This may begin a bigger run in the Yuan as a stronger currency makes imports cheaper.
Comments »Italian Bond Yields Reverse Course and March Higher
Argentina Central Bank Will Have to Reduce Dollar Deposits by 20% as Deposits Fall by $645 Mn
GOP Candidates Talk Tough on Iran
Republican presidential candidates said on Saturday they would stop Iran from developing an atomic bomb but differed over how to do it in a debate that tested their knowledge of world hotspots.
The economy has been the No. 1 issue for the 2012 election campaign, so the CBS News/National Journal debate offered a rare opportunity to hear the candidates explain how they would handle the job as commander-in-chief.
The candidates made no major stumbles during the first hour of the 90-minute gathering, but Texas Governor Rick Perry’s belief that the United States should consider eliminating foreign aid to Pakistan stirred debate among the candidates.
Newt Gingrich, who came to Spartanburg, South Carolina, riding a new wave of support as the conservative alternative to the more moderate Mitt Romney, declared he would launch covert operations within Iran in order to be able to deny them later.
Romney, who for months has been a front-runner to win the right to challenge President Barack Obama in the election next year, vowed in the debate at Wofford College to prevent Iran getting a nuclear weapon.
“One thing you can know is if we elect Barack Obama, Iran will have a nuclear weapon,” said Romney, a former Massachusetts governor. “If you elect me … as the next president they will not have a nuclear weapon.”
The U.N. nuclear watchdog, the International Atomic Energy Agency, on Tuesday reported that Iran appears to have worked on designing an atomic bomb and may still be conducting secret research related to building such weapons.
Businessman Herman Cain, who has been dogged by sexual harassment allegations recently, said the only way to stop Iran from developing a nuclear weapon was through economic means, squeezing Tehran through sanctions and boosting Iran’s opposition movement.
Perry, hurt by a string of poor debate performances, including an embarrassing gaffe Wednesday night that some observers say might have crippled his campaign, was insistent that Washington should consider cutting aid to Pakistan.
While Gingrich agreed, Rick Santorum was adamantly opposed.
“Pakistan is a nuclear power,” Santorum said. “We cannot be indecisive about whether Pakistan is our friend. They must be a friend.”
None of the eight candidates on the stage have much in the way of foreign policy experience, save for former U.S. ambassador to China Jon Huntsman, but they all criticized Obama for mishandling U.S. relations abroad..
Comments »Former MF Global Client: “I will never do business in the United States of America again.”
Strategist Pavlik: U.S. Stocks Can Withstand Europe
“Many investors are concerned about the impact of Europe’s debt crisis on the U.S. stock market. Just this past Wednesday, the Standard & Poor’s 500 Index plunged 3.7 percent on Italian bond fears, just the latest in many fluctuations stemming from news out of the troubled eurozone.
But Bob Pavlik, chief market strategist at Banyan Partners, says Europe won’t have much of an impact on the U.S. market beyond the short term.
Looking longer-term, “think about all the other countries that have defaulted on their sovereign debt and how much of a lasting impact that had on the worldwide economy,” he tells Yahoo.
“I think this is going to be the same situation. It’s just that we have a few more of them going on at the same time.”
That’s not to say that coming weakness in European economies doesn’t matter. “But I’m looking out three to five years down the road,” Pavlik says. “That’s how I’m investing my clients’ money.”
Full article
Discussing a Possible Break Up of the EU Becomes More Palatable
Given all the turmoil in Europe and the publicity that comes with it, we have now arrived at a point in time where serious discussion is taking place on the potential breakup of the EU.
Comments »IMF Warns Developed Nations May Fall Into Recession
Rumors of Downgrade and Exposure to Eastern Bloc Nations Have Austria’s Yields Spiking
This has quietly gone unnoticed until now. When yields spike it is hard for the markets to ignore it.
Comments »JPM and C Pick Up Loan Underwriting Market Share in Europe
Deflation May Take Hold As Debt Woes Increase
Italian Banks Ramp Up Borrowing From the ECB as Yields Climb
Yields have climbed significantly as of late and as a result the banks in Italy have gone on a borrowing spree. From September till now Italian banks have gone from a rate of 41 billion euros to 111 billion euros…
Comments »Kill the Euro, Win a $400K Prize
A British CEO will give £250,000 (roughly $400,000) to the person who comes up with the best plan for one or more countries to leave the euro.
That’s a lot of money — the second biggest economics prize after the Nobel, according to the think tank that’s administering the award.
Then again, figuring out how a country could exit the euro without unleashing economic havoc on the world may be nearly as hard as winning a Nobel.
For most of the brief life of the euro, nobody gave any thought to how a country might leave. Even today, European leaders still rule out the possibility.
But what if?
What if Greece, say, wanted to go back to the drachma, so it could devalue the currency and make its exports more competitive?
In the absence of an orderly plan, it could get very ugly, as we heard in our podcast Europe’s Worst-Case Scenario — bank runs, political riots, financial disaster.
If you want to enter the contest, you’ll have to explain what to do about everything from private savings accounts to sovereign debt to the stability of the banking system.
The prize is funded by Lord Wolfson (Full name: Lord Wolfson of Aspley Guise), CEO of the British clothing store Next.
The FT addresses an issue that crossed my mind:
Lord Wolfson admitted the prize – coming from a non-eurozone country and soliciting ways to break up the currency bloc – could be received badly in Europe. But he insisted he wanted the euro to continue.
On that note, here’s Lord Wolfson speaking to us through the official announcement announcing the prize:
I, along with most European businessmen, hope that the Eurozone will stabilise, but in the event it does not Europe must not sleepwalk into a policy vacuum. This prize aims to incentivise the world’s brightest economic minds to help fill that policy void: their endeavours may well prevent Europe from descending into a financial chaos that would destroy savings, jobs, and social cohesion.
The entry deadline is Jan. 31, 2012. Good luck!
Italy Closer to National Unity Government
Italy moved closer to a national unity government on Thursday, following Greece’s lead in seeking a respected veteran European technocrat to pilot painful economic reforms in an effort to avert a euro zone bond market meltdown.
After four days of chaotic haggling, former European Central Bank vice-president Lucas Papademos was appointed to head an interim crisis cabinet charged with saving Greece from default, bankruptcy and an exit from the euro zone.
In Rome, former European Commissioner Mario Monti emerged as favorite to replace Italian Prime Minister Silvio Berlusconi within days and lead an emergency government that would implement long delayed reforms of pensions, labor markets and business regulation.
Political and economic turmoil in Italy has spurred fears of a possible break-up of the euro zone with borrowing costs for Europe’s third biggest economy at unsustainable levels and the 17-nation currency bloc unable to afford a bailout.
German Chancellor Angela Merkel, Europe’s main paymaster, called for broad political support for reforms in Greece and said she believed Italy was winning back confidence, but political clarity was still needed in Rome.
She rejected talk of a possible shrinking of the currency area, saying: “We only have one goal, that is to bring about a stabilization of the euro zone in its current form.”
European Union officials continued to dither and pass the buck on how best to fight the worsening sovereign debt crisis.
Three senior ECB policymakers rebuffed pressure from investors and foreign governments to intervene massively as a lender of last resort on bond markets to shield Italy and Spain from rapidly spreading financial contagion.
“We have gone pretty far in what we can do but there is not much more that can be expected from us. It is now up to the governments,” ECB governing council member Klaas Knot told the Dutch parliament.
Knot, who is also Dutch central bank chief, said bond-buying only had a temporary effect. The ECB has bought more than 180 billion euros of peripheral euro zone bonds and traders said it was active again in the market on Thursday, but the purchases have failed to lower borrowing costs durably.
Stepping up the scale of bond-buying would eventually force the ECB to start printing money with the risk of stoking inflation, which was why the EU treaty had excluded such action, Knot said.
ECB executive board member Peter Praet said it was not the task of the central bank to intervene “when there are fundamental doubts about the sustainability of some countries.” Outgoing ECB chief economist Juergen Stark earlier rejected calls for the ECB to act as lender of last resort like the U.S. Federal Reserve or the Bank of England.
In Brussels, a euro zone official said there were no plans to use the bloc’s 440-billion-euro ($600 billion) rescue fund to help Italy, even with a precautionary credit line.
“Financial assistance is not in the cards,” the official said. A second official said: “The ECB will be drawn like every one else by the weight of gravity (to act).
MARKETS STEADIER
Italian 10-year bond yields steadied at around 7 percent, a level seen as unquestionable in the long term, due to signs that the political deadlock may be easing. Rome paid less to sell 1-year treasury bills than many had feared.
Sources in Berlusconi’s conservative PdL party said he was now convinced it would be better not to call elections at the moment, an abrupt reversal. The billionaire media magnate has agreed to resign within days after parliament approves long delayed economic reforms demanded by European partners.
PdL parliamentary floor leader Fabrizio Cicchitto said the party was considering backing a unity government led by Monti, a respected economist favored by the center-left opposition.
Berlusconi’s populist coalition partner, the Northern League, said it would not support a Monti government.
Monti, 68, was appointed a senator for life on Wednesday in a move that appeared to prefigure his possible rise to the premiership, but he has made no public statement and it is unclear what conditions he may set for taking office.
In Athens, Papademos said after agreeing to head a crisis coalition: “The Greek economy is facing huge problems despite the efforts undertaken.
“The choices we will make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence.”
The euro rose from a one-month low and world stocks inched up on hopes that new governments being formed in Italy and Greece could help fend off a euro zone break-up.
SMALLER EURO ZONE DENIED
Merkel, French officials and the EU’s executive Commission all tried to quash talk of a possible shrinking of the euro area, although they raised the possibility last week that Greece might leave the single currency.
EU sources told Reuters that French and German officials had held informal discussions on a two-speed Europe with a more tightly integrated and possibly smaller euro zone and a looser outer circle.
The discussions among senior policymakers, still in the realms of the theoretical, have focused on how to protect the euro zone from breaking up via tighter common policies which some members may by unable or unwilling to live with.
European Commission President Jose Manuel Barroso issued a stark warning of the dangers of a split in the European Union.
“There cannot be peace and prosperity in the North or in the West of Europe, if there is no peace and prosperity in the South or in the East,” Barroso said in a speech in Berlin.
Merkel called on Wednesday for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stays more loosely connected.
The head of the International Monetary Fund called for political clarity in efforts to tackle Italy’s debt crisis, warning that the world could face a “lost decade” if Europe’s problems were not tackled boldly.
Uncertainty around who would succeed Berlusconi was fuelling market volatility, Christine Lagarde said on a visit to China.
“No one exactly understands who is going to come out as the leader. That confusion is particularly conducive to volatility,” she told a news conference in Beijing. “Political clarity is conducive to more stability and my objective from the Fund’s point of view is better and more stability.”
A senior G20 source said the idea of convening an emergency meeting of finance ministers of the world’s leading economies to discuss support measures for the euro zone before the French presidency ends at the end of the year had been dropped. They would meet next in Mexico in February.
Euro zone finance ministers agreed on Monday on a road map for leveraging the currency bloc’s rescue fund to shield larger economies like Italy and Spain from a possible Greek default.
But markets are running faster than policy and there are deep doubts about the efficacy of those complex leveraging plans, and with Italy’s debt totaling around 1.9 trillion euros even a larger bailout fund could struggle to cope.
Read more: http://trade.cc/fnmixzz1dKaVeh1k
Pimco’s El-Erian: Italy’s Woes Signal ‘Dangerous Phase’ in Crisis
Europe’s Bailout Fund Finds More Gridlock and May Be Delayed Further
Squabbling between Germany and France over haircuts are acting as a speed bump to producing a bazooka.
Comments »Russia Says Iran is Willing to Negotiate a Deal to Calm Fears Over Their Nuclear Program
“Iran has confirmed that it wants to resolve all outstanding issues with the IAEA,” Lukashevich said, referring to the UN’s International Atomic Energy Agency. “This is incompatible with efforts to impose new sanctions, which will only drive any prospects of negotiations into a dead end.”
Comments »EU Lowers Grow Estimates For the Euro Zone
This years targets is only off by .1%, but next years target went from 1.8% to 0.5%.
Comments »Finding a Leader For Greece Will Be Harder Than Expected
Euro Zone Will Let Italy Crash and Burn
“Financial assistance is not in the cards,” one euro zone official said, adding the euro zone was not even considering extending a precautionary credit line to Rome.”
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