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Asbytec

Asbytec
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  • Graphic: Germany's Target 2 Exposure [View article]
    Sure, makes sense. If a state decided to leave the union, we might experience a similar condition. So, a banking union is really dependent on a political union.
    Jun 16, 2012. 01:14 PM | Likes Like |Link to Comment
  • What Did Bernanke REALLY Say On June 7? [View article]
    Bingo.
    Jun 16, 2012. 11:35 AM | Likes Like |Link to Comment
  • What's Next For The U.S. Dollar? QE3? [View article]
    "And none of them are interested in creating real wealth." Hence, the transmission mechanism is broken. Little impact on the real economy. So, why are some advocating the Fed target nominal GDP with massive asset purchases (probably) beyond those required to set interest rates to spur consumption and investment? With investors sloshing between risk (profit taking) and safety, ain't much gonna happen.

    "...the U.S. government has a technology, called a printing press," this is true, but it is not the Fed that has it. It's the Treasury. Helicopter drops are fiscal policy. Even an LTRO net's to zero as the loan is repaid. Banks should have plenty of liquidity to create investment loans in the private sector, already.
    Jun 16, 2012. 11:17 AM | Likes Like |Link to Comment
  • Saving The Euro [View article]
    Dib, "The process is dysfunctional because the dual crisis aren't manageable." Well said.
    Jun 16, 2012. 11:12 AM | 1 Like Like |Link to Comment
  • Europe - Watch Mario, Not Merkel [View article]
    So what do they mean by political integration, the European parliament will have some Euro wide tax and spend authority...toooooooo support the redemption fund? Taxation without representation, maybe? Or does it mean each sovereign will still be on the hook for it's redemption? It just gives them 20 years to pay it off?

    Personally, I believe the Chancellor should believe taxes fund government spending, at least it does in the euro zone's hard currency. This is not the case in the US with it's soft currency dollar, of course. I agree, the ECB has the bazooka as the pressure for the euro to become a soft currency increases. Still, they will resist it to the bitter end...even with occasional mention of backing it with gold.

    From the article you linked. "German taxpayers should not be directly exposed to the costs of helping Spain’s banks." Of course not, the ECB should be on the hook for it.
    Jun 16, 2012. 10:42 AM | 1 Like Like |Link to Comment
  • Supply Side Revolution In Europe [View article]
    You know, this article and a few comments in other threads is really bugging me...causing some juices to flow (occasionally in the brain.) You show Greece is really trying to grow through reforms you labeled, "most impressive." Gotta admit I was taken aback by that, but hey...who's to argue. Okay, I trust you well enough to agree the reforms in the notes are remarkable.

    So, where's the beef? If Greece is "most impressive" in it's reform efforts, then why is it still falling into deflation, arguing against the tough austerity, and debt yields well into double digits? Ireland and Spain, same question? Are they having trouble servicing their debt? In another thread, someone mentioned Spain's debt service is 3% GDP and it taxing nearly 36% GDP. Seems servicing debt is a no brainer, pay up and borrow cheaply, again.

    You make a great point that Merkel's reforms ("...but this builds the foundation for a much more competitive Europe when it finally emerges from the eurozone crisis.") are needed...smaller governments and smaller budgets and more reliance on the private sector...so, why are they still headed into the debt deflation spiral? I guess if reform is the way to growth, why is it still elusive? Investor nerves? Spain cannot service some small percentage of it's GDP, or is it prioritizing it's population with what little money it does have?
    Jun 16, 2012. 10:22 AM | Likes Like |Link to Comment
  • Graphic: Germany's Target 2 Exposure [View article]
    Mr Chandler, there is something to the idea Fed wire is not "fragmented" as it appears to be in Europe. For example, if every depositor in one state moved all their deposits to new bank accounts in another state, there would be no problem for the banking system as a whole nor for each state, correct?

    A few banks may fail in one state and there might be some contagion, but the deposits would be safe without one state owing the other anything. As I understand it, there are no imbalances in the US Fed reserve system because of they way they are cleared and the way the system functions. (This "owning" is a way I visualize the reserve banks clearing those transactions through reserve transfers.)

    I guess what I am trying to get my head around is what must be done to have a functioning banking union in Europe. It does seem they need to address target2, possibly with a deposit insurance scheme. But that seems incomplete.
    Jun 16, 2012. 08:13 AM | Likes Like |Link to Comment
  • The Greek Elections This Weekend Will Impact Everything [View article]
    On the reserve currency: neither the Euro Zone nor the IMF has the depth of financial markets required to fund a reserve currency, especially backed by gold. Central banks own reserves due to capital inflows, often resulting from trade surplus. That would give China a huge claim on European gold...ain't gonna happen. As for SDRs, the US might just as soon pull IMF funding than let that happen. The IMF will be left lending SDRs to developing nations who have little access to US dollars. As for SDR denominated bonds replacing US treasuries, look no further than Greek debt to see anything lent to someone is risk free.
    Jun 16, 2012. 07:49 AM | 1 Like Like |Link to Comment
  • The Greek Elections This Weekend Will Impact Everything [View article]
    "And so, I believe the solution will be to give Syriza the bailout it wants, on the condition that Greece concede greater fiscal unity to the Eurozone. The ECB will then print as much money as it needs to to make the debt problem go away."

    Greece is finally standing up to be heard as a distressed Euro Zone partner. Good for them. The current policies are not working. They will win concessions to remain on the euro. If the ECB cuts funding, it's over. They won't.

    "The US, with $15.7 trillion USD in national debt and larger deficits, has a larger debt problem and spending problem than the countries in the Eurozone added up."

    It may seem counter intuitive, and what you say might be true...but the consequences are not. The US is self funding. It can print it's own currency and need not borrow (or tax) a dime from anyone to do so.

    I am not sure how a hard currency euro will respond to ECB actions in the wake of a Greek concession to keep it in the euro, but printing might lead either to debasement or to increased euro risk appetite. I suspect the latter will be the case since ECB "rescue" actions will not likely be inflationary. Under austerity, the ECB is turning a blind eye to the ELA. If Greece wins concessions, the ECB must print. If Greece leaves and defaul;ts, it must print. Either way, it's "printing."
    Jun 16, 2012. 07:29 AM | 1 Like Like |Link to Comment
  • The Dreaded Bond Vigilantes Are Coming [View article]
    "...but the income stream that they pay you on those bonds has never been lower..in history."

    You mean taxes, of course. Go figure that one, but it's really not bizarre. Taxes do not fund the printing press.
    Jun 16, 2012. 07:07 AM | Likes Like |Link to Comment
  • Bank Lending Keeps Its Foot On The Gas [View article]
    Interesting, thank you. Yea, I'd agree...what's the rush for more QE? Is Facebook not performing well enough?
    Jun 16, 2012. 07:03 AM | 1 Like Like |Link to Comment
  • Target2 Imbalances: One Great Graphic [View article]
    An excellent article in FT described a hypothetical target2 transaction as an ECB credit to the Bundesbank backed by a Greek euro denominated asset of dubious quality. If Greece leaves the union or defaults, that asset is worthless on both the ECB's balance sheet and to the Bundesbank which has a target2 claim with the ECB.

    Furthermore, the Bundesbank often sells a higher quality assets to keep it's reserve balance. The end result of target2 is the Bundesbank depleting it's stock of good quality assets and is directly exposed to a Greek default or Euro exit. In fact, they are complaining about that contagion.
    Jun 16, 2012. 06:57 AM | Likes Like |Link to Comment
  • Why QE3 Is Still Not Coming [View article]
    Flow, excellent comment.

    I do not understand the following, "Government’s in the secondary market (held by the non-bank public) may be monetized (financing government spending) through open market operations of the buying type..." This form of easing is a direct injection of currency. I do not see how this monetizes US debt, I mean allowing the government to spend more. It seems to simply allow private sector savers to simply spend currency already in existence by redeeming a savings account. Doing so /might/ spur some consumption, however, where easing of the credit type seems to have failed.
    Jun 16, 2012. 06:45 AM | 1 Like Like |Link to Comment
  • Why QE3 Is Still Not Coming [View article]
    Agreed. Bernanke has stated as much many times. Setting interest rates and defending banks is the Fed's job. They have done the former and stand ready for the latter. The problem is monetary policy has lost it's transmission mechanism: portfolio preferences for risk investment is weak at best and runs for safety at the drop of a hat.

    Also, market "uncertainty" is simply investor confusion. That's one thing. Contagion is another. The Fed will certainly act on contagion concerns, but it cannot do much about investor confusion. There may be some liquidity injections, but "easing" is probably not on the table until OT plays out.

    The Fed should concentrate on US banks and let the ECB save it's own. The crisis is in Europe, not the US. Our central bank acted fairly quickly, the ECB needs to do the same.
    Jun 15, 2012. 09:27 PM | 1 Like Like |Link to Comment
  • Greece Now Just A Footnote [View article]
    “Europe has set out to complete economic and monetary union,” she said. “Here we are certainly in a race with the markets.”

    Well, reform and competitiveness are probably something that would have been better accomplished when times were good, not during a crisis.
    Jun 15, 2012. 09:20 AM | Likes Like |Link to Comment
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