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Monthly Archives: November 2011

Europe needs a sucker. Pick up a mirror.

This is unreal. Early this morning central bankers made a surprise coordinated move to stop the banking system melt-down in Europe from worsening there, and from spreading beyond Europe. The debt-fueled financial system contagion has been slowly steam-rolling everything in its path. It had reached the point where banks in Europe could not stop it, were not lending to each other, and the ECB was unwilling/unable […] Read the rest of this entry »

Short Economic Stories: Europe

  Financial system contagion continues to spread and slowly spiral out of control. Interest rates demanded by bond buyers, and implied interest rates from credit default swaps (CDSs) are higher across the board. It doesn’t matter whether you’re a PIIGS country, BIGPIGS country, or anywhere else in the Eurozone.  The Brits must be downright gleeful they have access to cheaper money than Germany does […] Read the rest of this entry »

Short Economic Stories: US

Moody’s debt ratings service is threatening to lower their US sovereign debt rating if the Congress lets things slide until November 2012.  Rightfully so.  Speaking of debt ratings threats, Standard & Poors threatened to do the same to Japan.   S&P debt ratings service lowered ratings on most of the big US banks a couple hours ago.   Last week’s durable goods orders report was bad. Upward US GDP […] Read the rest of this entry »

US Bank Stress Test. Version 3.0

The Fed announced another (the 3rd) stress test of US banks.  This time the test will include scenarios with a deep recession in Europe, and 13% unemployment in the US.  Plus -importantly- the results will be made public! This is going to force banks to clean up their balance sheets even faster: sell assets (good, bad, or ugly); raise capital via new share offerings; […] Read the rest of this entry »

More Euro toast

Germany and most of northern Europe are highly industrious and productive, and they’re net creditors (are owed money). On average, southern Europe is 30% overpaid / less productive, and they’re the ones that owe money to the north.   Debt monetization is going to cause inflation across Europe and devalue the euro. It will make all debts & assets less valuable.  Obviously that’s what you […] Read the rest of this entry »

What to expect, when you’re expecting financial system contagion.

Today, the IMF stepped into the fray to arrest the creeping financial system melt-down in Europe. The ECB refuses to ramp-up lending to its own, so the IMF is putting everyone’s money at stake instead. Let’s see….  European banks are being supported/ bailed out by their national governments. These national governments are being further bailed out by the supranational entity- the European Central Bank (ECB). The ECB is hitting […] Read the rest of this entry »

Short Economic Stories: US

The BEA lowered its estimate of 3Q GDP to 2.0%.  3Q is history and no ones cares. 4Q GDP is likely to start out strong as well (2% is strong?), but will drop towards 0 by year end. It is hard to see a 4Q GDP appreciably better than 1%. And it remains hard to see the US avoiding a recession kicking off in […] Read the rest of this entry »

Gold update

Having run back up (to $1800/oz) in tandem with stocks over the past 1.5 months, gold has pulled back for a breather again. This means it has primarily been driven by the risk-on / risk-off trade. The ECB & Germany announced (vehemently) that the ECB would not print euros // not use QE to get out of this mess. This is driving the price of gold […] Read the rest of this entry »

The Euro is toast

Financial system contagion continues to spread and infect more countries — not just the PIIGS now. The remaining AAA-rated countries are seeing their cost of borrowing rise as well (other than Germany).  The bond market is slowly increasing the chances of the euro currency breaking up. By year end, the odds may approach 40%.  The pressure is mounting -primarily on Germany- to either: allow […] Read the rest of this entry »

Short Economic Stories: Europe

Big Picture: Europe continues to unravel. Banks still aren’t lending to each other. Bailout programs are being used up and are not big enough. The economy is entering recession yet budget cutting and tax raising have barely begun. Political leaders are being thrown out and there remain doubts newly installed leaders will be willing or able to cram the requisite medicine down the throats […] Read the rest of this entry »