European Debt Crisis

[olderstill]

sean 1234567 started this thread and I was hoping it would go further than it did.

So it won't get lost and forgotten, I've moved it here in anticipation of a little more action.

Europe's situation is strange from the strongest nation Germany (which by the way is the world's second largest exporter, therefore blessed with a strong current account a la China - and, also determined to hold onto it!) to the weakest link, Greece.

In between there are all manner of question marks. What's happening in Austria and Hungary? Who wouldn't feel safer with carry trade loaded with Swiss francs? What can we hope for from Portugal and Spain? And,why isn't Italy more newsworthy?

These and other questions about the unique currency situation makes this a topic of considerable interest to me. I'd like to hear more thoughts about it. I've read eonomists thoughts on the subject, would like to hear your reactions.

Have at it people. Please.

[olderstill]

sean1234567
Message #1 - 12/21/10 08:42 AM
What is the current status of the European Debt Crisis? Is news being swept under the rug or is there more to come?

[olderstill]

BiMetalAUPT
Message #2 - 12/21/10 11:04 PM
THE TRUTH IS TOLD WITH THE FEDERAL RESERVE WORKING TO SOLVE THE USD SHORTAGE IN EUROPE WITH A NEW 14 DAYS SWAP.. FANCY WAY TO SAY LENDING THE ECB MONEY ....INTEREST PAID SO FAR HAS BEEN AS HIGH AS 11% FOR SPANISH DEBT.. SOVEREIGN BONDS ARE NOW BEARING HUGE CDS PREMIUMS . FROM THE FEDERAL RESERVE IN WASHINGTON, FOMC PAGE...++THIS WAS AN EMERGENCY PHONE MEETING OF THE FOMC.. IT IS ALSO INTERESTING THAT IT IS FOR 14 DAYS.. GENERAL FEELING FROM THE GANG IS IT IS SPAIN.. THIS COULD BE A REAL BIG ONE AND THAT WOULD EXPLAIN THE 14 LOAN OVER THE HOLIDAYS!!! JUST A THOUGHT, BI METAL AU PT
Press Release



Release Date: December 21, 2010

For immediate release

The Federal Open Market Committee has authorized an extension through August 1, 2011, of its temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The swap arrangements, established in May 2010, had been authorized through January 2011.YES , BUT NOT 14 DAYS!!!!
Information on the actions that will be taken by other central banks is available at the following websites:

Bank of Canada

Bank of England

European Central Bank

Bank of Japan

Swiss National Bank

U.S. Dollar Liquidity Swaps--Frequently Asked Questions (51 KB PDF)

2010 Monetary Policy Releases

[olderstill]

Scared_Shirtless
Message #3 - 12/22/10 08:13 AM
To summarize;
They are hanging on by a very thin thread while they continue to play kick the can.
And that won't solve a thing.

[olderstill]

BiMetalAUPT
Message #4 - 12/22/10 01:33 PM
From the Co-Op Bank in the Netherlands: Rabobank...
21-12-2010 | Economic news
Jan Lambregts, Rabobank’s Global Head of Financial Markets Research, discusses the economic incentives for weak and strong eurozone countries to stay together in the euro.
The financial crisis isn’t dead. It is alive and kicking in the European bond markets where different countries are pushing the limits of what market players will accept. European policymakers will eventually have to enlarge their support fund considerably. It’s a politically sensitive undertaking that will be played out on the cutting edge. With only a very small margin of error.

It’s no wonder some people are speaking openly about breaking up the eurozone. But how realistic is this scenario? It is a tricky topic that can best be approached via a simple question. Why would the weak and strong eurozone countries ultimately want to stay together? The euro project is backed by strong political will – a factor that is underestimated and difficult to quantify. I will limit myself to discussing the related economic incentives.

Greece no stranger to financial crisis
Let’s start with the weak countries. There are frequent calls for Greece to reintroduce the drachma. These voices claim massive depreciation of the Greek currency would bring about both welcome inflation and an export-led recovery. It’s a dangerous idea. According to this scenario, Greece would be left with a mountain of debt in euros that would have to be repaid in hugely depreciated drachmas. Making capital flight a very real risk, which would wreak havoc on the Greek banking sector. An export-driven economic recovery is also unlikely, due to Greece’s lack of a large export industry. So the benefits of a weaker currency are minimal. While a limited increase in inflation would reduce real debts, it would come at the expense of savers. It is, however, naive to think inflation would remain limited in this scenario. Hyperinflation and all the related disastrous effects would be much more likely.
Supporters of Greece breaking away from the eurozone often conveniently forget that the return of a weak drachma would place upward pressure on Greek interest rates. I can hear you thinking: Aren’t Greece’s interest rates already sky-high? Well, not by Greek standards. The Greek 3-month money market interest rate rose to above 120% in May 1994. So Greece is no stranger to financial crises and it clearly didn’t need the euro for economic turmoil. Greece’s best option is consequently to stay the distance with the IMF, the ECB and the EU. Benevolent neighbouring countries’ support combined with painful reform measures and ultimately partial debt restructuring seems to be the best solution for the country.

[olderstill]

BiMetalAUPT
Message #5 - 12/22/10 01:38 PM
Cont:
Germany wants level playing field
Sounds great, but why would the strong eurozone countries want to participate in this? Wouldn’t it be better for Germany to leave the negotiating table and reintroduce the German mark? We think it is in Germany’s own interest to remain in the eurozone and to help finance support programmes. German banks are already heavily exposed to eurozone periphery government bonds. An orderly settlement of this debt crisis is the least expensive option for German taxpayers. Plus the European debt crisis is keeping the value of the euro lower than it would be otherwise. It’s a development that the ultra efficient and competitive German export industry can use to their full benefit. If Germans want to reintroduce the mark, it would be much stronger. In the past Germany specifically wanted to involve the weaker countries in the euro project in order to create a level playing field. This continues to be an important aim. While it must not come at the expense of everything, it is a factor that should not be overlooked.

The European debt crisis is not over. The solutions might not be perfect. Even so, there are strong incentives for both weak and strong countries to stick with the euro project in order to serve their own interests.
www.rabobank.com/content/news/news_archive/099_Leaving_the_euro.jsp
TWO FACT THEY BRING UP HERE.. GERMANY NEEDS A CHEAP EURO AND BOND INTEREST IS GOING UP.. FROM RABOBANK'S SITE.. IMHO A GOOD AND MOST SOLID BANK IN THE EU...

Just a thought,
Bruce

[olderstill]

Scared_Shirtless
Message #6 - 12/23/10 09:38 AM
Great info Bruce.
MANY thanks!

[olderstill]

dendl
Message #7 - 12/23/10 09:53 AM
Hey Readers,
This is just more evidence that the financial world are a bunch of children wanting to play their game as long as possible, without regard to cost, or cost to others. We'll pay through the nose, and the fat cats will run to the Caymans or Dubai, or with Jimmy Rogers!!
Chad in CO

[olderstill]

BGA4444
Message #8 - 12/23/10 03:37 PM
BiMetal is that like continuing the swap we made earlier this year? The one trillion dollars for the one trillion Euros? I guess it is just a balance sheet wash? Sean, just like here in the USA if the answer is just keep going to the well for more money eventually inflation will go double if not triple digit. When that happens the dollars used to cover the loans will be worth way less than those loaned. One problem the creditors will not be able to do one thing about it. Also the housing problem will go away. A home owner will be able to use a few months salary to pay off the mortgage! Inflation ain't all bad! I just can not believe double digit inflation is not here already??

[neohguy]

Germany's unemployment rate has been contracting for over a year now. The highly educated, highly paid, predominately unionized manufacturing sector is crucial contributor to the German gdp. They did not start the propagandist, theoretical, "we've outgrown manufacturing", "it's all the unions fault" nonsense that the not so educated US citizen fell for. Germany imports stuff but their citizens support German businesses.
Education is important in German manufacturing. Continuing job related education is a lifelong experience for the workers in manufacturing from the assembly line to design engineers.
They've made it part of their culture. There is no shame for a German engineer to take an entry level job on the assembly line so as to gain real experience in that business.
The US (and some other countries) would be doing themselves a great favor by adopting a little German discipline. Continuing education and some loyalty to locally made goods.

[vl]

I don't see much future in the EUC. That said, the reconstitution of individual economies is a daunting task we all face. I look forward to the establishment of certain efficiencies that get the ball rolling. I suspect there will be inroads in 2011
I haven't liquidated my major short because the cost to shift will get pulled from our stock markets about the same time we press banksters for legitimacy. Duffminster always talks up derivatives-- bankers own them and will watch positions evaporate as real cash deploys out to recover everybody else's job.

[bimetalaupt]

V.L.,
Put's and Call's are to sell..Looks at the math.. Over the long run sellers make more then 3% over the market....I know Flow5 has done better then I have but I used it to improve my Sharpe index vs a home run on the 9th.. What are your thoughts on the 50/50/30 system??? or Delta Natural Hedging?.. From John C. Hull book" Option,Futures & other Derivatives".. Chapter 23.."Credit Risk"
there is a real reason for 3.48% estimated default rate vs 0.51% historical!!~!!

Neoh Guy,
It will take a longer look at Hamburg Deep Water Port.. Now #3 in the EU. It now makes good sold or bought by what was East Germany open to the World via the Largest ships.. carrying bulk,containers or oil...Germany did have a lot of precision products but the USA also has them. Like in WWII when the German thought their ARMS were better then the USA found out the hard way we had advanced faster then they did. The first heavy tank was imported when we had Antwerp Deep Water Port . What we have seen was poor management from some of the industrial firms sending work to China. Now the UAW are backing GM's improvement manufacturing skill sets to build a better car or truck. This is going to be only the first of many joint efforts to return
America to the best producing nation in the world..

Just a thought,
Bi Metal Au Pt

[bimetalaupt]

Older Still,
I am not sure about the M3 effect of this but many of the large investors I know are buying in CD in the USA. It is an underestimation to say Ben B. is doing it for the single reason of doing good but the Federal Reserve will make a lot of money!!!... Free EURO's and renting then ECB USD's at a real profit... M3 has been recovering over the last four week and the money is real. We have a few banks like Citibank that have enough capital to pass "STRESS TEST #2" .. As before we have three BAnking systems.. We have the Bank of North Dakota, Farmers Credit Banks and FDIC backed deposit banks!!!... Bank of North Dekota is not FDIC backed..

I think the recapitalization is now working in the small banks.. Soon in the Mega banks with Citibank leading the way....

Just a thought,
Bi Metal Au Pt

[olderstill]

Overall, I don't believe small banks per se are a problem. Yes, there's still more resolution and consolidation ahead. The weaker entities have not been completely culled out. If more are resolved and/or assumed, it may better for the system. The assumption would be that the weaker among them are victims of mis-mangement and their loss is the system's gain. Plus, in search of a bell curve pattern on closures, we had 140 closures in 2009; 160, in 2010. If the major part of the weaker banks have been addressed, the curve should slope down, rather than fall straight down in 2011. If it's headed down I'd look for 120-140 closures next year, and perhaps in a year we'll be in fairly decent shape. If it trends higher than 160, bad news. There's hard work ahead for the FDIC for at least the next three years.

Additionally, it would be healthier for the future system if one or two of the big 25 were closed down - if closure is at all a measure of incompetence and/or mis-management. Top-of-the-head evaluation and expected statistical balance would indicate that the same percentage of larger banks suffer from incompetence as does the community sector. Let a couple drop off the map - with the proviso that they not be assimilated by others in the top 25 even if that means setting up two banks in place of the one failure! That might even be good-bank/bad-bank, though I'm not a fan of the concept. Break them up to be absorbed in pieces or reassembled - and it would be more reassuring to those skeptical of the sincerity of our regulation and supervision process.


It's not surprising to see large investors buying into our CDs. I just had a call today, day after Christmas with the banks still closed inquiring after that option. Some present indications are that the dollar may, despite all the weaknesses found in it, emerge from the crisis in better shape than other currencies, including the euro. The obviously sounder currencies such as the Swiss franc, are limited in the traffic they can tolerate. There isn't that much available to satisfy demand. European money has been fleeing in that direction for an extended period now, and the long term concerns behind that movement are driving the Swiss franc up. The Swiss have to shut the trend down for self-protection. Then, where does that hungry money go?

As to current questions about the euro, it will survive - though it appears because of the demands of the PIIGS condition (a terrible burden to bear even with IMF assistance) in diluted condition - gradually losing value in relation to the USD. Popular reactive sentiment might have surplus dollars abroad moving into US CDs in anticipation of the "calming" process sketched above, causing the increase you note above.

It's not necessarily good for the US since that process would put into circulation US currency currently being "hoarded" abroad, i.e., in the vault, currently unaccounted for, out of circulation. If the Fed were to accumulate and pass it along by crediting the accounts of commerical banks, they'd be stoking inflation at an unanticipated rate. Consider what happens when the QE, regardless of degree, meets that unanticipated increase in currency. . . waiting out there, looking for a place to land. Uncle Ben may have this additional worry on his pillow whispering every night, "Don't raise the interest rates, Ben. You'll have a nightmare flood on your hands." Chinese currency is not attractive, China does not yet have a large enough share of the remaining global sentiment that delivers about 87-89% of the commitment to the global reserve currency to the USD and the euro. How much of that 11% remaining belongs to China? Even if it's the lion's share, it remains less than half the euro's share. That is, without calculating the effect of the ¥ and the UK£.

I agree with your thought that recapitalization is now at work in the community banks. I'd judge investors have a better outlook than they did a year ago, and feel safer dealing with them. But still a substantial measure of reticence remains out there.

As for M3 effect of this? - Not immediately, but, positive all the way, unless that inflationary threat is not handled correctly. . . Responsibility for which is resting on Uncle Ben's doorstep, waiting for him to open the door and face up to the parental responsibility he thought he sloughed off.

[comokate]

It's not surprising to see large investors buying into our CDs. I just had a call today, day after Christmas with the banks still closed inquiring after that option. Some present indications are that the dollar may, despite all the weaknesses found in it, emerge from the crisis in better shape than other currencies, including the euro. The obviously sounder currencies such as the Swiss franc, are limited in the traffic they can tolerate. There isn't that much available to satisfy demand. European money has been fleeing in that direction for an extended period now, and the long term concerns behind that movement are driving the Swiss franc up. The Swiss have to shut the trend down for self-protection. Then, where does that hungry money go?

I believe that is part of the explanation for why metals continue to be of interest-

[comokate]

Tensions are increasing between nations, currencies, and the notions of "bailing"

Icelandic Way Out

The Tele­graph reports Ice­land offers risky temp­ta­tion for Ire­land as reces­sion ends

Ice­land has finally emerged from deep reces­sion after allow­ing its cur­rency to plunge and wash­ing its hands of pri­vate bank debt, prompt­ing an intense the debate over whether Ire­land might suf­fer less dam­age if adopted the same strategy.

Iceland’s bud­get deficit will be 6.3pc this year, and soon in sur­plus: Ireland’s will be 12pc (32pc with bank bail-outs) and not much bet­ter next year.

The pain has been dis­trib­uted very dif­fer­ently. Irish unem­ploy­ment has reached 14.1pc, and is still ris­ing. Iceland’s peaked at 9.7pc and has since fallen to 7.3pc.

Iceland’s pres­i­dent, Ola­fur Grims­son, irri­tated EU offi­cials last month when he said his coun­try was recov­er­ing faster because it had refused to bail out cred­i­tors – mostly foreigners.

“The dif­fer­ence is that in Ice­land we allowed the banks to fail. These were pri­vate banks and we didn’t pump money into them in order to keep them going; the state should not shoul­der the respon­si­bil­ity,” he said.

The Irish press reported that EU offi­cials “hit the roof” when Irish nego­tia­tors talked of broader burden-sharing. The Euro­pean Cen­tral Bank is afraid that any such move would cause instant con­ta­gion through the debt mar­kets of south­ern Europe.

Com­par­isons between the Irish and Ice­landic banks must be han­dled with care. Ice­land is tiny. It could walk away from lia­bil­i­ties equal to 900pc of GDP with­out caus­ing a global sys­temic crisis.

Ire­land is 12 times big­ger. The bal­ance sheets of Irish banks are $1.3 tril­lion (£822bn). The inter­lock­ing ties with Ger­man, Dutch, Bel­gian, and British banks cre­ate a nexus of vul­ner­a­bil­ity. Bond­holder defaults would risk con­ta­gion to Spain and Por­tu­gal, where the banks rely heav­ily on for­eign cap­i­tal markets.

Of course, banks are only half the story. Nobel econ­o­mist Paul Krug­man said Ice­land has been able to eke out recov­ery sooner because it never joined the euro.

“Ice­land deval­ued its cur­rency mas­sively and imposed cap­i­tal con­trols. And a strange thing has hap­pened: although it expe­ri­enced the worst finan­cial cri­sis (any­where) in his­tory, its pun­ish­ment has been sub­stan­tially less than that of other nations,” he said, refer­ring to Baltic states pegged to the euro.

Two years later, the krona is down 30pc, alu­minum smelters are fir­ing on all chim­neys to meet export demand and local pro­duce has dis­placed imports, includ­ing such exot­ica as veg­eta­bles and toma­toes grown in greenhouses.

The under­ly­ing tale of Ire­land and Ice­land, and the tale of the 1930s, is that a deval­u­a­tion shock may cause a vio­lent cri­sis – that looks and feels ter­ri­ble while it hap­pens – but the slow-burn of pol­icy aus­ter­ity and debt defla­tion does more dam­age in the end.

howestreet.com/2011/01/brazil-accuses-china-currency-manipulation-intense-monetary-tightening-china-iceland-solution-tempts-irelandunprecedented-hell-belgium/


www.eubusiness.com/news-eu/iceland-ireland.7ic

[bimetalaupt]

Jan 12, 2011 0:30:30 GMT -5 @comokate said:

Tensions are increasing between nations, currencies, and the notions of "bailing"

Icelandic Way Out

The Tele­graph reports Ice­land offers risky temp­ta­tion for Ire­land as reces­sion ends

Ice­land has finally emerged from deep reces­sion after allow­ing its cur­rency to plunge and wash­ing its hands of pri­vate bank debt, prompt­ing an intense the debate over whether Ire­land might suf­fer less dam­age if adopted the same strategy.

Iceland’s bud­get deficit will be 6.3pc this year, and soon in sur­plus: Ireland’s will be 12pc (32pc with bank bail-outs) and not much bet­ter next year.

The pain has been dis­trib­uted very dif­fer­ently. Irish unem­ploy­ment has reached 14.1pc, and is still ris­ing. Iceland’s peaked at 9.7pc and has since fallen to 7.3pc.

Iceland’s pres­i­dent, Ola­fur Grims­son, irri­tated EU offi­cials last month when he said his coun­try was recov­er­ing faster because it had refused to bail out cred­i­tors – mostly foreigners.

“The dif­fer­ence is that in Ice­land we allowed the banks to fail. These were pri­vate banks and we didn’t pump money into them in order to keep them going; the state should not shoul­der the respon­si­bil­ity,” he said.

The Irish press reported that EU offi­cials “hit the roof” when Irish nego­tia­tors talked of broader burden-sharing. The Euro­pean Cen­tral Bank is afraid that any such move would cause instant con­ta­gion through the debt mar­kets of south­ern Europe.

Com­par­isons between the Irish and Ice­landic banks must be han­dled with care. Ice­land is tiny. It could walk away from lia­bil­i­ties equal to 900pc of GDP with­out caus­ing a global sys­temic crisis.

Ire­land is 12 times big­ger. The bal­ance sheets of Irish banks are $1.3 tril­lion (£822bn). The inter­lock­ing ties with Ger­man, Dutch, Bel­gian, and British banks cre­ate a nexus of vul­ner­a­bil­ity. Bond­holder defaults would risk con­ta­gion to Spain and Por­tu­gal, where the banks rely heav­ily on for­eign cap­i­tal markets.

Of course, banks are only half the story. Nobel econ­o­mist Paul Krug­man said Ice­land has been able to eke out recov­ery sooner because it never joined the euro.

“Ice­land deval­ued its cur­rency mas­sively and imposed cap­i­tal con­trols. And a strange thing has hap­pened: although it expe­ri­enced the worst finan­cial cri­sis (any­where) in his­tory, its pun­ish­ment has been sub­stan­tially less than that of other nations,” he said, refer­ring to Baltic states pegged to the euro.

Two years later, the krona is down 30pc, alu­minum smelters are fir­ing on all chim­neys to meet export demand and local pro­duce has dis­placed imports, includ­ing such exot­ica as veg­eta­bles and toma­toes grown in greenhouses.

The under­ly­ing tale of Ire­land and Ice­land, and the tale of the 1930s, is that a deval­u­a­tion shock may cause a vio­lent cri­sis – that looks and feels ter­ri­ble while it hap­pens – but the slow-burn of pol­icy aus­ter­ity and debt defla­tion does more dam­age in the end.

howestreet.com/2011/01/brazil-accuses-china-currency-manipulation-intense-monetary-tightening-china-iceland-solution-tempts-irelandunprecedented-hell-belgium/


www.eubusiness.com/news-eu/iceland-ireland.7ic

The last two( 1873 and 1931) long lasting depressions started with European( Austrian) banks failures due to eastern bond defaults.. Could happen again@@!!! .. in Europe no one trust anyone else.. That is why Ben B. had to come to the rescue of the ECB with the swap line.. He made a ton of money for the Federal Reserve system. The more I read esp from the Lux side of the family the more I understand how much risk he took with your money and the Dollar.

Just a very troubled thought,
Bruce

[Aman A.K.A. Ahamburger]

Risk can sometimes equal reward.. I thought '08 was it(endgame)! I guess Ben B, proved a lot of people wrong!!

[bimetalaupt]

Frank,
That is what I recall..

From the AIG Post on 2009.. Counter Party Risk was huge!!! and could kill many Banks if AIG was left to rest like Lehman.. The Bail Out was 150 Billion USD!!!
Bruce

[Aman A.K.A. Ahamburger]

You guys were right, just a couple things though that are a little different then what you two are saying. Just wondering how you guys think this might affect the outcome. You both said that the Euro would be on par in '10 and we didn't see that. There was also no talk about other countries stepping up to save the euro zone.
Is it possible to kick the can down the road long enough to let the worlds largest economy get churning along again then restructure some of these small countries when the event won't be such a shock to the system? Also there have new calls for a euro wide e-bond, which I find interesting.. There were no record setting stock offerings during past depressions, just saying..

[bimetalaupt]

Jan 14, 2011 2:11:02 GMT -5 Aman A.K.A. Ahamburger said:

You guys were right, just a couple things though that are a little different then what you two are saying. Just wondering how you guys think this might affect the outcome. You both said that the Euro would be on par in '10 and we didn't see that. There was also no talk about other countries stepping up to save the euro zone.
Is it possible to kick the can down the road long enough to let the worlds largest economy get churning along again then restructure some of these small countries when the event won't be such a shock to the system? Also there have new calls for a euro wide e-bond, which I find interesting.. There were no record setting stock offerings during past depressions, just saying..

A++,
Yes We had $1.00=1 EURO from MMX..as a 12 month projection.. The Chinese are a bid factor in the EURO as the European States are the largest buyers of their products. The last EURO I bought was at )0.97 in 1997??? and I spent them on a few Picasso's Linoleum Works like 1 ot 50 .. called the original work due to its number of 1... The Dancer and several other in the matador series. I could not touch them today for the price i paid for them .. Things were real bad then.

Olderstil,
It is interesting to note the value of coal assets in the USA and SAAR's.. Do you think Nat is correct in giving $4 Billion for that asset for steam coal ?? We are too close to making the Nuclear Fourth Generation Power work. No CO2 and little risk with almost no acid rain.
No one i talked to had any Idea how much money will the Chinese use to buy the Bonds from Spain with. ON THING IS THEY ARE NOT MAKING AN MONEY BUYING USA BOND AND THAT IS THE REAL REASON FOR NOT BUYING T-BONDS .

So if we save then our GDP will decrease but the M2 will rise.. In 12 months we will be better off and China will be in a depression like Japan. Or am I reading this chart wrong ??
JUST A THOUGHT, [/img]
Bi Metal Au Pt

Attachments:

[bimetalaupt]

Jan 14, 2011 2:11:02 GMT -5 Aman A.K.A. Ahamburger said:

You guys were right, just a couple things though that are a little different then what you two are saying. Just wondering how you guys think this might affect the outcome. You both said that the Euro would be on par in '10 and we didn't see that. There was also no talk about other countries stepping up to save the euro zone.
Is it possible to kick the can down the road long enough to let the worlds largest economy get churning along again then restructure some of these small countries when the event won't be such a shock to the system? Also there have new calls for a euro wide e-bond, which I find interesting.. There were no record setting stock offerings during past depressions, just saying..

A++,
Again things are hot in Europe because of the lack of action to stop this problem.. They were sure ready to remove the backstop last summer before banking was not crashing. As we stated the "Bank STRESS TEST" WAS the banking Joke of the year!! How many that passed now need billions of EURO's in fresh capital Say they need something like 150- 250 billion more euro's more capital to make the BIS III rules if they are not hiding huge losses. will bet the PIIGS are.. Like Spain alone according to a family member for Luxembourg needs due to hidden losses. Man do I have an oil deal for them.. How about a coal mine in Borneo We have started to see the effect of the Americanism: Production system cutting cost ..ok at the cost of wages.. Productivity is growing faster then GDP will this put it here???[/img]

an. 18 (Bloomberg) -- The euro weakened for a second day against the dollar and the yen on concern an agreement among European finance ministers will fail to contain the region's debt crisis.

The single currency fell against 14 of its 16 major counterparts as Euro-area finance ministers indicated after a meeting yesterday they don't face immediate pressure to tame the crisis, while pledging to strengthen the safety net for debt- strapped countries.

"Markets are likely to be disappointed by any lack of European agreement on new steps to stem the crisis," said Takashi Kudo, general manager of market information services at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo. "The bias would be to sell the euro."

The euro fell to $1.3262 as of 9:27 a.m. Tokyo from $1.3294 in New York yesterday, when it fell 0.7 percent. The single currency dropped to 109.67 yen from 109.91 yen. The dollar bought 82.71 yen from 82.68 yen.

European finance chiefs started a two-day meeting yesterday in Brussels to discuss a revamped debt-crisis-fighting strategy. The gathering came after bond auctions in Portugal, Spain and Italy last week offered a respite from market pressure for steps that go beyond the emergency aid program.

"We shall improve our currently existing backstops so that the so-called market forces can't have the slightest doubt about our capacity to act even in most stressed scenarios," European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters yesterday. He also said more rigorous stress tests will be conducted on banks in the first half of this year.

Attachments:

[bimetalaupt]

Jan 12, 2011 22:47:52 GMT -5 Aman A.K.A. Ahamburger said:

Risk can sometimes equal reward.. I thought '08 was it(endgame)! I guess Ben B, proved a lot of people wrong!!

A++,
I thought this may add some energy to the fire.. Dr. Kenneth Rogoff is the former Chief Economist for IMFand current chair in Economics at HSB.. He said Europe is in for an Japan style no growth recession for the next 10-20 years.. He know what he talking aboput.. The whole european thing about going into a very strong austerity program is what he thinks is wrong.. He agrees with Ben B. on QE2.. I think it is too small but M2 has not grown in Japan either.. We had a 3.6% growth in M2 year over year for 13 week test.. Not good enought to end the problem of high under/un- employment.

European Production has a problem with lack of productivity growth.. The USA is the worlds leader in Productivity and the Federal reserve QE2 should start to increase investing system to make America more productive in the Future. THIS CHART IS WORTH READING[/img]
Just a thought,
Bruce
Harvard University professor Kenneth Rogoff said the fallout from Europe’s debt crisis will linger for years as the region faces the possibility of default amongst some of its fiscally weakest members.

“Europe is experiencing problems that will take years to play out,” said Rogoff, who is also a former chief economist at the International Monetary Fund. “The periphery countries are obviously in deep fiscal trouble; I think we will see restructuring still in some of the periphery countries,” he said, speaking at a conference hosted by the Confederation of Norwegian Enterprises in Oslo today.

The euro region, which grew to 17 members after Estonia’s Jan. 1 accession, last year had to bail out Greece and Ireland after they racked up more debt than they could repay. Leaders in the region last month agreed to amend the bloc’s treaties to put in place a permanent crisis mechanism in 2013 to contain future debt shocks. That mechanism won’t address existing budget stresses faced by members of the single currency including Portugal and Spain.

Rogoff, whose 2009 book “This Time Is Different,” co- written with Carmen M. Reinhart, charts the history of financial crises, said “debt will be the big issue in the next 10 years.

Default Risk

A basket of emerging-market European debt containing Romania, Bulgaria and Lithuania is for the first time cheaper to insure than a gauge of western European bonds including Germany, France and Greece, according to a Bloomberg analysis of the Markit iTraxx SovX Western Europe Index of credit default swaps on 15 countries and the Markit iTraxx SovX CEEMEA Index.

The shift suggests governments in developed Europe may be failing to convince investors that planned austerity measures will succeed in curbing deficits.

“The unsustainable public debt and public expenditure is a question Europe and the United States will be confronted with big time over the next decade,” Rogoff said.

Attachments:

[scaredshirtless]

Speaking of lack of action in Europe...

Did I read right Bruce? They let the Irish Central Bank PRINT 51 billion Euros out of thin air and lent it to their banks? Nothing backing it - except the "debt"

That was in addition to the "bailout"

Have they gone completely crazy over there???

[bimetalaupt]

SS,
Sounds like the Irish. I tho0ught their bonds were backed with Whiskey.. Bonded stores of Good Whiskey.. Or was that the Scots

If that was true then you have to love the our Social Security System. It was created with no capital and now: ZERO asset except the cash from future retiring people. The only backing was the hope that your son would find and keep at job for 40 years or so to make your retirement income come true.. As the system was based on each lady giving our country her healthy son to pay for her retirement then we are enjoying the Irish whiskey too much. In fact our system is a bit better then the Chinese system due to the fact we have more babies per household then one. The hottest investment in China is retirement homes.

I will have to do some search on the Irish thing. Banks are more about Trust then that I thought. It sure is interesting to note the effect of the Warburg Brothers on American Banking.. Real assets vs FIAT money as in Germany.. Now Irish are into FIAT money.. So much for the EURO. ( IMHO)..

Just a thought,
Bruce

[bimetalaupt]

The French vs German in the ECB and at it again.. JCT is in left field.. OK When PIIOGS Fly.. Need more 777-900 XR.. or is the 749-900 freights !!!!~
Europe is still feeling the impact of the recession as two more countries struggle through their financial crises. Both Spain and Portugal face possible bailouts even after selling off some of their debt in auctions on Jan. 12 and Jan. 13.

European Central Bank President Jean-Claude Trichet is calling for an increase in the European Financial Stability Facility, which is an emergency bailout fund for the euro zone countries. Only 10 percent of the 440 billion euro (590 billion) fund has been tapped into, and that 10 percent went to Ireland.

Spain and Portugal could be next on the bailout list. So what are some options that could help ease their debts? Here are pros and cons of some of the things they can do.

Selling debt

Selling debt in Europe is the same process as in the United States. Anyone -- nations or individuals -- can buy debt, such as a Treasury bond, which will be paid back with interest by the entity selling the bond. In the short term, selling bonds is considered a good move because it can instantly give countries some cash flow in their treasuries. It does add to the debt later however, because when investors cash in, they are repaid with interest. The sellers, in this case Spain and Portugal, assume they will have more money later to repay the loan. Selling debt increases the cash flow to Spain and Portugal's treasuries. Both sales were successful and stock markets in Europe went up as a result. It was a win-win situation for Spain and Portugal's economies at that point.

The downside of selling bonds is that they will still have to be repaid in the future. Selling debt now will work to bring in money in the short term, but in order to pay for the debt, Spain and Portugal will still have to take measures to to cut their budget deficits and increase their income. Selling bonds is like taking a loan; it allows them a little extra time to figure out the more intense actions they'll have to take to decrease long-term debt.

Bailout

A eurozone bailout is another option. This would come from the European Financial Stability Facility (EFSF). Should Spain or Portugal tap into the bailout fund set aside for Euro member countries, they could be loaned billions of dollars to help them stay afloat. Plus, the European Central Bank can keep interest rates lower for the loans, making them easier to be paid off.

But each bailout agreement comes with specific regulations and requirements. There are strings attached to bailouts, of course. Ireland, which received a 67.5 billion euro bailout at the end of November, must use its own cash reserves and dilute its pension fund to help cover assistance from its neighbors. According to the AP, Ireland will contribute 17.5 billion euros toward its own bailout cause. When Greece accepted terms from the European Union for accepting the bailout, the ensuing (and required) austerity measures caused mass riots.Greece already had a 20 percent unemployment rate, and people were not happy about having to cut back on top of that.

Refinancing

Refinancing is a way to stave off the maturation of a loan. Bloomberg reports many companies run by the government in Spain have loans due in four years. Refinancing with a different government loan would take the remainder of the terms of the loan and spread it out over a longer period. Spain would still have to pay back the loan but the payments would due further in the future. For the life of the refinanced loan, more interest would be paid because Spain is lengthening the loan, as opposed to paying it off, which would increase the country's debt.

The downside to refinancing is that the government's credit rating may take a hit. Should they need to take out excessive loans to stay in operation, Spain and Portugal may find it harder to get them because the interest rates will have risen.

Finance ministers met this week to discuss increasing the bailout fund and how to deal with increasing debt in the future. So far, they remain mixed. Germany and France are suggesting the euro zone doesn't need to increase the bailout fund, while others say potential bailout for Spain and Portugal could wipe it out. Finance ministers will continue to discuss the issue and hope to come to a conclusion over the coming weeks.

[scaredshirtless]

Thought I'd bump this one since recently:

1) We had Ireland CB print 50 million euros for their own banks to use. This is on top of the 130 million + EU/IMF bailout.

2) Now the revelation that Ireland banks saw 110 million euros in capital flight in 2010.

3) I believe February 25th are new elections and the fallout may be they reneg on the EU/IMF bailout.

4) Iceland meanwhile looks to be picking itself up and humming along. They let their banks fail - the thing we couldn't POSSIBLY do. Bad year now recovery is on the way. Might I add organic recovery?

5) Ireland banks are running on fumes. Have to be. So when is the fallout from the brash Euro money print? Germany? France?

6) I believe I've seen 5 countries over there now raid various forms of future pension funds too.

Interesting times for sure!

[itstippy]

The numbers out of the Euro zone always startle me - 50 Million Euros? 110 million Euros? What's the big deal? We're getting our undies in a bundle over that?

In 2010, the United States Federal Government accumulated over $3.5 billion in new debt each and every day. That’s more than $2 million per minute. On top of the borrowing, we electronically printed $600 billion QE2 dollars just to "stimulate" things a bit.

Instead of invading Iraq we should have just purchased Europe. Cheaper and much more fun!

[bimetalaupt]

Dec 26, 2010 16:58:45 GMT -5 bimetalaupt said:

V.L.,
Put's and Call's are to sell..Looks at the math.. Over the long run sellers make more then 3% over the market....I know Flow5 has done better then I have but I used it to improve my Sharpe index vs a home run on the 9th.. What are your thoughts on the 50/50/30 system??? or Delta Natural Hedging?.. From John C. Hull book" Option,Futures & other Derivatives".. Chapter 23.."Credit Risk"
there is a real reason for 3.48% estimated default rate vs 0.51% historical!!~!!

Neoh Guy,
It will take a longer look at Hamburg Deep Water Port.. Now #3 in the EU. It now makes good sold or bought by what was East Germany open to the World via the Largest ships.. carrying bulk,containers or oil...Germany did have a lot of precision products but the USA also has them. Like in WWII when the German thought their ARMS were better then the USA found out the hard way we had advanced faster then they did. The first heavy tank was imported when we had Antwerp Deep Water Port . What we have seen was poor management from some of the industrial firms sending work to China. Now the UAW are backing GM's improvement manufacturing skill sets to build a better car or truck. This is going to be only the first of many joint efforts to return
America to the best producing nation in the world..

Just a thought,
Bi Metal Au Pt

IT IS NOW OFFICIAL : USA BUILT Automotive ARE THE BEST IN THE WORLD..LESS PROBLEMS IN THE FIRST 90 DAYS THEN JAPAN OR GERMANY!! GO UAW ...

We can ship to the left coast and then ship by rail... European factories are locked out if the Suez channel is closed...


[/img]
just a thought,
Bi Metal Au Pt
I like my black Ford SHO!!! It is SHO FAST!!!

[scaredshirtless]

Absolutely true. Everything we do is as unsustainable.

I think the bad domino to fall may well come from Europe. Thus my interest.