When the Greeks under Papandreou suggested a referendum on the GREEK AUSTERITY plan, the Greek PM was met with great consternation by the ruling elites in Brussels. A giant don’t-you-dare-call-a-referendum greeted PM Papandreou and basically forced his abdication. I warned then that the idea of a referendum on any issue of economic austerity was anathema to the EUROCRATS for the denizens of Brussels were/are fearful of testing the “PUBLIC WILL.” Every time a referendum was held it resulted in a decision opposite of the elite’s will: Another referendum was called until the “correct” result was realized. (It was usually preceded by warnings that all financial and budgetary agreements would be rendered null and void.)
Posts Tagged ‘Eurobonds’
FINALLY. It seems that the world is waking up to the idea of putting to use the barbarous relic so despised by the financial gurus like Charlie Munger and Warren Buffett. A May 25 BLOOMBERG article by Brian Parkin and Jeffrey Donovan hinted at some type of debt-sharing plan: Not a Eurobond in a traditional sense but more of a collateralized debt obligation and a concept of a REDEMPTION FUND. The fund would take all sovereign debt more than the 60% of GDP level and deposit the excess paper in a central fund. The fund would be collateralized by the GOLD RESERVES of all the European nations–an amount more than 10,000 TONS OF GOLD. As the debt levels of the abusive nations recede–and taking back the maligned paper–the TROUBLED NATIONS COULD DRAW DOWN THE COLLATERAL.
What has Ben Bernanke wrought? Since the FED CHAIRMAN uttered that Phrase ”FISCAL CLIFF” at the now infamous April 25 press conference, the S&P has dropped more than 6% (take out month-end window dressing). Investors were unnerved by the Bernanke acknowledgement of a huge drop in GDP if the Washington politicos did not start to deal with the problem of fiscal retrenchment that awaits. It has been estimated that the hit from spending cuts and tax increases will result in at least a 3.5% hit to U.S. growth. It was Bernanke that lit the fuse and today the CBO weighed in with its great concern over the “fiscal cliff.”
The Fed Chairman’s remarks at Jackson Hole left those hoping for QE3 disappointed. The Wall Street crowd who have grown addicted to the “Greenspan Put” and its help in sustaining the BULL in equities were aghast that Ben failed to maintain the monetary injection. Mr. Bernanke backed off of aggressive new policy and did not mention wealth effect of the PORTFOLIO BALANCE CHANNEL. While in the serene surroundings of the Grand Tetons, it seems the FED Chairman has learned that the Fed cannot be held hostage to the daily machinations of Wall Street and the markets and fiscal policy stewards are going to have to be patient in regards to further monetary support.
The weekend news has been unusually quiet, so with no news about any spreading of the financial crisis the EUROCRATS were opining about the need for Germany to back a massive issuance of EUROBONDS. Joining in the chorus for the creation of a massive dose of EUROBONDS were a group of global finance ministers, including Mr. Tremonti from Italy. The world’s PHILOSOPHER KING, George Soros, also threw his weight behind the need for a EUROBOND. It is now widely known that Merkel and Sarkozy are to meet in Paris on Tuesday in an effort to come to some agreement on [INSERT THOUGHT HERE], so as to help calm European markets and provide some plan for relieving the pressure on French and other European Banks.
Yes, the dollar rallied Wednesday as the U.S. Treasury curve continued to steepen but European and British news was very negative. The potential downgrade of Spain and German Parliamentary battles roiled the European currencies. In Germany, politics are being played out to see if the economic locomotive of Europe is going to be more European or more German. A Financial Times op-ed by Frank-Walter Steinmeier and Peer Steinbruck set the tone for the battle lines. These are political heavyweights as Steinmeierwas foreign minister and Peer Steinbruck was finance minister in the first Merkel administration so their voices are louder than others.