That’s what the news outlets say …
Emphasis mine (via Telegraph)
Despite the relative calm, Europe’s debt crisis remained the central focus. The euro, which came off fresh four-year lows around $1.21 on Wednesday after a massive €9.5bn intervention by the Swiss central bank, edged lower.
The currency was around $1.2324 by mid morning. It had spiked above $1.24 earler on speculation of a possible intervention from the Federal Reserve, European Central Bank and Bank of England, and talk that Greece may be about to leave the eurozone.
“The day will be a roller coaster, no doubt,” said David Keeble, an analyst at Credit Agricole. “The German short ban has emphasised that Europe is not unified and this is at a juncture when it really, really needs to be.”
Ms Merkel, in a wide-ranging speech on financial regulation, stressed the importance of tightening the fiscal rules governing the euro area, the breech of which has contributed to the current crisis.
“If you have a currency like the euro … then you need stricter rules than other governments that just decide for their own currency,” she said.
“We need to tighten up the Stability and Growth Pact,” she insisted, ahead of a meeting of EU finance ministers and the EU president Herman van Rompuy to discuss the pact Friday in Brussels.
On an global bank levy, she quipped: “This is something that won’t find agreement at our first dinner … but I do not think it would ruin markets if we had international taxation.”
She also called for a European version of the rating agencies which have been accused of exacerbating the crisis.
“I would be in favour of introducing a European rating agency which would act as a competitor to other rating agencies on a level playing field,” she said.
- Greece out of the EMU is already a done deal, not going forward with that would be ruinous for EMU/Euro/Europe/Greece
- The Maastricht Treaty was always watered down since its inception by Germany, France and other finance ministers. EMU has substantial short-comings - visible when the Makeup came off. The same EMU finance ministers who went over the pact, decided what penalties to enact. Conflict of interest again.
- You don’t solve rating-agency-problem with more EU rating agencies and more competition. You don’t solve the legitimate conflict of interest between rating agencies and banks. Period. And in case you think to introduce an EU Commission operated rating agency (aka gov run) - then you have another conflict of interest.
Shouldn’t we be happy being bailed out?
» Welcome to Bailout Nation «
“The big picture is of a world which (a) can’t afford to make more mistakes, and (b) is certain to make more mistakes, thanks in part to the increasingly important role of politics in national economies. The world seems to be converging on a model of “state capitalism”, but no one really knows what that model looks like, and with national and international politics becoming increasingly fractious, tail risks are increasing even as the base-case outlook remains underwhelming.
We seem to be leaving the era of independent central banks behind us, as they are now the only institutions capable of taking on the debt which moved during the most recent crisis from banks to now-overburdened sovereigns. The last major holdout, Jean-Claude Trichet, threw in the towel last weekend, and we’re now in a world where the only real guarantee of central bank independence is a small government debt. (Think Australia, which, alongside Canada, is one of the few relatively bright spots in the non-EM Pimco universe.) El-Erian is not happy about this development.” (via)
Shouldn’t we be happy being bailed out? No? That may be because you weren’t bailout out! Am I right?
Hand up who was not bailed out!
Things got considerably more interesting.
# “And so the European private banks win the overnight battle with the Central Banks again: after shorting the EURUSD all the way to almost 1.25, they have forced the European Central Banks to buy ever more of their worthless Government bond holdings. Reuters reports that overnight CBs have been aggressive buyers of Greek, Portuguese and Irish Sovereign (if there is such a laughable concept as sovereign any more) bonds, which in turn has forced a quick short covering spree in the EURUSD and the EURJPY, which in turn has forced futures to go from 10 handles down to up 4. In other words, Central Banks now are fighting tooth and nail to prevent the market from going down ever again. To all the shorts out there- you are no longer taking on merely the Fed, now you have every money printer against you as they scramble to load up with every worthless asset imaginable. At this rate Dow, Dax and Dung Manure 36,000 is easily reachable. The only way to play this is through gold, which is now the only flight from Central Bank lunacy.” (via ZH)
# “Tom Hoenig’s Chinese doppelganger has finally appeared. Yesterday we pointed out that the Chinese economy is now in unsustainable overdrive mode and is likely at most months away from entering runaway inflation mode. Today, Li Daokui, a monetary policy committee adviser of the People’s Bank of China, was quoted by the China Business news as saying conditions necessitated a start to policy tightening. Should the PBoC decide to do the right thing and officially enter a tightening mode, watch oil and copper, not to mention the BDIY, to crumble by 10%-15% overnight.” (via ZH)
China needs to tighten selectively! Not on a broad measure (ie support rural poor / low income / build social safety net / get more people into the empty urban developments with good paying jobs).
# “Late yesterday, the FRBNY posted the full terms of the various FX swaps that it instituted as part of the bailout of the Euro, and of various French and German banks. The specifics of the rescue agreements with the BOE, the ECB and the SNB are below while the Bank of Canada and BOJ swap details are still pending. One thing we know is that all swap arrangement will have a maximum duration of 88 days. Surely at that point they will merely be rolled over as the Euro could be facing parity and various European banks will all be on the verge of bankruptcy due to the $6 trillion USD/EUR underfunded mismatch which the BIS and Zero Hedge have previously discussed. Yet a critical missing item is the full size of each specific swap, leading us to believe that the Fed’s latest swap lines are limitless in size. If the expectation is that the Fed should not be constrained by how large any given swap line can get (and even in the first European bailout round each swap line had a hard ceiling), one can speculate that the Fed fully anticipates European dollar funding needs well into the trillions. Which of course would mean that the Fed’s balance sheet is about to go up by 50% on behalf of rescuing Europe… And that FR banks will make double the expected $1.25 trillion in interest on excess reserves. Thank you US taxpayers.” (via ZH)
I see Financial Senate Committee up in arms already! But EU Dollar market is in distress. As is the EU bond market. Other than UK, as we saw two days ago.
# “Spain will slash public spending by €6bn and cut civil servants’ by 5pc salaries this year as part of a plan to ease fears the country could slide into a debt crisis like that of Greece.” (via Telegraph)
AAAAAND Goldman Sachs again
# Jim Rickards, who recently has gotten massive media exposure on everything from the JPM Silver manipulation scandal, to the Greek default, was back on CNBC earlier with one of the most fascinating insights we have yet heard from anyone, which demonstrates beyond a doubt why any attempt by Europe to print its way out of its current default is doomed: “Look at what Soros did to the Bank of England in 1992 - he went after them, they had a finite amount of dollars, he was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country, you don’t need money you just need synthetic euroshorts or CDS. A trillion dollar bailout: Goldman can create 10 trillion of euroshorts. So it just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money.” Just wait until Europe finally realizes that the CDS “speculators” had all the cards in the poker game all along. And we hope Europe listens to the man: being LTCM’s GC he knows all about failed bail outs. (via ZH) - video on ZH
Annnd AUDIT THE FED
# “Senate clears measure to audit Federal Reserve
The Sanders Amendment makes it clear that the Fed can no longer operate in the kind of secrecy that it has operated in forever,” Sanders said on the floor before the vote. “Under the Sanders Amendment, for the first time, the American people will know exactly who received over $2 trillion in zero or virtually zero interest loans from the Fed and they will know the exact terms of those financial arrangements.
The Senate also voted 43 to 56 to reject an amendment from Sen. John McCain (R-Ariz.) that would have forced the government to end its control of mortgage giants Fannie Mae and Freddie Mac within two years. Dodd’s bill does not address the two government-sponsored enterprises, drawing strong criticism from Republicans who say their risky loans played a major role in the 2008 economic crisis. (via Politico)