“On an optimistic view, that a deal was struck implies that neither side was ultimately willing to risk a Greek exit because they recognise that no one fully understands all the ramifications of such a decision. Under this scenario, when pressure again builds, the authorities will do the same: let Greece remain in the euro, … Read more
A friend commented to me when he saw the story that Iceland had been upgraded by Fitch, the ratings agency, that this “sure makes default look palatable”. Obviously, Iceland is not out of the woods yet but their relative success says there are other ways to get it done. The BBC reports: Iceland is safe … Read more
How much is enough, or how much is not enough? This is the question…The Greek drama evolves before our eyes like a slow motion train crash. On the one hand, there are the irrational expectations of the foreigners – be it the Eurozone finance ministers or the IMF, the private banks, driven by reckless greed … Read more
Today the ECB released the Euro area balance of payments for December. This is a statistical release that is worthy of only the biggest data geeks – but it is quite interesting, especially in forming relationships between FX and capital flows. I’ll demonstrate what’s been going on in EA bond, equity, and money markets in one … Read more
From Project Syndicate: Since late last year, a series of positive developments has boosted investor confidence and led to a sharp rally in risky assets, starting with global equities and commodities. Macroeconomic data from the United States improved; blue-chip companies in advanced economies remained highly profitable; China and emerging markets slowed only moderately; and the … Read more
It has been recognized for well over a century that the central bank must intervene as “lender of last resort” in a crisis. In the 1870s Walter Bagehot explained this as a policy of stopping a run on banks by lending without limit, against good collateral, at a penalty interest rate. This would allow the … Read more
The esteemed former Fed Chairman, Paul Volcker, introduced a very simple regulatory concept that bears his name: The Volcker Rule. It was part of the Dodd-Frank regulatory reforms passed after the financial crisis of 2008-09. There has been enormous pushback against what should be a simple piece of prophylactic rules on proprietary trading by depository … Read more
The European crisis continues to deepen. This column argues that the current monetary and fiscal policy strategy is inappropriate, and is likely to be counterproductive. Current policies do not address the source of the public debt problem, and provide little hope for economic recovery in periphery countries. Introduction Deficient private demand, weak or falling output, … Read more
President Obama’s 2013 budget includes a proposal to extend the current 2 percent payroll tax cut, first put in place last year, for the balance of 2012. Congress will probably go along after another round of grandstanding. Yes, the payroll tax is too high. In itself, even a small, temporary cut might be welcome, but … Read more
Via Mike Shedlock, this item from MarketWatch caught my eye: Newt Gingrich said that if elected president, he’d name [James] Grant to help run a commission looking at a possible return to the gold standard. And Ron Paul said, if elected president, he’d go all-in and name Grant– one of Wall Street’s best-known gold bugs– … Read more