Europe has just eviscerated the sovereign CDS market
What happens when you get a default that equates to a 50% loss for most investors without triggering default insurance? Massively negative unintended consequences.
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default
How the latest emergency euro summit addresses the sovereign debt crisis
Markets’ initial reaction to the latest EU emergency summit has been positive. Risk assets are trading up, risk-sensitive currencies are up, European bank stocks are up, and the broader stock market is as well. This relief rally is…
Four biggest lessons from Iceland’s brush with national bankruptcy
Poul Thomsen wrote an article on the IMF’s blog site about Iceland that I would to highlight. The lessons bear repeating given the economic problems in Europe and the US. The IMF worked with Iceland to stabilise the economy and avoid…
Europe’s Non-Solution
Let’s not get bogged down in numbers. The EFSF could have 440 billion euros behind, 1 trillion, 2 trillion, even 10 trillion euros, but it all comes back to the funding sources. The French are right: it makes no sense to implement this…
Fed Outgunned, EMU Outflanked
The auxiliary objective of QE by the Fed is to weaken the USD. Herein lies the rub. Quite simply, with the recent announcement by the BOE of another round of QE worth £75 billion, with the ECB now willingly or unwillingly being forced into…
Harrisburg Fails to Get the Word
Municipal bondholders have something else to worry about. If Occupy Wall Street has legs, and, if labor unions handcuff the protestors' agenda ("Major Unions Join Occupy Wall Street Protest" - New York Times, October 5, 2011), will that…
Juncker: It may not be enough even if Greece defaults with 60 percent haircut
In an interview carried on Austrian Television station ORF, Euro Group President Jean-Claude Juncker admitted that the present bailout package for Greece will not stand. The 21% discount worked out just a few months ago will become 50 or…
In which Jim O’Neill says muddling through leads to deepening crisis
Muddling through means deepening crisis for the euro zone.
Felix Zulauf: expect more market turmoil than in 2008
In an interview from late September, Zulauf tells James Turk that he is very much a eurosceptic. The external imbalances in the euro zone make the euro an untenable currency union. Like David Blanchflower, Zulauf remarks how markets are…
More on the S&P bear market and the central bank liquidity train
Just a few moments ago I posted on the fact that the US is officially in bear market territory. On Twitter, I said that “in Fall 2008, 10-year yields went to extreme lows and then the liquidity train went into overdrive. Stocks rallied,…