.@ObsoleteDogma @ryanlcooper @thestalwart Is the idea writers check their facts and proofread so don't publish "yes" where they mean "no"?
13 minutes ago
Category Archive: Debt Crisis
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CDS: Insurers Pay Only When the Bond Is ‘All Dead’
The saga that is the Greek CDS trigger – a credit event being ruled only after CACs were inserted retroactively and then used by the Greek government to force the debt swap – made me think of a classic scene in the Princess Bride. Watch the YouTube clip of Billy Crystal as Miracle Max, who famously [...]
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I Still Don’t Get Why the ECB Hiked Rates
I still don’t get why the ECB hiked rates in April and July of 2011. I questioned this using bond market pricing back in August 2011. Now I question it once more using the ex post trajectory of mortgage rates. Across the Euro area, 43% of total home loans are made on a variable rate [...]
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Core Euro Area Banks Still Very Exposed to Contagion from a Greek Exit
Today Megan Greene (@economistmeg) wrote a rather insightful post linking this weekend’s German proposal to Greece’s eventual exit from the EMU – the leaked proposal is to (1) make Greek debt service a top priority, and (2) for Greece to rescind national fiscal sovereignty to the European level (links included in her post). At the [...]
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Ratings Matter for the Euro Area
As you all have heard, Friday was (again) S&P’s day in the limelight. The rating agency downgraded over half of the 16 Euro area countries put on credit watch negative in December 2011. A quick look at my feed shows several takes on S&P’s action: the Economist’s Free Exchange comments on the now soft-core country, [...]
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EA Spreads: Why Should the Trend Change?
They changed the title; but originally the NY Times reported “Euro Zone Agrees to Reinforce Maastricht Rules“. That’s exactly what EA policy makers agreed to last week – not much to bring home. The real shift in policy came from the ECB. Ambrose Evans-Pritchard highlights the ECB’s actions as ensuring some sort of bank profitability, while [...]
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EA Balance of Payments: the Current Account
I’ve been doing quite a bit of research on the balance of payments flows within the Euro Area (EA). Given the complexity of the balance of payments, there are too many angles to tackle in one post. Therefore, spanning the next week I will dedicate my commentary to the EA balance of payments. In this [...]
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European Policy Makers Don’t Understand But Markets Do
So here we are: the Italian yield curve is flat at above 7%; the government institution is in question; and the ECB is using its SMP purchase program as a carrot to drive austerity implementation in and Berlusconi out. Some would argue that the ‘market is irrational’ – Italy faces a liquidity not solvency crisis. That’s the [...]
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Worries About Italy: Growth and Politics
Current bond market pricing implies a 6.17% yield on a 10-yr Italian government bond, or 430 basis points (%/100) over a like German government bond. I’d call this distressed levels for Italian debt, especially for an economy that is very likely contracting as we speak. Today Mark Thoma points us to Kash Mansori’s article on [...]
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The Euro Area Precedent for Policy Failure
Last weekend, a leaked Troika report (Troika = ECB + EC + IMF) revealed that European policy makers now comprehend that the Greek policy prescription is not working (bold by yours truly): The growth and fiscal policy adjustments assumed under the program individually have precedent in other countries’ experience, but experience to date under the program suggests that [...]
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Don’t Hold Out for a Lasting German Economic Rebound
German industry is plugging away. Ending in August, the 3-month average of the seasonally- and calendar-day adjusted volume of industrial production (excluding construction) maintained a quick 8.3% annualized pace. Even if this core measure of industrial activity falls another 1% in September, the Q3 quarterly annualized pace would be 10.5% - a robust acceleration from Q2 (6.3%). [...]
