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.
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.
http://londonbanker.blogspot.com/201...eform.html?m=1Central 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.
emphasis hereIf 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.
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.
Central banks could do better at regulation.
The Fed has oodles of regulatory power it mainly sits on.
http://www.spiegel.de/international/...3097-2,00.htmlCalls 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.nytimes.com/2011/12/13/op...=1&ref=opinionPerhaps 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.bloomberg.com/news/2011-1...rd-streak.htmlDuke 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) alternated between gains and losses of more than 400 points, the longest streak ever, and its intraday swings 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 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 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 banks posted their worst quarter in trading and investment banking since the depths of the 2008 financial crisis.
http://www.bloomberg.com/news/2011-1...rd-streak.htmlDuke 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) alternated between gains and losses of more than 400 points, the longest streak ever, and its intraday swings 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 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 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 banks posted their worst quarter in trading and investment banking since the depths of the 2008 financial crisis.
I expect there will be NO regulatory backlash on either side of the Atlantic to keep the banks from ing us all over.
German factory orders decline:
http://www.bloomberg.com/news/2012-0...ak-demand.html
http://globaleconomicanalysis.blogsp...spain-dry.html"We created a single currency to avoid compe ive 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 compe ion.
Just how is Spain supposed to pay back French and German banks if other European countries seek to block Spanish exports?
http://www.economist.com/node/21542450“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”.
France loses AAA rating:
http://www.nytimes.com/2012/01/14/bu...ef=global-home
Mind posting something in English for the slow-witted?
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 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)
u forgot the part what happens if they default and wont repay the debt...what u going to do? attack their country?
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.
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