slightly off topic:

http://www.bis.org/publ/otc_hy1111.pdf

[Winehole23]

D'oh. I should pay closer attention to leaders genders.Don't you recall the infamous Bush/Merkel attempted backrub?

[Winehole23]

eTQY1Aw9zcs

[SnakeBoy]

I want to see them fall and fall hard. I really am so angry at what that group of companies did to the world and I think the only way to stop them is through their own doing. Even if it means we all suffer I think its better in the long run.

When I supported the bailouts, I did so under the hope (and maybe the extremely naive hope) that there would be large scale changes done through forced legislation as a result. Now that I see that is simply an impossibility, I just want to see them fall flat on their face so we can move on.

Eff that! I just bought BofA stock again.

[FuzzyLumpkins]

Eff that! I just bought BofA stock again.

If you are speculating without being forced to by an IRA then you deserve whats coming to you. I took all my assets out earlier this year when the bailouts finally inflated the market to precrash levels and have not looked back.

They are playing the same game and there isnt going to be a bailout this time.

[SnakeBoy]

If you are speculating without being forced to by an IRA then you deserve whats coming to you. I took all my assets out earlier this year when the bailouts finally inflated the market to precrash levels and have not looked back.

They are playing the same game and there isnt going to be a bailout this time.

What exactly is it you think is going to happen to BofA? And if it did why do you think there wouldn't be another bailout?

[spursncowboys]

http://www.nationalreview.com/corner/284169/zone-out-euro-daniel-hannan

[FuzzyLumpkins]

What exactly is it you think is going to happen to BofA? And if it did why do you think there wouldn't be another bailout?

Most American holders are leveraged pretty extensively in the bond markets and because as its currently written Dodd-Frank precludes it. Speculation in the American stock market is foolhardy.

[spursncowboys]

Was BoA one of the banks that didn't want the bailout money but pretty much was made to accept it? I saw that on NOVA I believe.

[FuzzyLumpkins]

Was BoA one of the banks that didn't want the bailout money but pretty much was made to accept it? I saw that on NOVA I believe.

Really man, if you do not have these questions answered already then why are you investing or are you just following Buffet around?

[admiralsnackbar]

That's the problem all along.

Nobody is too big to fail. If there is such a consensus, then maybe instead, we need to never let them get that big.

Aren't you against government regulation?

[spursncowboys]

1. I never lead with any conversation that I was investing at the time. Yeah I am a value investor. Closer to B. Graham than Buffet, FWIW. But it is true--man. BoA didn't want the bail out money, like other banks, man.

[Winehole23]

BoA needed the money and is probably still lying about its true financial condition.

[Winehole23]

Billions in cash for trash loans and arbitrage on other money loaned to BofA essentially for free by the Fed, helped a good deal, wouldn't you say?

[Agloco]

Any thoughts on how accurate this article is? Keep in mind that I don't really understand this stuff, I'm attempting to wade into the pool at this point:

http://moneyland.time.com/2011/11/29/how-to-know-when-the-euro-crisis-reaches-a-tipping-point/?hpt=hp_t2


Investors face two growing risks – a crackup of the Eurozone and a double-dip recession. To track the gathering storm, keep your eye on global bond yields.

[Winehole23]

Ah gad.

The danger must be getting close -- it's being openly discussed...

[coyotes_geek]

Was BoA one of the banks that didn't want the bailout money but pretty much was made to accept it? I saw that on NOVA I believe.

Whether they wanted it and whether they needed it might not yield the same answers.

[MannyIsGod]

I'm coming to the conclusion that many conservatives can't face the reality on the financial crisis (and big banking in general) for the same reasons their views on climate change: It requires acknowledgement that more government regulation is needed.

[coyotes_geek]

I too feel like my political views represent the unquestionable truth and anyone who disagrees with my views is simply incapable of dealing with reality.

[Winehole23]

a very common theme

[SnakeBoy]

I'm coming to the conclusion that many conservatives can't face the reality on the financial crisis (and big banking in general) for the same reasons their views on climate change: It requires acknowledgement that more government regulation is needed.

Who's not facing reality?

[MannyIsGod]

I too feel like my political views represent the unquestionable truth and anyone who disagrees with my views is simply incapable of dealing with reality.

Total mischaracterization of what I said. Its not only my view, but the view of the vast majority experts that I've read on the subject (in both of those subjects, actually). I was a much larger free market champion until 2008 and I was much more of a climate change skeptic until I read the research. Questioning is fine but covering up your ears and screaming lalalalalalalalalala I can't hear you (or lalalalalalallalalalala it wasn't the banks or lalalalalalallalalalalalallalalal there is no climate change) is quite another.

At what point does questioning mounds and mounds and mounds of evidence move from questioning to simply having a closed mind?

[Winehole23]

credentialled experts have spoken. all you kids need to quieten down now.

[MannyIsGod]

credentialled experts have spoken. all you kids need to quieten down now.

Not at all what I said either.

Answer my final question, WH.

[MannyIsGod]

`
At what point does questioning mounds and mounds and mounds of evidence move from questioning to simply having a closed mind?

In case you missed it.

[Winehole23]

Answer my final question, WH.At no point, possibly. Treatments of single questions aren't comprehensive (for social and political problems.)

[Winehole23]

There can be political objections, too.

[Winehole23]

Can it be closed mindedness? Yes.

Is it necessarily? No.

[Winehole23]

so yeah, that was what I was originally responding to. it sounds more like that than you think, Manny.

[Winehole23]

and remarkably like what we torched y.h. for recently in another thread

[Winehole23]

admiring one's evidence from the deck of a distant ship

[Winehole23]

mounds and mounds and mounds

[coyotes_geek]

Total mischaracterization of what I said. Its not only my view, but the view of the vast majority experts that I've read on the subject (in both of those subjects, actually). I was a much larger free market champion until 2008 and I was much more of a climate change skeptic until I read the research. Questioning is fine but covering up your ears and screaming lalalalalalalalalala I can't hear you (or lalalalalalallalalalala it wasn't the banks or lalalalalalallalalalalalallalalal there is no climate change) is quite another.

At what point does questioning mounds and mounds and mounds of evidence move from questioning to simply having a closed mind?

I didn't mischaracterize a damn thing.

[MannyIsGod]

You guys can go on believing that there is not enough evidence to clearly point to the need to more (and effective) regulation. You're welcome to believe that me pointing out the overwhelming evidence shows that is some kind of out of hand dismissal (ironic considering the fact that it relies on evidence) of the arguments against it. I don't see it at all.

Its fine to sit in a philosophical circle jerk and say that its never close minded to question whats obvious, but when it comes down to decision making there definitely comes a time when a burden of proof is met.

[Winehole23]

what's so obvious again?

[MannyIsGod]

I didn't mischaracterize a damn thing.

You absolutely did. Its not my political view: Its the preponderance of evidence. SHOW me where lack of regulations has produced a good results regarding large MNT corps and you might have a point.

Not going to hold my breath waiting for that.

[Winehole23]

i'm a proponent of prompt action laws and a strong resolution authority. i'm ok with a bank funded rescue fund and a functional equivalent of glass-stegall being adopted.

more than that?

make your case if it's so obvious...

[coyotes_geek]

what's so obvious again?

That manny is a logical person who shares a viewpoint with other logical people. Logically, the only way someone can come to a different conclusion than he did is in a world absent of logic.

[MannyIsGod]

what's so obvious again?

Lack of effective regulation and the efforts of financial giants led to the financial crisis in 2008.

[MannyIsGod]

i'm a proponent of prompt action laws and a strong resolution authority. i'm ok with a bank funded rescue fund and a functional equivalent of glass-stegall being adopted.

more than that?

make your case if it's so obvious...

Is that more regulation? Because I'm pretty sure what I said was "more regulation".

[MannyIsGod]

I'll check though.

[MannyIsGod]

Yup.

[MannyIsGod]

I'm coming to the conclusion that many conservatives can't face the reality on the financial crisis (and big banking in general) for the same reasons their views on climate change: It requires acknowledgement that more government regulation is needed.

[MannyIsGod]

i'm a proponent of prompt action laws and a strong resolution authority. i'm ok with a bank funded rescue fund and a functional equivalent of glass-stegall being adopted.

more than that?

make your case if it's so obvious...

Sounds like more regulation to me.

[MannyIsGod]

I guess you went through all of that just to agree.

[MannyIsGod]

That manny is a logical person who shares a viewpoint with other logical people. Logically, the only way someone can come to a different conclusion than he did is in a world absent of logic.

Do you think we need more regulation?

[Winehole23]

I guess you went through all of that just to agree.Who's dodging now?

[Winehole23]

:lol

[Winehole23]

I asked you a question, Manny.

[MannyIsGod]

Who's dodging now?

I didn't quantify the level of regulation, WH. Why didn't I do that? Because obviously that requires more nuance and is obviously more contentious and up for debate. That doesn't take away that people (although apparently you're not one of them) still deny that very simple fact.

What I said was that we needed more regulation. I said no more and anything else you read into that is on you. Not me.

I said we need more regulation and that it was obvious. You and CG jumped on me and mischaracterized that into something much more only for you to then agree with me that we did indeed need more regulation.

[MannyIsGod]

i'm a proponent of prompt action laws and a strong resolution authority. i'm ok with a bank funded rescue fund and a functional equivalent of glass-stegall being adopted.

more than that?

make your case if it's so obvious...

Why is it my case to make? Seems like your creation, not mine.

[Winehole23]

well, i'm still asking. it isn't so obvious what's necessary to me, and frankly offensive you should attempt to beg the question while shunning all discussion of the particular measures to be taken.

[Winehole23]

if it's so obvious we must do something it can hardly be out of bounds to demand you specify what's so damned necessary to do

[Winehole23]

otherwise, you're just gathering partisan wool

[MannyIsGod]

I'm not shunning the conversation at all. I just want to be clear what my initial statement was saying and its not saying anything specific at all about how much more regulation we need for a reason. I go into specifics and then you and CG try to lump that into my original statement which was not meant to be a discussion on what was needed but rather simply that the failure to acknowledge the need for additional regulation was a symptom of completely ignoring information that might change a person's paradigm and how that is also evident when it comes to climate change. There are people out there who under no circumstances will admit that more government regulation is needed. That was my point and (quite frankly) think it was pretty damn clear.

I don't know the exact level of regulation needed outside of - as you said - something like glass stegal although I definitely believe there needs to be a form of regulation regarding the derivatives market and whether or not outright gambling and speculation should be allowed on a security or item where the buyer has no vested interest.

[TeyshaBlue]

Within the mounds and mounds of evidence are the caveats of unintended consequences (additional bank fees anyone?). Questioning the tacit "need for regulations" is not always the liability that is being proscribed to it.

[coyotes_geek]

You absolutely did. Its not my political view: Its the preponderance of evidence. SHOW me where lack of regulations has produced a good results regarding large MNT corps and you might have a point.

Not going to hold my breath waiting for that.

I think I characterized your statement perfectly. Don't worry, we're all guilty of doing this to some extent. Myself included.

[MannyIsGod]

otherwise, you're just gathering partisan wool

Really? I didn't realize I even mentioned a political party. I don't remember swinging any donkey pom poms in that statement at all (or very much at all on this subject). In the context of what I said, it would be pretty hard to be critical of liberals considering they want more regulation and such an action would not exactly be paradigm shattering. I have never once outright said or even insinuated that liberals are somehow immune to those situations.

[MannyIsGod]

Are you basically saying I have to criticize liberals every time I criticize conservatives to remain on an even keel, WH?

[Winehole23]

big smoke, small steak :lol

banning naked shorts is probably fine, and maybe some of the margin rules could be tweaked, but i'd be against an outright ban. is that all you got?

[MannyIsGod]

I think I characterized your statement perfectly. Don't worry, we're all guilty of doing this to some extent. Myself included.

Whatever. In the meantime, do we need more regulation? Its a very simple question.

[Winehole23]

Are you basically saying I have to criticize liberals every time I criticize conservatives to remain on an even keel, WH?Nope.

Please continue to resist clarifying what you mean when you make broad generalizations: it helps the rest of us see how empty they are.

[TeyshaBlue]

Whatever. In the meantime, do we need more regulation? Its a very simple question.

.....Without a simple answer...

[MannyIsGod]

big smoke, small steak :lol

banning naked shorts is probably fine, and maybe some of the margin rules could be tweaked, but i'd be against an outright ban. is that all you got?

I made a very simple statement and you read it for more than it was and now you're being critical because I didn't say more?

WH, I have a good amount of respect for you, but criticism from you about my post being vapid is a bit much considering your posting style.

[MannyIsGod]

Nope.

Please continue to resist clarifying what you mean when you make broad generalizations: it helps the rest of us see how empty they are.

What the fuck am I resisting? I told you what I meant. I'm sorry it wasn't enough for you. Please continue reading more into what I said even after I broke it down for you.

[MannyIsGod]

.....Without a simple answer...

There's absolutely a simple answer. Yes, or no. At some point the decision making starts there. We either will add regulation or we will not. Before you decide what changes need to be made, don't you have to decide whether or not changes need to be made?

[Winehole23]

what you cannot correct you can at least insult



i ole' !

[MannyIsGod]

what you cannot correct you can at least insult

http://spurstalk.com/forums/showpost.php?p=5484954&postcount=94

[coyotes_geek]

Do you think we need more regulation?

I think we need to break up the banks in to small enough pieces where no piece is big enough to be considered TBTF. Once there, I think we need to be as regulation free as possible. Different people will probably have different opinions as to whether or not this consitutes more or less regulation.

I also think that someone seeing things differently than me doesn't disqualify them from "dealing with reality". Logical people can disagree.

[Winehole23]

I don't remember swinging any donkey pom poms in that statement at all http://www.spurstalk.com/forums/showpost.php?p=5484707&postcount=52

[MannyIsGod]

Throwing a lot of stones from the safety of a glass house this morning, WH.

[coyotes_geek]

Whatever. In the meantime, do we need more regulation? Its a very simple question.

Answered above.

[MannyIsGod]

I think we need to break up the banks in to small enough pieces where no piece is big enough to be considered TBTF. Once there, I think we need to be as regulation free as possible. Different people will probably have different opinions as to whether or not this consitutes more or less regulation.

I also think that someone seeing things differently than me doesn't disqualify them from "dealing with reality". Logical people can disagree.

Thanks for agreeing that we need more regulation. I guess you and I live in the same reality after all.

I think its fairly impossible to say that breaking up the banks is anything but more regulation, CG. However, in fairness, I add the caveat that it would be more effective regulation. I just felt that effective should have been implicit.

[TeyshaBlue]

There's absolutely a simple answer. Yes, or no. At some point the decision making starts there. We either will add regulation or we will not. Before you decide what changes need to be made, don't you have to decide whether or not changes need to be made?

Im going to recommend surgery on your husband, Mrs. MIG. The last time I tried this procedure the patient got better in some ways but worse in others. What would you like to do?

[Winehole23]

http://spurstalk.com/forums/showpost.php?p=5484954&postcount=94

your reply was petty, your initial assertion, sweeping. don't blame me for your disappointment.

[Winehole23]

Throwing a lot of stones from the safety of a glass house this morning, WH.Fire away.

[Winehole23]

You liked me well enough when someone else was the target.

[Winehole23]

What changed? Me or you?

[MannyIsGod]

your reply was petty, your initial assertion, sweeping. don't blame me for your disappointment.

Oh, MY reply was petty. OK. I guess I just misread your tone. Now that you've pointed out I was the one being petty, I aplogize. :toast

[TeyshaBlue]

Thanks for agreeing that we need more regulation. I guess you and I live in the same reality after all.

I think its fairly impossible to say that breaking up the banks is anything but more regulation, CG. However, in fairness, I add the caveat that it would be more effective regulation. I just felt that effective should have been implicit.

Its also quite possible to apply regulations we already have on the books. Sherman anybody?

[MannyIsGod]

Its also quite possible to apply regulations we already have on the books. Sherman anybody?

Lack of enforcement is in essence, more regulation.

[SnakeBoy]

I'm trying to understand your position Manny. This is what I gather so far.

You supported the bailouts in hopes that the financial industry would be more regulated. There have been more regulations but because they don't meet your standards (although you don't know what additional regulations you want to see) you now hope the entire industry collapses and takes down our economy with it just to teach them bastards a lesson.

Is that about right?

[MannyIsGod]

You liked me well enough when someone else was the target.

I never said I didn't like you anymore. I don't expect anyone I like to be perfect, WH. You're inability to see how I'm correct here just proves your humanity to me. :lmao

[Winehole23]

Oh, MY reply was petty. OK. I guess I just misread your tone.. You did.

Perhaps I should have said, feather-light. Insubstantial.

Superficial.

[TeyshaBlue]

I never said I didn't like you anymore. I don't expect anyone I like to be perfect, WH. You're inability to see how I'm correct here just proves your humanity to me. :lmao

I like you even when you're wrong as fuck!:lol:toast

[MannyIsGod]

I'm trying to understand your position Manny. This is what I gather so far.

You supported the bailouts in hopes that the financial industry would be more regulated. There have been more regulations but because they don't meet your standards (although you don't know what additional regulations you want to see) you now hope the entire industry collapses and takes down our economy with it just to teach them bastards a lesson.

Is that about right?

No. I don't remember saying at all wishing the whole industry would collapse. I hope they take it on the chin regarding CDS because that is apparently the only way they'll move away from the an unregulated derivatives market. I don't remember ever saying that I hope it takes down our economy in the least.

You took a hell of a lot of liberties with what I said and just ran with it. You did ask for clarification though.

[coyotes_geek]

Thanks for agreeing that we need more regulation. I guess you and I live in the same reality after all.

I think its fairly impossible to say that breaking up the banks is anything but more regulation, CG. However, in fairness, I add the caveat that it would be more effective regulation. I just felt that effective should have been implicit.

And thank you for crafting your definition of regulation in such a way to support your point.

[MannyIsGod]

I like you even when you're wrong as fuck!:lol:toast

:toast:toast

[Winehole23]

I like you even when you're wrong as fuck!:lol:toastI like me even when I'm wrong as fuck, too.

[TeyshaBlue]

And seriously, Nobody here is questioning the need for more oversight but, rather, the notion that questioning it at all is a problem.

[MannyIsGod]

And thank you for crafting your definition of regulation in such a way to support your point.

Doesn't' it make sense that I would have thought about it in a way that would have supported my point? Doesn't make much sense otherwise.

[coyotes_geek]

Its also quite possible to apply regulations we already have on the books. Sherman anybody?

Exactly what I'm in favor of doing. Use Sherman on the banks to break them up into small enough pieces, then get government out of their day to day operations. Less regulation overall.

[MannyIsGod]

And seriously, Nobody here is questioning the need for more oversight but, rather, the notion that questioning it at all is a problem.

I never said it was anyone here nor did I say that anyone who questioned it feel into that category. I simply said that there are many conservatives who refuse to believe we need more regulation because they can't handle that it challenges their world view.

[MannyIsGod]

Exactly what I'm in favor of doing. Use Sherman on the banks to break them up into small enough pieces, then get government out of their day to day operations. Less regulation overall.

How in the world is that less regulation overall? You're breaking up the banks!

[Winehole23]

Doesn't' it make sense that I would have thought about it in a way that would have supported my point? Doesn't make much sense otherwise.No it doesn't.

I usually demand other fools back up their bs, but since you say your own thinking supports your lame ass (indeed, practically content free) generalization, I'll just take your word for it.

[coyotes_geek]

How in the world is that less regulation overall? You're breaking up the banks!

And then I'm leaving them alone to make their own decisions and to deal with the consequences of those decisions. I get that we're going to disagree on this, but that scenario sure looks like less regulation to me than being involved in a bank's day to day business for all eternity.

[SnakeBoy]

No. I don't remember saying at all wishing the whole industry would collapse. I hope they take it on the chin regarding CDS because that is apparently the only way they'll move away from the an unregulated derivatives market. I don't remember ever saying that I hope it takes down our economy in the least.

You took a hell of a lot of liberties with what I said and just ran with it. You did ask for clarification though.

I wasn't trying to take liberties with what you said. I took hoping they would "fall and fall hard" to mean a collapse of the industry and our economy because that's exactly what would happen. You pick the TBTF but if someone like BofA "falls hard" at this time you can forget about the Lehman ripples through the industry, it'll be a tsunami.

[MannyIsGod]

I guess it doesn't make sense if you thought I was lying. I'll leave that up to the reader. If you and others think that I meant something else I can live with that. In the end I try to make sure that my conclusions are logical and at this time I feel satisfied they are. This is NOT to say that if you come to a different one it means you're not logical (which is not what I said above).

[MannyIsGod]

I wasn't trying to take liberties with what you said. I took hoping they would "fall and fall hard" to mean a collapse of the industry and our economy because that's exactly what would happen. You pick the TBTF but if someone like BofA "falls hard" at this time you can forget about the Lehman ripples through the industry, it'll be a tsunami.

Fair enough

[Winehole23]

It's when we've been wrong that we need love the most.

[MannyIsGod]

:lmao

I'm willing to revisit this thread at a later time as right now I don't agree I'm wrong, but I can say that having you, CG, and Teysha all saying to a varying degree that I am isn't taken without note.

[Winehole23]

it's clear you've remained oblvious

[Winehole23]

and that's ok

[MannyIsGod]

it's clear you've remained oblvious

I'm gonna go ahead and apologize in advance for misreading the tone of this post too.

[Winehole23]

no blood, no foul

[MannyIsGod]

no blood, no foul, no intent

[MannyIsGod]

I dish it out so I'd better be able to take it but that doesn't mean I can't spot it.

[Winehole23]

you're the one who offered an empty generalization. all i did was point that out.

that's a foul?

[TeyshaBlue]

:lmao

I'm willing to revisit this thread at a later time as right now I don't agree I'm wrong, but I can say that having you, CG, and Teysha all saying to a varying degree that I am isn't taken without note.

I think you're wrong.:lol

[Winehole23]

intent to foul?

[Winehole23]

i think you're just sore that you skinned your knee

[Winehole23]

the fact that we're discussing the pro and cons of more regulation at all in this thread clearly suggests to me that someone had a political axe to grind.

[Winehole23]

no biggie, just cop

[Agloco]

Ah gad.

The danger must be getting close -- it's being openly discussed...

Sooooooo........are you giving the article your blessing tacitly?

[Winehole23]

not at all

[Winehole23]

the veracity of financial reporting can be greatly overstimated

[Winehole23]

how could anyone really know?

[Winehole23]

if I see it in Time I assume that's because it's what we're being given to understand, no more.

[Winehole23]

just happen to be reading a pretty good Old Media book by Halberstam. The doorstop he devoted to Paley, Luce and Chandler...

[Winehole23]

i've come to look at pretty much all financial reporting, public or private, as straight up propaganda. it's probably a damn lie, at best a misleading truth.

[Winehole23]

revisions continue to be downward

[MannyIsGod]

i think you're just sore that you skinned your knee

Obviously all me. How big of you.

[Winehole23]

sorry if i hurt your feelings, but your bull was weak today

[MannyIsGod]

I think you're wrong.:lol

Yeah, I gathered as much. I'll revisit and reevaluate at a later time.

[Agloco]

i've come to look at pretty much all financial reporting, public or private, as straight up propaganda. it's probably a damn lie, at best a misleading truth.

Well, the yields are consistent with the OP no?

Is the situation (correction:Euro) salvageable IYO?

[Winehole23]

http://2.bp.blogspot.com/-4QV_YnxnODI/TZYd9knY4tI/AAAAAAAABOY/mvD_54aSDwE/s1600/magic+8+ball.jpg

[velik_m]

how could anyone really know?


The only function of economic forecasting is to make astrology look respectable.

[Winehole23]

1. I never lead with any conversation that I was investing at the time. Yeah I am a value investor. Closer to B. Graham than Buffet, FWIW. But it is true--man. BoA didn't want the bail out money, like other banks, man.BofA could be a great value:

http://money.cnn.com/2011/11/29/markets/bofa_stock/


(WH23 is not a financial advisor, offers no advice and has taken no position himself wrt BofA)

[SnakeBoy]

BofA could be a great value:

http://money.cnn.com/2011/11/29/markets/bofa_stock/

The comments on that article are like a boutons family reunion. I like this one in particular.


Not to worry my friends. When the euro collapses next month, the banks in the US will collapse with the stock market. It will be very 'Depressing" for the wealthy but the poor and wise will never feel it for they know how to live.

[Winehole23]

In a statement, the Bank of England said: “The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing co-ordinated actions to enhance their capacity to provide liquidity support to the global financial system.



“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.” In another day of turmoil in Brussels, European finance ministers also admitted that they had failed to raise enough funds for a rescue fund to prop up the single currency.



The International Monetary Fund (IMF) is expected to assist in the bail-out plan – and a senior European official warned that there were now 10 days to save the euro.



Olli Rehn, the European Commission vice-president responsible for economic affairs, warned that a summit of Europe’s leaders on Friday Dec 9 was now crucial.


“We are now entering the critical period of 10 days to complete and conclude the crisis response of the EU,” he said.http://www.telegraph.co.uk/finance/financialcrisis/8927148/Britain-has-entered-second-credit-crunch-confirms-Downing-Street.html

[Winehole23]

But policy makers and analysts were quick to caution that the Fed’s action did not address the fundamental financial problems threatening the survival of the European currency union. At best, they said, efforts by central banks to ease financial conditions could allow the 17 European Union countries that use the euro (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/euro/index.html?inline=nyt-classifier) sufficient time to agree on a plan for its preservation.


“The European sovereign debt problem will not be solved only with liquidity,” the governor of Japan’s central bank, Masaaki Shirakawa, told reporters in Tokyo. He said that he “strongly” expected Europe to “push through economic and fiscal reform.”http://www.nytimes.com/2011/12/01/business/central-banks-move-together-to-ease-debt-crisis.html?_r=1&ref=business

[MannyIsGod]

YsY2-yi5W74

[MannyIsGod]

Liquidity = Tussin

[Agloco]

Liquidity = Tussin

Well said.

[coyotes_geek]

Liquidity = Tussin

:tu

Great analogy, and also one of the funniest bits Chris Rock has ever done!

[Winehole23]

For the periphery, it is frightening to think that conditions may actually grow worse. Jobless rates in Greece and Spain are already at eye-watering levels. Among young people, those under 25, rates of joblessness across the whole of southern Europe are startling. In Greece, 45% of young people were unemployed as of August, which is the last month for which data are available. In Spain, the rate is 49%, up sharply from a year ago. In Italy, youth unemployment is 29%; in Portugal, it is 30%. Even in France, 24% of young people are without employment. http://www.economist.com/blogs/freeexchange/2011/11/european-joblessness

[Agloco]

Scary stuff. We already see civil unrest popping up where usually stable situations exist.

[Winehole23]

Europe has two-and-a-half crises it’s facing. The first is an immediate banking crisis very much like our crisis in 2008. A large number of their financial institutions are viewed as being insolvent. That run has already begun. It’s slow, but it’s there. In my opinion, they will have to recapitalize their banks, one way or the other. Second crisis, which is related but distinct, is the fiscal crisis. There’s sort of a run on the public issuance of new debt.

So one is a toxic, existing asset problem, The banks hold all this sovereign debt, and as the value of all that existing stuff goes down, that’s almost exactly parallel to mortgage-backed assets going down in 2008. But then the governments of Southern Europe have to fund themselves, but they’re having a hard time doing that. And in there is the Northern European viewpoint that this is just a spending problem. And that leads to the half crisis, which is that they’re not growing. The normal thing you would do, which is devalue and have an export-led growth strategy, is impossible, and therefore someone has to have an explanation for how these countries will grow. Otherwise, we’ll just repeat this again and again.
http://www.washingtonpost.com/blogs/ezra-klein/post/austan-goolsbee-on-why-the-euro-zone-wont-survive/2011/08/25/gIQAZGvaCO_blog.html?wprss=ezra-klein

[Winehole23]

Capitalism works by rewarding capital formation and productive investments. That requires a healthy rate of interest, not a zero rate that only encourages malinvestment and unproductive speculation. With a zero rate of interest, banks have trouble making money on their deposits. Hmm, isn’t the Fed trying to save the banks? Then why is it destroying their ability to earn a return?

Capitalism works by enabling the liquidation of insolvent lenders, enterprises, and households and letting the market discover the price of assets. Instead of allowing that, the Federal Reserve and federal regulators have enabled the masking of insolvency via illusory (marked-to-fantasy) asset valuations and bailed out banks that should have been liquidated long ago.http://www.theamericanconservative.com/blog/inflation-by-any-other-name/

[Winehole23]

http://www.nytimes.com/2011/12/04/magazine/adam-davidson-european-finance.html?_r=1&hp=&pagewanted=all

[coyotes_geek]

In other words, instead of Americans acting prudently to lower their unprecedented levels of debt and build some capital, the advocates of targeting GDP want us to go back to the go-go days of the housing bubble and borrow and spend more, more, more, all because they believe the key problem is lack of consumer demand.

If we just pump that empty keg hard enough, the party will come back to life.

[Winehole23]

I don't know whether to laugh or cry

[SnakeBoy]

Capitalism works by enabling the liquidation of insolvent lenders, enterprises, and households

But what do you do when that applies to the majority of lenders, enterprises, and households?

[coyotes_geek]

That was a good read WH, although I do wish they'd have recommended an alternative as to what they think we should do.

Seems like we've tried everything on the "near zero" interest rates side of the equation with underwhelming "success" to say the least. What happens if we raise interest rates rates? If we're worried about banks having adequate capitalization, does giving people an incentive to put their money into savings accomplish that? Do higher interest rates give banks an incentive to loan out that money instead of parking it in treasuries?

I know this idea is counterintuitive to the conventional thinking that higher interest rates will slow consumer spending. And, I concede that I don't have a strong enough background in economics to offer a solid retort to that. But nothing "conventional" seems to be working. Maybe it's time to grab our balls and go contrarian?

[Winehole23]

But what do you do when that applies to the majority of lenders, enterprises, and households?Those who have, buy even more at a steep discount. Basically anyone who saved money and didn't overborrow or invest imprudently (or unluckily) has the opportunity of a lifetime

For the rest, there's far worse fates than bankruptcy.

[Agloco]

I don't know whether to laugh or cry

Cover your bases, do both.

[SnakeBoy]

For the rest, there's far worse fates than bankruptcy.

They'll figure something out.

http://countrytimerecipes.alphamaids.com/images/great_depression%202.jpg

http://www.xtimeline.com/__UserPic_Large/7508/ELT200804260635503431347.JPG


Three years ago when the govt was in a position to provide some sort of safety net I agreed with the overall sentiment and maybe 2-3 years from now when people and institutions have had enough time to better right their wrongs I'll agree with it again, but for now I think it's a bad idea to suddenly pretend we didn't take the course we took and allow the market to efficiently clean up the mess.

[Winehole23]

If we're worried about banks having adequate capitalization, does giving people an incentive to put their money into savings accomplish that? Do higher interest rates give banks an incentive to loan out that money instead of parking it in treasuries?It seems so to me too, on both counts. There should be more incentives for savers and lenders, but one must be wary of injecting too much reason into economics; human beings stand at the center of it. Confidence and trust in institutions has been greatly damaged since the last time we ratcheted rates up in the 1980's. There's no telling what would happen this time.

Maybe it's time to grab our balls and go contrarian?Maybe so, but yikes.

[boutons_deux]

He's more often right than not

Killing the Euro


Can the euro be saved? Not long ago we were told that the worst possible outcome was a Greek default. Now a much wider disaster seems all too likely.

True, market pressure lifted a bit on Wednesday after central banks made a splashy announcement about expanded credit lines (which will, in fact, make hardly any real difference). But even optimists now see Europe as headed for recession, while pessimists warn that the euro may become the epicenter of another global financial crisis.

How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!

But the truth is nearly the opposite. Although Europe’s leaders continue to insist that the problem is too much spending in debtor nations, the real problem is too little spending in Europe as a whole. And their efforts to fix matters by demanding ever harsher austerity have played a major role in making the situation worse.

The story so far: In the years leading up to the 2008 crisis, Europe, like America, had a runaway banking system and a rapid buildup of debt. In Europe’s case, however, much of the lending was across borders, as funds from Germany flowed into southern Europe. This lending was perceived as low risk. Hey, the recipients were all on the euro, so what could go wrong?

For the most part, by the way, this lending went to the private sector, not to governments. Only Greece ran large budget deficits during the good years; Spain actually had a surplus on the eve of the crisis.

Then the bubble burst. Private spending in the debtor nations fell sharply. And the question European leaders should have been asking was how to keep those spending cuts from causing a Europe-wide downturn.

Instead, however, they responded to the inevitable, recession-driven rise in deficits by demanding that all governments — not just those of the debtor nations — slash spending and raise taxes. Warnings that this would deepen the slump were waved away. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, then the president of the European Central Bank. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery.”

But the confidence fairy was a no-show.

Wait, there’s more. During the years of easy money, wages and prices in southern Europe rose substantially faster than in northern Europe. This divergence now needs to be reversed, either through falling prices in the south or through rising prices in the north. And it matters which: If southern Europe is forced to deflate its way to competitiveness, it will both pay a heavy price in employment and worsen its debt problems. The chances of success would be much greater if the gap were closed via rising prices in the north.

But to close the gap through rising prices in the north, policy makers would have to accept temporarily higher inflation for the euro area as a whole. And they’ve made it clear that they won’t. Last April, in fact, the European Central Bank began raising interest rates, even though it was obvious to most observers that underlying inflation was, if anything, too low.

And it’s probably no coincidence that April was also when the euro crisis entered its new, dire phase. Never mind Greece, whose economy is to Europe roughly as greater Miami is to the United States. At this point, markets have lost faith in the euro as a whole, driving up interest rates even for countries like Austria and Finland, hardly known for profligacy. And it’s not hard to see why.

The combination of austerity-for-all and a central bank morbidly obsessed with inflation makes it essentially impossible for indebted countries to escape from their debt trap and is, therefore, a recipe for widespread debt defaults, bank runs and general financial collapse.

I hope, for our sake as well as theirs, that the Europeans will change course before it’s too late. But, to be honest, I don’t believe they will. In fact, what’s much more likely is that we will follow them down the path to ruin.

For in America, as in Europe, the economy is being dragged down by troubled debtors — in our case, mainly homeowners. And here, too, we desperately need expansionary fiscal and monetary policies to support the economy as these debtors struggle back to financial health. Yet, as in Europe, public discourse is dominated by deficit scolds and inflation obsessives.

So the next time you hear someone claiming that if we don’t slash spending we’ll turn into Greece, your answer should be that if we do slash spending while the economy is still in a depression, we’ll turn into Europe. In fact, we’re well on our way.

http://www.nytimes.com/2011/12/02/opinion/krugman-killing-the-euro.html?_r=1&ref=opinion&pagewanted=print

========

Yes, in USA, the Repugs are screaming "inflation!" and "cut spending", when demand-push inflation is totally absent and "cut spending" is pro-cyclical, exactly how to make the Banksters' Great Depression much worse, which is specifially what the 1% Repugs/VRWC want as a political strategy to defeat Obama.

[Winehole23]

If we just pump that empty keg hard enough, the party will come back to life.

While Bernanke et al have been bungling through with hapless and ineffective quantitative easing policies (http://www.nakedcapitalism.com/2011/12/philip-pilkington-a-point-of-real-interest-in-the-latest-fed-minutes.html#) and ‘operation twists’, commentators like Krugman – who cut his teeth getting Japan wrong for years – have come out in support of negative interest rate policies (http://krugman.blogs.nytimes.com/2011/11/16/irving-maynard-and-me-wonkish/), which essentially means trying to provoke inflation that will cause real interest rates to be effectively negative. These are two sides of the same bad economic model, I’m afraid. They are both based on the same crappy engineering-diagram-cum-economic-model and they both steadfastly refuse to recognise the key lesson Keynes tried to teach us about capitalist economies: namely, that the whole thing is subject to an overarching indeterminacy that cannot be accounted for in a childish toy-model based on equilibrium analysis.

In fact, interest rate policy in the present environment is not simply worthless – it actually worsens the state of the economy to some degree. Why? Because of interest income channels. When the central bank lowers interest rates they assume that people will borrow more. And when Krugman says that we should have inflation outpace the interest rate, he is thinking along the same lines. What these folks never consider is the fact that low interest rates actually act as a net drain on new financial assets entering the economy.

If I’m a saver – and there are a LOT of savers out there these days – and the central bank lowers the interest rate or targets a negative real interest rate, I lose interest on my savings. This ‘interest income’ would have added to aggregate demand – that is, total spending power – as it would mean new net financial assets flowing into my bank account and encouraging me to consume more. Instead, my savings sit around idly earning nothing and so I have even less of an incentive to purchase goods and services.
The MMTers – especially Warren Mosler (http://mosler2012.com/?page_id=41) – have been pointing this out for years, but to no avail. But now the idea is starting to get play among the VSPs (Very Serious Persons). While most analysts focused on yawn-inducing speculation about the possibility of the Fed running a pointless QE3 program, some more nuanced analysts noticed something of actual interest in the recently leaked Fed minutes. Per the minutes (http://www.federalreserve.gov/monetarypolicy/fomcminutes20111102.htm):
It was noted that very low interest rates were negatively affecting pension funds and the profitability of the life insurance industry.
That is not much, of course, but at least it is something. It is, at the very least, a jumping-off point for those of us who are sceptical about the efficacy of monetary policy to get a foot in the door.
http://www.nakedcapitalism.com/2011/12/philip-pilkington-a-point-of-real-interest-in-the-latest-fed-minutes.html

[boutons_deux]

Savers who realize interest gains from higher rates go out and spend it or, or do they leave it in savings to compound?

the low US interest rates and various bad news hasn't hit the US bond markets, where the T-bill demand remains solid (unlike Germany's auction in November).

[Winehole23]

Savers who realize interest gains from higher rates go out and spend it or, or do they leave it in savings to compound?Some will have money to invest, or for a rainy day. Saving is the traditional cradle of capital.

[Winehole23]

A contrarian take:


This will enrage many readers — especially the "Austrian" internet vigilantes — but I have to say it.


A near universal view has emerged that Europe's crisis can only be solved by governments and fiscal policy, with varying views over the proper dosage of pain.
I beg to differ. This is a monetary crisis, caused by a jejune central bank that aborted a fragile recovery by raising rates earlier this year, allowed the money supply to collapse at vertiginous rates in southern Europe, and caused a completely unnecessary recession — and a deep one judging by the collapse in the PMI new manufacturing orders in November.


Needless to say, drastic fiscal austerity is making matters a lot worse. You cannot push two-thirds of the eurozone into synchronized fiscal and monetary contraction without consequences.


Note that five-year break-even spreads have dropped below zero for Italy, meaning that markets are now pricing in outright deflation. For a country with public debt stock of 120pc of GDP, that is a death sentence.http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100013558/you-are-all-wrong-printing-money-can-halt-europes-crisis/

[Winehole23]

http://www.economist.com/node/21541032

[Agloco]

http://www.economist.com/node/21541032

Great article. Discipline is the key key.

[Winehole23]

http://blogs.ft.com/gavyndavies/2011/12/02/fed-bazooka-aimed-at-eurozone/#axzz1fQq0DbLm

[MannyIsGod]

I'm coming to the conclusion that many conservatives can't face the reality on the financial crisis (and big banking in general) for the same reasons their views on climate change: It requires acknowledgement that more government regulation is needed.

I put some thought into this statement because having a group of people I respect on here all point out how bad it came off was something I took to heart. I do not want to ever be close minded and I want to be able to take criticism from others regarding my viewpoint appropriately.

Revisiting it just a few days later and I can see completely why people came at me for it. I definitely think what I said was close minded and wrong. I get very frustrated with the handling of the financial crisis because nothing makes me feel as powerless as feeling as though our country is in the hands of the people who run these corporations and how much influence they have over our political system. Aside from completely collapsing the system, I don't see how much clearer this can be made to the people of this country and thats just really sad.

That being said, there is a huge difference between acknowledging there is a problem wanting others to do the same and saying there is only ONE way to fix it. There are different ways to skin a cat, and many people I consider intelligent here think differently than I do on what the best way to proceed is.

[Winehole23]

been there :tu

[boutons_deux]

"nothing makes me feel as powerless as feeling as though our country is in the hands of the people who run these corporations and how much influence they have over our political system"

We are powerless in the sense we'll never be able to vote in, even be presented with, OWS/99% candidates. Without those seats in Congress, the UCA/VRWC will continue to outvote disenfranchised/powerless Human-Americans.

And that's without even considering how the SCOTUS has been packed with extreme right-wing activists who fuck stare decisis and Human-Americans with almost every decision, and will for decades.

[Wild Cobra]

I put some thought into this statement because having a group of people I respect on here all point out how bad it came off was something I took to heart. I do not want to ever be close minded and I want to be able to take criticism from others regarding my viewpoint appropriately.

Revisiting it just a few days later and I can see completely why people came at me for it. I definitely think what I said was close minded and wrong. I get very frustrated with the handling of the financial crisis because nothing makes me feel as powerless as feeling as though our country is in the hands of the people who run these corporations and how much influence they have over our political system. Aside from completely collapsing the system, I don't see how much clearer this can be made to the people of this country and thats just really sad.

That being said, there is a huge difference between acknowledging there is a problem wanting others to do the same and saying there is only ONE way to fix it. There are different ways to skin a cat, and many people I consider intelligent here think differently than I do on what the best way to proceed is.
A question comes to mind then. Do you think the bailouts for banks and corporations were right or wrong?

[Wild Cobra]

We are powerless in the sense we'll never be able to vote in, even be presented with, OWS/99% candidates. Without those seats in Congress, the UCA/VRWC will continue to outvote disenfranchised/powerless Human-Americans.

I think the best thing to do is have runoff elections. Make changes state by state to require a political win requires a 50%+1 minimum vote. If votes are split like 46%, 37%, and 10% among the top three candidates, the person with 46% does not win. This would allow meaningful challenges by third party candidates.

[TDMVPDPOY]

http://www.theage.com.au/business/world-business/italian-minister-in-tears-over-spending-cuts-20111205-1odxe.html

Italian minister in tears over spending cuts

Prime Minister Mario Monti unveiled a 30-billion-euro ($40.3 billion) package of austerity measures on Sunday, raising taxes and increasing the pension age in a drive to shore up Italy's strained finances and stave off a crisis that threatens to overwhelm the euro zone.

LOL ITALY, why she crying...fkn living it up with taxpayers money...

[SnakeBoy]

A question comes to mind then. Do you think the bailouts for banks and corporations were right or wrong?

Seems to me that is an irrelevent question at this point. What should be done now and in the future is the only relevant question.

[Winehole23]

never prevented wheel spinning, regardless, and won't.

(broadly agrees)

[CosmicCowboy]

If we just pump that empty keg hard enough, the party will come back to life.

That's a GREAT analogy. I am SO going to steal that line.

[coyotes_geek]

That's a GREAT analogy. I am SO going to steal that line.

I want royalties. :)

[Winehole23]

The public psychology of going into debt for gain passes through
several more or less distinct phases: (a) the lure of big prospective
dividends or gains in income in the remote future; (b) the hope of selling
at a profit, and realizing a capital gain in the immediate future;
(c)the vogue of reckless promotions, taking advantage of the habituation
of the public to great expectations; (d) the development of downright
fraud, imposing on a public which had grown credulous and gullible.http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

[Winehole23]

http://www.spurstalk.com/forums/showthread.php?t=137941&highlight=irving+fisher

[Winehole23]

http://londonbanker.blogspot.com/2008/07/fishers-debt-deflation-theory-of-great.html

[TeyshaBlue]

I put some thought into this statement because having a group of people I respect on here all point out how bad it came off was something I took to heart. I do not want to ever be close minded and I want to be able to take criticism from others regarding my viewpoint appropriately.

Revisiting it just a few days later and I can see completely why people came at me for it. I definitely think what I said was close minded and wrong. I get very frustrated with the handling of the financial crisis because nothing makes me feel as powerless as feeling as though our country is in the hands of the people who run these corporations and how much influence they have over our political system. Aside from completely collapsing the system, I don't see how much clearer this can be made to the people of this country and thats just really sad.

That being said, there is a huge difference between acknowledging there is a problem wanting others to do the same and saying there is only ONE way to fix it. There are different ways to skin a cat, and many people I consider intelligent here think differently than I do on what the best way to proceed is.

I think you're wrong.

[Agloco]

http://news.yahoo.com/p-warn-downgrades-euro-zone-eu-officials-210739496.html


NEW YORK (Reuters) - Standard & Poor's is expected to announce later on Monday that it may downgrade the credit ratings of all 17 euro zone countries, two EU officials told Reuters.

The sources confirmed earlier reports that said S&P was preparing to place all the euro-zone countries --including those with top-tier AAA-ratings such as Germany and France -- on credit watch negative, which normally means a chance of downgrade within three months.

Germany can't borrow as is. What now?

[Agloco]

WH needs to slow down with the links........

I can't keep up without any Marnier on board. :lol

[MannyIsGod]

I think you're wrong.

gfy

[ElNono]

http://londonbanker.blogspot.com/2008/07/fishers-debt-deflation-theory-of-great.html

This was a good read...

[Winehole23]

ah thanks. i'm reading Boomerang today. do you like Michael Lewis?

[Winehole23]

great airplane book

[ElNono]

ah thanks. i'm reading Boomerang today. do you like Michael Lewis?

Never heard of him, I don't think.

[Winehole23]

The Big Short is his book on some of the guys who shorted the market before 2008. it's maybe a little better known, as is Moneyball, which was just released as a movie...

[Winehole23]

EVAY first singled him out for me, though in a dim way I have been aware of Moneyball by reputation for awhile.

[Winehole23]

recently mentioned by CC: Liar's Poker

[Winehole23]

http://www.independent.co.uk/news/world/europe/coalition-at-odds-over-eu-as-tories-call-for-referendum-on-fiscal-union-6272386.html

[Winehole23]

http://uk.ibtimes.com/articles/263160/20111207/growing-clamour-cameron-eu-referendum.htm

[Winehole23]

http://www.bbc.co.uk/news/uk-politics-16063911

[Winehole23]

http://financialpostbusiness.files.wordpress.com/2011/12/theroad.jpg?w=620

http://business.financialpost.com/2011/12/07/ubs-advice-for-a-euro-collapse-tinned-goods-small-calibre-weapons/

[Winehole23]

http://i.dailymail.co.uk/i/pix/2011/12/06/article-2070644-0F1398D400000578-488_634x444.jpg
http://www.dailymail.co.uk/news/article-2070644/800-UK-businesses-day-collapsed-year-largest-number-records-began.html

[Winehole23]

http://www.washingtonpost.com/world/merkel-opposed-to-speedy-fixes-critics-say-europe-needs-a-breakthrough/2011/12/05/gIQAtXgZVO_story.html?hpid=z5

[Winehole23]

Mario Draghi, the president of the European Central Bank (http://www.guardian.co.uk/business/economics-blog/2011/dec/08/ecb-boss-mario-draghi-baptism-fire), has announced a battery of emergency measures to rescue Europe's crisis-hit banks and unblock frozen financial markets, as Europe's leaders gather to discuss the future of the single currency (http://www.guardian.co.uk/politics/2011/dec/08/eu-summit-crunch-cameron).


The Frankfurt-based lender said it would cut interest rates (http://www.guardian.co.uk/business/interest-rates) for the second time in two months; make three-year loans to cash-strapped banks; and accept a far wider range of collateral, including mortgage-backed securities and other A-rated assets, in exchange for emergency loans.


Individual central banks within the eurozone will also be allowed to accept bank loans in exchange for liquidity, at their own risk.


Explaining the ECB's decisions at his regular press conference, Draghi said tensions in financial markets presented the greatest risk to Europe's economy.
"Intensified financial tensions are continuing to dampen the economic outlook," he warned.


The scale of the emergency measures, which also included a cut in the reserve ratios which banks are required to deposit with the ECB, from 2% to 1% from January, underlined how concerned the ECB has become about the risk of a credit crunch taking hold.


http://www.guardian.co.uk/business/2011/dec/08/european-central-bank-euro-ecb

[SnakeBoy]

ah thanks. i'm reading Boomerang today. do you like Michael Lewis?

Good read. I thought his description of Texas boy Kyle Bass was a little over the top until I remembered I have relatives that fit the description (minus the money).

[coyotes_geek]

The Frankfurt-based lender said it would cut interest rates for the second time in two months; make three-year loans to cash-strapped banks; and accept a far wider range of collateral, including mortgage-backed securities and other A-rated assets, in exchange for emergency loans.

Mortgage-backed securities. Good stuff! :tu

[Winehole23]

@SnakeBoy: anecdotal in the best sense -- the stories help you get it

[Winehole23]

Germany and France have failed in their bid to amend the European Union treaties with the support of all 27 EU member states after the United Kingdom refused to get on board. Observers are warning of a split in the EU as a result.



The 17 euro-zone members and six other non-euro countries -- Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania -- are now going to push ahead with a separate pact, French President Nicolas Sarkozy announced on Friday morning, following long talks in Brussels at the highly anticipated European Council summit. (http://www.spiegel.de/international/europe/0,1518,802299,00.html) The pact would impose stricter budgetary discipline on countries in a bid to bring the crisis under control.

In addition to Britain, Hungary said it would not support a change in the EU treaties, while Sweden and the Czech Republic will consult their parliaments before deciding if they want to be involved, Sarkozy said.

http://www.spiegel.de/international/europe/0,1518,802674,00.html

[Winehole23]

British Prime Minister David Cameron had insisted on provisions allowing Britain to opt out of a proposed tax on financial services, which would significantly impact London as a financial services center.

Cameron justified his opposition to an amendment to the EU treaties as a "tough but good" decision. "Where we can't be given safeguards, it is better to be on the outside," he said after the talks.

[Winehole23]

Van Rompuy also announced a key decision regarding the involvement of the private sector in national bankruptcies. In the future, private creditors such as banks will no longer have to share losses resulting from a haircut on debt issued by ailing euro-zone countries.

[Winehole23]

Liquidity = Tussin
Central bankers and securities regulators lost sight of liquidity over the past decade or two in permitting reforms which compromised the health of the financial system. Thanks to the Greenspan and Bernanke puts, and to surplus recycling by Asian economies, many took liquidity - like oxygen - for granted. Like oxygen, you only realise how critical liquidity is when its absence becomes noticeable.

Now that bank regulators have rediscovered liquidity as an essential attribute of healthy banks and healthy markets, it is important to reinforce some key qualities.


Liquidity means you can generate cash from a physical asset or paper claim.If you can't exchange the asset for a major currency to meet a sudden funding need, then the asset shouldn't be permitted as regulatory capital. Basel II and Basel III have generated hundreds of pages around credit scoring and asset type while ignoring the fact that most of what banks are attributing as capital cannot be turned into cash on demand.


Liquidity can be gained by sale or repo of an asset, preferably in a transparent market. Where no market exists or the market has become illiquid, then liquidity must be gained through a central bank.Virtually all RMBS markets failed under stress in 2008 and 2009, with failures spreading to other asset classes as investors grew wary of dealer spreads and perceived shallow dealer commitment levels. As the scope of funding problems grew, illiquidity spread to sovereign debt for troubled countries such as Greece and Portugal. Few OTC asset markets have recovered sufficient liquidity for dealing in size.

When the public markets will not price an asset in size without a large spread, then the central banks become the market makers of last resort. Without central bank repo of illiquid RMBS and sovereign debt, virtually every major bank in the OECD would have failed.

Because they now have the role of market maker of last resort, central banks should become much more active in ensuring that any asset permitted to be classed as capital by a bank can be liquidated on demand in a public market. Rather than leaving market structure to the investment banks and their tame securities regulators, the central banks should be driving forward reforms to ensure that capital assets are issued in fungible series, in size, and traded in transparent exchange markets with committed market makers.http://londonbanker.blogspot.com/2011/09/liquidity-and-market-reform.html?m=1

[Winehole23]

If you can't exchange the asset for a major currency to meet a sudden funding need, then the asset shouldn't be permitted as regulatory capital.emphasis here

[Winehole23]

London Banker re-emphasizes in the final graf


Because they now have the role of market maker of last resort, central banks should become much more active in ensuring that any asset permitted to be classed as capital by a bank can be liquidated on demand in a public market.

[Winehole23]

Central banks could do better at regulation.

[Winehole23]

The Fed has oodles of regulatory power it mainly sits on.

[Winehole23]

Calls for the Big Bazooka

Italy and Spain, which have both been hit by the crisis, will have to once again borrow large amounts of capital already in January. If buyers continue to shun their bonds, there will immediately be renewed calls to deploy the instruments Merkel has consistently rejected, namely euro bonds and a massive intervention by the ECB.


The German chancellor knows all too well that her coalition partner, the liberal Free Democratic Party (FDP), will not go along with jointly issued bonds. If she supported euro bonds, her coalition would be finished. That is a step she is not prepared to take, she recently told close associates.


The chancellor is much more flexible when it comes to the ECB. Merkel and Finance Minister Wolfgang Schäuble are tacitly relying on the central bankers for their help in saving the euro. Merkel and Schäuble are calculating that they will rush to the euro's aid with their unlimited funds if the continued existence of the monetary union is in danger. That would not require a banking license for the EFSF or its permanent successor, the ESM.
http://www.spiegel.de/international/europe/0,1518,803097-2,00.html

[Winehole23]

Perhaps it’s not a coincidence that Cameron’s veto coincided with a young Euro-sceptic Tory member of Parliament, Aidan Burley, finding himself at a stag party in Val Thorens — a French ski resort with a German-sounding name — along with a bunch of mates dressed up in Nazi SS uniforms and performing Nazi salutes in an atmosphere of great jollity. Burley, who’s had to apologize, footed the bill for the festivities. http://www.nytimes.com/2011/12/13/opinion/cohen-the-british-euro-farce.html?_r=1&ref=opinion

[Winehole23]

http://www.ft.com/cms/s/0/0ed916a0-225c-11e1-923d-00144feabdc0.html#ixzz1gSHjcJWl

[Winehole23]

http://www.bbc.co.uk/news/in-pictures-16090055

[Winehole23]

http://www.bloomberg.com/news/2011-12-14/greek-creditor-committee-is-said-to-work-with-blackstone-group-law-firms.html

[Winehole23]

Duke Buchan III’s $1 billion hedge fund beat U.S. stocks by 46 percent in the decade through March, a period that included the steepest equity-market losses since the 1930s.



Then came the selloff in August when global stocks suffered their worst nine-day drop since the 2008 financial crisis. For four days, The Dow Jones Industrial Average (INDU) (http://www.bloomberg.com/apps/quote?ticker=INDU:IND) alternated between gains and losses of more than 400 points, the longest streak ever, and its intraday swings (http://www.bloomberg.com/apps/quote?ticker=.SWING:IND) have averaged twice the level seen during the first seven months of the year. Last week, Buchan told clients he is shutting his firm Hunter Global Investors LP.



“Markets seem to be driven more by the latest news out of Europe (http://topics.bloomberg.com/europe/) than by a company’s earnings prospects,” Buchan, 48, said in a Dec. 8 investor letter. “We have not weathered the ensuing volatility well.”



Traders who used to profit from price swings are struggling as record stock market volatility shows no signs of abating. Hedge funds are on track to post their second-worst year on record, with managers such as John Paulson (http://topics.bloomberg.com/john-paulson/) seeing bets undermined by Europe’s two-year sovereign-debt crisis and concerns over the U.S. economic recovery. U.S. mutual funds are headed for their weakest year in two decades, and the top Wall Street (http://topics.bloomberg.com/wall-street/) banks posted their worst quarter in trading and investment banking since the depths of the 2008 financial crisis.
http://www.bloomberg.com/news/2011-12-15/wall-street-traders-confounded-as-global-volatility-extends-record-streak.html

[Winehole23]

Duke Buchan III’s $1 billion hedge fund beat U.S. stocks by 46 percent in the decade through March, a period that included the steepest equity-market losses since the 1930s.



Then came the selloff in August when global stocks suffered their worst nine-day drop since the 2008 financial crisis. For four days, The Dow Jones Industrial Average (INDU) (http://www.bloomberg.com/apps/quote?ticker=INDU:IND) alternated between gains and losses of more than 400 points, the longest streak ever, and its intraday swings (http://www.bloomberg.com/apps/quote?ticker=.SWING:IND) have averaged twice the level seen during the first seven months of the year. Last week, Buchan told clients he is shutting his firm Hunter Global Investors LP.



“Markets seem to be driven more by the latest news out of Europe (http://topics.bloomberg.com/europe/) than by a company’s earnings prospects,” Buchan, 48, said in a Dec. 8 investor letter. “We have not weathered the ensuing volatility well.”



Traders who used to profit from price swings are struggling as record stock market volatility shows no signs of abating. Hedge funds are on track to post their second-worst year on record, with managers such as John Paulson (http://topics.bloomberg.com/john-paulson/) seeing bets undermined by Europe’s two-year sovereign-debt crisis and concerns over the U.S. economic recovery. U.S. mutual funds are headed for their weakest year in two decades, and the top Wall Street (http://topics.bloomberg.com/wall-street/) banks posted their worst quarter in trading and investment banking since the depths of the 2008 financial crisis.
http://www.bloomberg.com/news/2011-12-15/wall-street-traders-confounded-as-global-volatility-extends-record-streak.html

[Winehole23]

http://www.economist.com/node/21542187

[boutons_deux]

I expect there will be NO regulatory backlash on either side of the Atlantic to keep the banks from fucking us all over.

[Winehole23]

http://www.dailymail.co.uk/news/article-2081721/Greece-warns-leave-eurozone-clinch-100bn-bailout-deal.html

[Winehole23]

German factory orders decline:

http://www.bloomberg.com/news/2012-01-06/german-november-factory-orders-decline-more-than-forecast-on-weak-demand.html

[Winehole23]

"We created a single currency to avoid competitive devaluations". Indeed, that was one purpose wasn't it? The other purpose was to increase trade. Now France is imposing a sales tax specifically to protect French jobs from Spanish competition.

Just how is Spain supposed to pay back French and German banks if other European countries seek to block Spanish exports?http://globaleconomicanalysis.blogspot.com/2012/01/brussels-recommends-sucking-spain-dry.html

[Winehole23]

“DINNER for one”, a 1963 British comedy sketch barely known in its country of origin, is Germans’ favourite television viewing on New Year’s Eve. Year after year they delight at the sight of Miss Sophie celebrating her 90th birthday with only her butler, James, for company. He is commanded to follow “the same procedure as last year”, going around the table impersonating each of the now-dead dinner guests, raising toast after toast and becoming ever more drunk.
As one awful year for the euro zone made way for another, the German television network ARD digitally retouched the original sketch to create a spoof of European Union summits. Angela Merkel was the bossy dowager. Nicolas Sarkozy was the faithful butler, taking on the roles of departed leaders: George Papandreou of Greece, José Luis Rodríguez Zapatero of Spain and, although he is still in office, David Cameron of Britain. (Italy’s Silvio Berlusconi is a tiger-skin carpet on the floor.) The joke was clear: summits are empty charades, only Mrs Merkel matters and Mr Sarkozy is her comical servant.


The new year will begin rather as the old one ended, with a Merkel-Sarkozy meeting, on January 9th, to prepare the way for yet another EU summit on January 30th. Both sides of the “Merkozy” couple started the year trying to outdo the other in gloom. For the French president, this crisis is the worst since the second world war. For the German chancellor, the road to recovery “remains long and won’t be free from setbacks, but at the end of it, Europe will emerge stronger”. For Germany itself 2012 will prove “more difficult” than 2011. Even Mr Cameron has seen fit to evoke “debt storms now battering the euro zone”.
http://www.economist.com/node/21542450

[Winehole23]

France loses AAA rating:

http://www.nytimes.com/2012/01/14/business/global/euro-zone-downgrades-expected.html?_r=1&ref=global-home

[Agloco]

Mind posting something in English for the slow-witted? :lol

[boutons_deux]

Europe is screwing itself with austerity in exactly the same way the US is screwing itself with austerity.

No recovery is possible without strong economic expansion.

Both have about the same amount of total debt.

America lives in a glass house, why does it throw schadenfreude stones at Old Europe?

It was America's criminally fraudulent financial sector, aka "free market capitalism", that pushed industrial countries into catastrophe, not Europe.

It was America's corrupt/whoring ratings agencies, never punished, that rated toxic shit as AAA, but now they are to be believable when rating Euro countries?

(btw, by pushing bond interest rates higher, the ratings agencies are filling the pockets of the wealthy buyers of Euro debt)

[TDMVPDPOY]

(btw, by pushing bond interest rates higher, the ratings agencies are filling the pockets of the wealthy buyers of Euro debt)

u forgot the part what happens if they default and wont repay the debt...what u going to do? attack their country?

[boutons_deux]

There is little probability that they default. anyway, high risk = high gain, Wall St mantra, and the wealthy losers will be bailed out by other govts' taxpayers.

and the smart ones, insiders know how to hedge by betting against their own investments.