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Europe's Looming Bust Replies |
rffrydr
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 Posted: Tue Jun 07, 2011 6:41 am Post subject: |
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If they were to apply the "Irish finish" as their stress tests then most banks in Europe are insolvent (zero property appreciation until 2040, for example). "Stress" is a measure on a standard loan portfolio set against some standard (low) of general economic performance. But when, say half, the bank's capital is sovereign debt then the entire exercise depends on a bi-polar political event and the snake thus bites its tail. Stress tests in this circumstance are only a tool for nationalization. At this point, they are pointless.
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HenryTo
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| Posted: Mon Jun 06, 2011 9:30 pm Post subject: |
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Bridgewater's update on the European sovereign debt crisis:
| Quote: | | It appears that the European Bank Regulator, the EBA, will postpone the bank stress-tests because of concerns about the accuracy of the data. We believe that these concerns are justified especially as we estimate that an accurate picture would show large losses and there are no clear provisions in place for handling them. This is a solvency problem mixed with a political/social problem that is best handled by fudging the numbers and kicking the can down the road. Getting the real numbers out and applying mark-to-market to them is impractical. Besides not having the agreements in place to handle them, the EU doesn't have the institutions to organize handling them -- there is no European FDIC, no Treasury, no other mechanism for recapitalizing insolvent banks in an insolvent country and no political consensus on the proper way to ultimately deal with default. |
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diesel
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| Posted: Wed Jun 01, 2011 4:54 pm Post subject: |
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3% debt/GDP ratios are way to tight at this point in the cycle and they are looking to tighten further.
Basic sectoral economics says that spending has to come from either the government or the private sector. Government has bought us out of the prior recession with stimulus programs but they are prematurely ending them when the private sector isn't ready for the handoff. Credit growth is just not there yet.
Now as for Europe the vast majority of them have shackled there economies in a gold standard equivalent and get to play pro-cyclically. The UK/Iceland will get off lightly compared to the rest.
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rffrydr
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| Posted: Wed Jun 01, 2011 8:33 am Post subject: |
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That is certainly the risk. However dare I note that "core" europe is now within sight of 3% debt/GDP ratios as REALLY designed while the UK sputters into the PIIGS orbit.
Of course there was the design...and then the implementation of the design which bore no resemblance to one another. Why? Simple, the impulse to europe was first and foremost a political concept; to be built on some very obvious economic integration. In a way, this grand mismatch was anticipated and a bet was made that the now vested institutions would make the necessary pull. Depression tugged hard against this but also forced a kind of cooperation and decision making.
On that score it has not been pretty. Yet it bumbles forward. 1.4X euro is no crisis. As FT writes off the banks it's interesting that while PIIGS spreads have again blown out--this time the CDS bank's have not.
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diesel
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rffrydr
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rffrydr
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| Posted: Mon May 23, 2011 2:08 pm Post subject: |
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Still optimistic here....and still confident in the eurocrats bumbling ways. I bet now they wish that $5B greek CDS market was shuttered. On to the ratings agencies. Italy will be italy and spain will be spain but downgrade of belgium is really striking at the heart. And now turning against themselves?
http://www.nytimes.com/2011/05/24/business/global/24iht-euro24.html
Prisoner's dilemma
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rffrydr
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| Posted: Fri May 13, 2011 10:35 am Post subject: |
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Money continues to roll in:
http://www.bloomberg.com/news/2011-05-13/german-economy-swelled-more-than-forecast-in-first-quarter-as-exports-grew.html
| Quote: | | German exports surged 7.3 percent in March to the highest monthly value since records began in 1950, and industrial production increased for a third month as construction surged. At 7.1 percent, unemployment is the lowest on record in reunified Germany.....The strength of Germany and France helped boost Spanish exports, offsetting some of the effects of government spending cuts. Spain’s economy expanded 0.3 percent in the first quarter, beating the 0.2 percent predicted by the Bank of Spain last week. Germany and France are Spain’s biggest trading partners. |
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rffrydr
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| Posted: Thu May 05, 2011 10:25 pm Post subject: |
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Either it's the constituent or the whole--you can't condemn it for both at the same time.
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HenryTo
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| Posted: Wed May 04, 2011 12:00 am Post subject: |
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Bridgewater on the Portuguese bailout:
| Quote: | | As expected, Portugal announced that they have agreed on a €75 billion bailout package with the EU/IMF. From our perspective, this development is another step in what will be a long progression of events that will force the EU to define how insolvent member states will be handled. As we have described, we don’t believe that the highly indebted European peripheral countries can achieve debt sustainability through fiscal austerity, especially as the ECB is tightening monetary policy and driving up the euro at a time when the periphery needs lower interest rates and a currency devaluation. The Portuguese package kicks the can down the road by lending more money in return for promised austerity measures. We will go through a deeper analysis later this week, but a basic understanding of economics and debt dynamics tells you that austerity will produce intolerable economic conditions which will then require further action, ultimately leading to debt restructuring. |
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rffrydr
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rffrydr
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| Posted: Wed Apr 27, 2011 7:20 am Post subject: |
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France an FDI champ???? Economist does a good job discriminating what they're doing in france, over what they're saying:
http://www.economist.com/node/18584584?story_id=18584584
| Quote: | This voiceless France, more adaptable and forward-looking, seldom permeates the national conversation. Yet a glance at the France behind the headlines hints at a picture that is a lot less glum. Shops are full, markets busy and consumer spending is buoyant. Property prices are up. The French have snapped up the iPad and 20m, or nearly a third of the population, are on Facebook. The French may moan about their country, their bureaucrats and their politicians, but they seem happy with their individual situation. Though only 17% of young people told one recent poll that their country’s future was promising, a massive 83% said that they were satisfied with their own lives.
Thanks to a decent diet and health system, the French, in particular French women, live longer than many others in Europe. Most strikingly, the French birth rate has risen to just over two babies per woman. By some estimates, France’s population will overtake Germany’s by 2037. The French, it seems, are persuaded by the ambient gloom that their country is doomed—yet even their own behaviour suggests that they think it may have a future. |
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rffrydr
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| Posted: Tue Apr 26, 2011 7:51 am Post subject: |
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Ford regained its footing in Europe in the first quarter, showing a pretax operating profit of $293 million, up from a profit of $107 million a year ago. Sales were up $1 billion to $8.7 billion in Europe.
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rffrydr
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| Posted: Mon Apr 18, 2011 6:43 am Post subject: |
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Glancing through the quarterly Economist performance table and, of course there's Europe, up 25%, with euro performance. So money is getting "allotted." Interesting though, that leading the pack, nipping out Russia, is carbon trading, up over 27%. CDS getting creamed down almost 30%....Reversion to the mean on oil sell-down???
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rffrydr
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| Posted: Thu Apr 07, 2011 7:03 am Post subject: |
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March German Construction PMI rose 1.1 to 61.8. It showed output the strongest in the survey
history (September 1999). New business was the best since 2008 and input cost inflation rose at
its quickest pace since July 2008.
· February German Factory Orders rose 2.4% m/m [0.5% forecast]. The index level is trending
higher.
· February Spanish Industrial Output rose 3.6% y/y [2.2% expected].
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