News Links: Big, Cheap Solution In Europe

But there is a solution. The markets seem to think we’re about to see the ECB inter into the fray as a lender of last resort to troubled countries. The ECB already nibbles in the secondary bond market, but at such low volumes, and such random intervals, it doesn’t mean anything. The solution: The ECB needs to declare an interest rate cap for various countries, and tell the market that if X-country’s bonds hit X-rate it will intervene.

Of course, among the six eurozone countries in trouble so far (Greece, Portugal, Ireland, Cyprus, Spain and Italy), a subset of them will experience restructurings and reductions of their public debts and private debts as a way to resolve their stock imbalances. And a different subset of these six countries may also eventually decide to exit to resolve their flow imbalances. So, many different permutations and combinations of outcomes/scenarios are possible. But our four options and the related policies associated with them provide a map of how one can potentially resolve stock and flow imbalances in the EZ. And our three scenarios provide a timeline of how, over the next 12-24 months, economic and financial conditions will evolve in the EZ. Some countries will for sure restructure their debts and some will most likely exit the EZ. If enough of them restructure and exit-especially the two big ones in the periphery (Italy and Spain)-this would effectively represent a break-up of the EZ.

On one level, today’s protesters are asking for little: a chance to use their skills, the right to decent work at decent pay, a fairer economy and society. Their hope is evolutionary, not revolutionary. But, on another level, they are asking for a great deal: a democracy where people, not dollars, matter, and a market economy that delivers on what it is supposed to do. The two are related: as we have seen, unfettered markets lead to economic and political crises. Markets work the way they should only when they operate within a framework of appropriate government regulations; and that framework can be erected only in a democracy that reflects the general interest – not the interests of the 1%. The best government that money can buy is no longer good enough.

One of the classic criticisms levelled at psychology is that it’s just common sense. And there’s nothing that winds up psychologists more than having this old saw repeated back to them. If it’s true we should be able to ask the general public six easy questions about the psychology of, let’s say, memory, and they should do pretty well. After all, everyone has a mind of their own and can introspect and see what’s going on inside it, so they should be able to answer these questions easily, shouldn’t they?

This leaves two roads for the eurozone. The first is to disband. The second is to move to a ‘You Break it You Own it’ Europe where insolvency of a sovereign is settled between the taxpayers of that sovereign and its creditors, without any permanent financial support from any other nation’s taxpayers. Likewise, threatening insolvency of systemically important banks (‘sibanks’) and other ‘sifis’ is first visited on these institutions’ unsecured junior and senior creditors. Their claims are written off or converted into equity before any taxpayer money goes in.

(Reuters) – Greece is relying on Iran for most of its oil as traders pull the plug on supplies and banks refuse to provide financing for fear that Athens will default on its debt.

Sadly, there’s zero chance of the kind of fiscal stimulus which can actually put millions of unemployed Americans to work. Obama, it turns out, is no FDR. And without strong backing from the White House, the Fed simply doesn’t have the credibility needed to make everybody believe that we’re emerging into a halcyon world of strong growth and high employment. Because, frankly, we’re not. No matter what Bernanke does.

The problem with praising kids for their innate intelligence – the "smart" compliment – is that it misrepresents the psychological reality of education. It encourages kids to avoid the most useful kind of learning activities, which is when we learn from our mistakes. Because unless we experience the unpleasant symptoms of being wrong – that surge of Pe activity a few hundred milliseconds after the error, directing our attention to the very thing we’d like to ignore – the mind will never revise its models. We’ll keep on making the same mistakes, forsaking self-improvement for the sake of self-confidence. Samuel Beckett had the right attitude: "Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better."

As email, documents, and almost every aspect of our professional and personal lives moves onto the "cloud"-remote servers we rely on to store, guard, and make available all of our data whenever and from wherever we want them, all the time and into eternity-a brush with disaster reminds the author and his wife just how vulnerable those data can be. A trip to the inner fortress of Gmail, where Google developers recovered six years’ worth of hacked and deleted e‑mail, provides specific advice on protecting and backing up data now-and gives a picture both consoling and unsettling of the vulnerabilities we can all expect to face in the future.

Recent years have seen an explosion of male joblessness and a steep decline in men’s life prospects that have disrupted the "romantic market" in ways that narrow a marriage-minded woman’s options: increasingly, her choice is between deadbeats (whose numbers are rising) and playboys (whose power is growing). But this strange state of affairs also presents an opportunity: as the economy evolves, it’s time to embrace new ideas about romance and family-and to acknowledge the end of "traditional" marriage as society’s highest ideal.

My current concerns are that, while EMU has lead to a process of convergence of nominal variables (inflation, interest rates, etc.). it has also been associated with a process of increased divergence in economic performance, especially regarding economic growth rates. This economic performance divergence is a serious problem for some EMU countries (Italy, Portugal, Greece) and it may eventually lead to a collapse of EMU. I am not supportive of such a collapse but, unless appropriate macro and structural economic policies are undertaken, the risk of a break-up becomes serious.

Goldman Sachs Group Inc. (GS) and Morgan Stanley are considering whether to abandon fair-value accounting for some loan promises after losses this year, according to two people familiar with the discussions. The change to accounting at original cost would only affect some investment-grade commitments, said the people, who spoke on condition of anonymity because decisions haven’t been made. Morgan Stanley had $55.1 billion of investment-grade commitments as of Sept. 30, while Goldman Sachs had about $51.6 billion.

Quinn, whose business interests spanned building materials to insurance, estimates he lost more than 1 billion euros ($1.36 billion) after investing in Anglo Irish Bank Corp, which was nationalized in 2009. Quinn and his family owe almost 2.9 billion euros, the bank said in a statement today.

Bank of Ireland Plc, the country’s biggest lender by assets, said that while it expects its net interest margin to stabilize in the second half of the year, it faces "some headwinds" in a period of low rates.

Technocratic economist assumes leadership of interim coalition government after weeks of political turmoil over debt crisis

MF Global, US brokerage run by former Goldman Sachs boss Jon Corzine, fires 1,066 staff, while regulators search for funds that went missing before collapse

I don’t have a problem when US industry lobbies congress for what they want. That’s the system we signed up for. But I do have a problem when the company that has the most to gain from the tax code is also advising the Administration on economic policy. Obama has made a bunch of dumb mistakes. His getting into bed with Jeff Immelt is high on the list.

Currently, over $500,000,000 in customer segregated funds is missing from MF Global Inc., the US broker/dealer and futures commission merchant (FCM) that filed for Chapter 11 bankruptcy protection last Monday, October 31, 2011. This is simply unprecedented in the futures industry, which passed relatively unscathed through the 2008 turmoil. When an FCM is about to declare bankruptcy, the brokerage accounts have historically been separated or sold from the failing entity to protect the integrity of the customer accounts. This did not occur with MF Global, and now the cash in 50,000 active accounts is frozen and subject to the actions of the trustee, James W. Giddens (the same trustee who was appointed to Lehman Bros.).

We think there’s an increasing risk that Apple’s iPhone sales in the quarter may be disappointing.

Today has been called a one-derful day. At eleven seconds past 11:11 am, on this, the 11th day of the 11th month of the 11th year, we have an unusual date and time

The markets and more importantly-the ECB-are coming to realize that the ECB is the rate setter in the Eurozone, just as the Fed is the rate setter in US dollar bond markets and the BOJ is the rate setter in yen. And the mechanism by which the central bank, in this case the ECB, sets rates is by buying or selling the securities of the government in the secondary market. NOT DOING SO would be an abrogation of their role. Just as the Fed can set rates anywhere along the term structure or, even on mortgages, the ECB can set rates on Italian, Greek, Irish, Spanish, German, French or any other debt in the Eurozone. That is its role even if it is reluctant to do it. It is finally coming to terms with that and doing it as needed.

it is time to undo the Eurozone in entire, but we will keep the Euro, or rather, Euros.  This would have to be done quickly or it would not work well.  When those in the Eurozone wake up one morning, they find that they do not have Euros any longer, but Greeks have Greek Euros, Germans have German Euros, etc., and they do not trade at parity.

Il fondatore del blog Credit writedowns parla delle origini della crisi dell’Eurozona. L’Italia ha molti strumenti per affrontare la crisi, ma ha un problema demografico. Berlusconi non contava molto.

If the ECB uses this resource to purchase Italian and Spanish sovereign debt, advocates claim there is no amount of market speculation which could overcome the resources of the central bank. That, after all, is what the Swiss National Bank has shown by threatening to intervene without limit to prevent the Swiss franc from appreciating. Why cannot the ECB use the same silver bullet to place a ceiling on Italian bond yields? Like the "big bazooka" which went before it, the ECB’s silver bullet is a much more problematic instrument than the markets want to believe.

The eurozone storm is spreading fast and Slovenia has become the latest country to be battered by its winds. Its 10 year bond yields have jumped dramatically since the start of November and are now sitting dangerously close to 7 per cent. Slovenia’s spread over German debt also reached a record high of 535 basis points. Such yields haven’t been seen in Slovenia since it joined the eurozone in 2007 and their slide can be traced straight to Italy’s ongoing crisis.